The series so far includes:

• Duncan Green from Oxfam, who contrasts progress in developing countries over the last year with the gloom of the ‘formerly rich’ countries of the G-8.
• Calestous Juma from Harvard, who identifies regional integration and better links with the diaspora as key drivers of Africa’s growth.
• Shanta Devarajan from the World Bank, who is cautiously optimistic, especially in the light  of increased demand by Africans for their governments to be accountable.
• Linda Raftree from Plan, who also emphasizes progress towards more inclusive and open societies.
• Kevin Watkins from Brookings and UNESCO, calling for “a properly financed global fund for education like those that have delivered such striking results in the health sector“.
• Jonathan Glennie from ODI and the Guardian, who is pessimistic about the prospects for international cooperation in the face of rising protectionism and nationalism as a result of poor economic prospects in the US and Europe.
• and my contribution, reproduced below, which gives a positive account of progress in many countries in Africa over the past year, and emphasizes the importance for developing countries of better global decision-making.

Economic growth has made the developing world less dependent on aid

A new generation of leaders, business friendly policies, technology, the spread of peace, and strong demand for natural resources have helped Africa to withstand the global downturn.

The Mercato, the commercial hub of the Ethiopian capital, Addis Ababa. Ethiopia's economy grew by 7.5% in 2011.

I celebrated New Year’s Day 2011 in Ethiopia, where we lived for three years. Ethiopia is humming with the optimism and energy of a fast-growing country, creating more jobs, sending more children to school, expanding healthcare, and providing electricity, clean water, sanitation and roads.

Ethiopia’s economy grew by 7.5% this year, and it is not the only country in Africa to boast a high growth rate. Africa has been the fastest growing continent of the past decade. The emergence of a new generation of leaders, the end of the continent’s debt crisis, business-friendly policies, new technologies, the spread of peace, and strong demand for natural resources have helped Africa withstand the global downturn.

Steve Radelet, a former senior fellow at the Centre for Global Development, has documented the emergence of 17 African countries in which total income is growing by more than 5% a year – increasing average incomes by 50% in 13 years. That growth is attracting businesses and investors from Africa and abroad, and the continent’s middle class is expanding. By 2015, about 100m African households will have incomes greater than £2,000 a year, roughly as many as India today.

And as they grow, developing countries are becoming less dependent on aid.

At the start of 2011, we did not expect a year in which so many people would be able to claim their rights and freedom. The Arab spring has moved many of us, but should not have surprised us. Better government has spread across Africa and the Middle East, defying outdated assumptions in the west. Thirteen African countries held national elections in 2011, four leading to a change of government; there will be 13 more in 2012. South Sudan gained its independence after a largely peaceful referendum.

When the year began, we did not know the rains in east Africa would fail. But in contrast to the 1980s, in today’s Ethiopia drought no longer means famine. Unlike its neighbour Somalia, there has been no repeat of the TV images of starving people in Ethiopia. That’s because, with the help of foreign donors, it has put in place early warning, food reserves and distribution systems, and a safety net that supports the poorest families in their own communities.

As developing countries have become more integrated into the world economy, and less dependent on aid, so their interests have changed. The most important international events for developing countries this year were the repeated failures of European leaders to put in place a credible plan to save the euro, the G20′s decision to put the world trade talks out of their misery, and modest progress at the Durban talks on climate change. These will all have more impact on developing countries than gatherings of the “development set” at World Bank meetings, the UN general assembly or the Busan forum on aid effectiveness.

But while progress has been good, it is not yet fast enough. Hundreds of thousands of people in the Horn of Africa will have spent Christmas in refugee camps, and about a billion people will go to bed hungry on New Year’s Eve.

In the years ahead, the Centre for Global Development in Europe will be working with policymakers, researchers and academics to find evidence-based, politically savvy ways for rich countries and powerful institutions to help developing countries lift themselves out of poverty. Our focus is on the world’s efforts to promote shared growth, protect our environment, reinvent our financial system, clamp down on international corruption, encourage and share innovation, reduce inequality and entrench peace.

For affluent and developing countries alike, these are the aspirations for 2012.

The southern port city of Busan in South Korea was a fitting host for a meeting on aid effectiveness.  Busan was the port through which humanitarian aid arrived sixty years ago, to help the people of a country ravaged by war.  Korea’s reconstruction and development was financed in part by international aid. Beginning in 1952, American aid alone averaged about $3 billion a year (in today’s prices) and USAID had up to five hundred staff in Korea. Busan is also at one end of the Gyeongbu Expressway, the cornerstone of Korea’s first five year plan and regarded by many Koreans as one of the most important early ingredients the country’s successful industrialization.  When the road linking the country’s main population centres with the port was planned 40 years ago, Korean national income was just $142 a person a year.  The World Bank and other donors refused to finance the construction, regarding it as an excessively grandiose project for a country so poor.  So President Park Chung-hee used a quarter of the nation’s budget, topped up with some reparations from Japan, to pay for it instead. National income quadrupled in the seven years following the construction of the road.

Today Busan is a bustling, prosperous city, home of the fifth largest port in the world; and the Gyeongbu Expressway is scheduled to become part of the Asian Highway, a planned network of routes connecting Korea with Japan, China, Southeast Asia, India, Pakistan, Iran and Turkey.

Korea exemplifies much of what we know about development: the fundamental importance of economic growth and industrialisation; the need for investment in economic infrastructure; the importance of good and effective leaders; the primary role played by the country’s own resources; the additional contribution that aid can make both to improving people’s lives and to investing in development; and the capacity of aid agencies to be wrong, especially in the poverty of their aspirations for developing countries.

Busan delegates wait for Starbucks to open at the conference centre in Busan

So Busan was a suitable place for about 3000 government officials, policy wonks, NGOs and a smattering of private sector representatives to discuss how the aid system could be made more effective.  This was the fourth in a series of meetings, which have toured Rome (2003), Paris (2005) and Accra (2008).

I’ve been involved in all this since 2002, motivated by my involvement in a series of studies in Ethiopia, Rwanda and Senegal. Though we represented donor agencies ourselves, our report was outspoken in its criticisms of donor behaviour. We found that “the aspiration of a government-led process for implementing the PRS [poverty reduction strategy], with a nationally led process for monitoring, review and renewal of objectives, has yet to be realised. Instead, donors have continued to focus on their own timetables, their missions, their conditions, and have demanded information to suit their requirements.”  Our reports on the experience of developing countries were part of the evidence which led to the Rome Declaration on Harmonisation the following year.  Yet despite the best efforts of many good people, the problems we identified ten years ago are, if anything, even worse today.

Since 2003 these summits have grown in size and attracted increasingly senior representation.  Among the roughly three thousand people in Busan were Ban Ki-moon, Hillary Clinton, Tony Blair, a brace of Presidents, a Prime Minister, and hundreds of ministers and senior officials. If this group did not have the authority to make progress on improving aid, it was difficult to know who would.  Negotiations on the communique began back in July and were concluded with the publication on the last day of the meeting of the “Busan Partnership for Effective Development“.

Now that the dust has settled, and many words have been written, it seems to me that there were four significant outcomes from Busan.

The Bexco Conference Centre in Busan

First, the beginning of a new global partnership. This is the result of Busan which the OECD and traditional donors have been most keen to emphasize.  It was not clear right up to the last day whether China, and perhaps other new donors, would be willing to agree to the declaration; and much of the last day was spent refining and agreeing to this key disclaimer which had to be included to persuade China to sign: “The principles, commitments and actions agreed in the outcome document in Busan shall be the reference for South-South partners on a voluntary basis.”  With this disclaimer the new donors are not bound to any particular commitments to improve their aid, but it must be a step forward everyone accepts the need of these new donors to be part of the conversation. Note that there was no need to weaken the specific commitments of traditional donors as a price of China’s agreement, since China was never likely to sign up to these commitments anyway. For example, the October draft would have committed all the donors who had signed the Accra Agenda for Action to “untie all aid by 2015″ – this was taken out of the Busan agreement in the final days at the request not of China, who would not have been bound by it, but of the United States.

Second, the new deal for fragile states. A group of 19 fragile and conflict-affected countries, known as the g7+, has been working with donors on how to improve peacebuilding and statebuilding efforts in these situations, beyond the aid effectiveness agenda.   The main idea has been to focus on five themes: legitimate politics, justice, security, economic foundations, and revenues and services. The resulting “New Deal for Engagement in Fragile States” was endorsed at Busan.  For more information see this article by ODI’s Alasdair McKechnie, and this blog entry by Fernanda Faria at ECDPM.

Third, significant progress on transparency.  Since Accra, transparency has shifted from the periphery to the centre of the discourse on aid effectiveness.  Secretary of State Hillary Clinton earned a round of spontaneous applause for her announcement that the United States would be signing the International Aid Transparency Initiative, taking the membership of IATI up to 75 percent of global aid. Donors committed to draw up plans within a year, explaining how by 2015 they will publish electronically full details of all current and planned future aid projects in a common, open standard. Stephanie Majerowicz and I have written elsewhere about the contribution that the Open Government Partnership may have made to this progress. It also owes a great deal to leadership by the UK and Sweden, and the World Bank and EU, as well as civil society organisations Publish What You Fund, Development Gateway and aidinfo.

Fourth, significant changes in the international governance of the aid system.  This may be one of the most important outcomes of Busan, yet it has so far attracted little comment.  The Busan agreement abolishes the Working Party on Aid Effectiveness, which is technically a sub-committee of the OECD DAC but in practice has become a sprawling network of committees and meetings which had come to represent a broader group of stakeholders than the donor club in which it had been incubated. In its place will be a new “Global Partnership for Effective Development Cooperation”, to be supported by the OECD and UNDP. Though it may seem impolite to point this out, this change relegates the DAC back to the role of a caucus of traditional official donors, representing a dwindling proportion of aid, in defiance of its aspirations to lead reforms of the global governance of development cooperation. Even more significantly, Busan turns its back on the requirement of unanimity which has underpinned agreements on the aid system for the last 50 years. The DAC makes decisions by consensus, giving all its members a veto so that it moves only at the speed of the slowest ship in the convoy.  But that is not how Busan envisages progress in future.  The implementation of Busan will take place through a series of ‘building blocks‘ which are described as “voluntary, practical and actionable game-changers in the global dialogue on aid and development effectiveness.”  This model was apparently conceived in in the light of the experience of work on transparency – the issue on which most progress has been made since Accra – which was taken forward by a coalition of the willing in the form of the International Aid Transparency Initiative. Stepping outside the DAC structures enabled a group of donors, foundations and civil society to work together without the constraint of an implicit veto of reluctant partners.  Busan marks a shift in the global governance of development cooperation from consensus in the DAC to the ‘variable geometry’ of building blocks. The declaration highlights  the ”opportunities presented by diverse approaches to development cooperation”.  There are new commitments for all donors on transparency, and the declaration calls for “a selective and relevant set of indicators and targets through which we will monitor progress”. (It is hard to see how these targets will be agreed in the coming months given that no consensus could be reached in the run-up to Busan.)  But beyond exposing their behaviour to public scrutiny, there is little else to which donors have specifically committed.  This evolution of the architecture for the global governance of development cooperation towards progress by more flexible coalitions of the willing has obvious parallels with the direction in which the global governance of climate change is also moving.

In addition to these four outcomes on which progress was made, I noted five other themes being discussed in Busan which were not translated into significant progress, but which may be issues to watch for the future. These were:

• everyone wants a shift from aid effectiveness to development effectiveness - the importance of this change in perspective was emphasized by many people, especially the delegations from Africa.  It is intended to mean focusing more on non-aid policies, and talking more about development outcomes. Everybody said they were in favour of such a shift, but this does not seem to have had much effect on the Busan agreement.
• there is greater recognition of the role civil society.  The Accra meeting in 2008 was notable for the involvement of civil society in the meeting. Busan went further by including a civil society representative in the drafting committee, which led to specific recognition (in para 22) of the role that civil society plays in the development process, especially in enabling people to claim their rights and in service delivery.
• everyone is talking about ‘the results agenda’. I actually think there are at least three results agendas, not wholly consistent with each other.  My CGD colleagues hosted a side event on results, which in my (not unbiased) view was one of the better discussions in Busan.  But overall there was not much progress on results from Busan, other than calling for developing countries to put in place specific results frameworks at country level. I anticipate that one of the most important ‘building blocks’ after Busan will be on how the development system can do a better job of identifying relevant results, and how to avoid the risk that a focus on results leads to misallocation of money, for example away from longer term and institutional changes towards short-term and easy to measure results.
• the notion of mutual accountability is evolving.  As Nancy Birdsall pointed out on the CGD blog, there seems to be less focus on ‘mutual accountability’ between donors and developing countries, and more attention to accountability of donors to their taxpayers and of aid-recipient governments to their own citizens in their use of aid.
• there is more talk about the private sector.  There were lots of meetings about the private sector and its role in development, but I got the impression that it was mainly discussions between governments, development finance institutions, and some government affairs and corporate social responsibility representatives of firms from industrialised countries. I saw no sign of any businesses from developing countries being part of the discussion. I wonder what anyone really involved in business would have made of Busan.

I’m glad to see more people taking development effectiveness seriously, and impressed that the UN General Secretary and US Secretary of State felt it worth their while to attend.   I also agree that it is important to build broader coalitions, and to think strategically about development and not just aid.  But I also regret that, as a consequence, these meetings are gradually losing the focus on more technical issues about how aid is delivered.  In 2003, the signatories to the Rome Declaration committed themselves to amend their “individual institutions’ and countries’ policies, procedures and practices to facilitate harmonisation”.  Yet in 2011 in Busan, the President of Rwanda, Paul Kagame, gave a masterclass in aid effectiveness, in which he observed

Developing countries spend more time and energy agreeing on procedures and accounting to donors and an ever-increasing number of related non-state actors than in actual development work, often responding to endless questioning that no answers can fully satisfy.

As Busan has shifted the discussion away from the nuts and bolts of how aid is delivered, and pushed much of the specific discussion of aid effectiveness to country level, it is not clear to me that there is any place left to address the concerns about donor agency policies which President Kagame so eloquently expressed.

In years to come, I expect that we will look back on the Busan agreement as a reflection of changing realities, including the growing range of different kinds of donors and shifting geopolitical power.  I think it less likely that we will look back on Busan as having done much to shape those realities.

Further reading:

Aid Alert: China Officially Joins the Donor Club By Nancy Birdsall (President of CGD), December 5, 2011

Busan HLF4: The will and the way By Brian Atwood (Chair of DAC), December 8, 2011

Busan has been an expression of shifting geopolitical realities  By Jonathan Glennie (ODI / Guardian), December 2, 2011

A View from Busan By Andris Piebalgs (EU Development Commissioner), December 5, 2011

Reflections on Busan By Judith Randel (Development Initiatives), December 9, 2011

Beyond Aid to Open Development By Alan Hudson (ONE), December 6, 2011

Moving towards open development By Sanjay Pradhan (World Bank), December 1, 2011

Busan: Yes we could By Patrick Love (OECD), November 30, 2011

An unnoticed but crucial development summit By Manuel Manrique (FRIDE), December 4, 2011

Busan: A Bang or a Whimper? By Alan Hudson (ONE), December 2, 2011

Busan: Why Aid Effectiveness Matters By Jessica Espey (Save the Children), December 1, 2011

Busan Forum: Aid promises come tumbling down By Sanda Van Damm and Jennifer Martin (Oxfam), November 29, 2011

Verdict still out on whether Busan is a good deal for poor countries By Oxfam, December 1, 2011

Two-speed aid effectiveness By Stefan Leiderer & Stephan Klingebiel, December 7, 2011

‘Value for money’ or ‘Results Obsession Disorder’? By Marcus Leroy (ex Belgian Development Cooperation), December 7, 2011

A killing embrace of diversity By Reinier van Hoffen, December 6, 2011

Towards more effective aid By Axel von Trotsenburg (World Bank), December 1, 2011

Written Ministerial Statement: Outcome of the Busan High Level Forum on Aid Effectiveness By Andrew Mitchell (UK Secretary of State), December 7, 2011

Three-way-learning. The South-South Agenda in Busan, By Han Fretters (World Bank), December 1, 2011

Aid architecture debate surfaces new ideas, appetite for dialogue By Axel van Trotsenburg (World Bank), December 2, 2011

“The defining division these days is increasingly: open or closed? Are we open to the changing world? Or do we see its menace, but not its possibilities?”

—Tony Blair, A Global Alliance for Global Values, September 2006

It is easy to be cynical about international summits and their carefully drafted communiqués. But they sometimes matter more than people expect. (If they didn’t, why would government officials put so much time and effort into negotiating the text?) Even if the text is often a bland compromise, these meetings can help to move an issue forward, by locking in a new consensus which forms the platform for further progress.

We saw how this works at this week’s High Level Forum on development effectiveness in Busan, South Korea. In a speech notable for a thinly veiled warning about aid from China, Secretary Clinton made the welcome announcement that the US would join the International Aid Transparency Initiative, which entails the publication of the details of all US aid projects.  This decision has given a major impetus to the international movement for aid transparency, which has been one of the important outcomes of the Busan meeting. According to US administration insiders, this decision was in part a consequence of an earlier international  initiative, which has not had as much attention as it deserves: the Open Government Partnership (OGP).

The OGP is an effort to create a club of nations committed to good governance and transparency. It was launched a few months ago in New York, at a side-event of the UN meetings, by 26 heads of state, the culmination of months of work by the White House and eight partner governments.

David Eaves (an open government enthusiast from Canada) sees the Open Government Partnership as more than just another meeting.  The OGP, he says:

…is much more than a simple pact designed to make heads of state look good. I believe it has real geopolitical aims and may be the first overt, ideological salvo in the what I believe will be the geopolitical axis of Open versus Closed. This is about finding ways to compete for the hearts and minds of the world in a way that China, Russia, Iran and others simpley cannot.

The Economist blog is less convinced: in their view “this is really nothing new or major” especially because the partnership includes “such beacons of openness as Russia and Pakistan.”

We’ve warmed to the Open Government Partnership after some initial skepticism.  The architects never had the grandiose ambitions that David Eaves suggests: rather they wanted to do something which might encourage small, tangible improvements in the way governments promote transparency and good governance. The idea is to provide a network of support to reformers across the world pushing for open government, to enable them to share ideas and lessons, and to strengthen their hand by demonstrating to sceptics that they are part of a broader international movement.  It brings government’s domestic achievements to the international spotlight to encourage reforms and reformers.  By that modest yardstick, the initiative is a step in the right direction.

Why were we skeptical at first?  Partly for the reasons set out by the Economist: the standards for joining the OGP (and the implicit endorsement that it confers) are not very exacting. What kind of transparency club has Russia and Azerbaijan as members? More importantly, we felt that an international initiative would have most value if it focused on transparency of cross border flows such as payments by companies for minerals, cross-border transactions between multinational companies and their subsidiaries, aid transparency, and cooperation between tax authorities. It is in tackling transnational problems that an international coalition makes most sense. But there was little political appetite for starting with these difficult international problems, and the OGP has focused mainly on encouraging its members to implement policies which promote transparency domestically.

But although the OGP has not focused on improving the transparency of international flows, there are already signs of how it can work to put pressure on its members to be more open.  It has apparently contributed to the announcement this week that the US would join the International Aid Transparency Initiative, bringing the US into line with other OGP members. Furthermore  there is now a debate bubbling up in the UK about the Extractive Industries Transparency Initiative which requires governments publicly to disclose their revenues from oil, gas, and mining assets, and for companies to disclose the payments they make. President Obama announced at the launch of the OGP that the US would itself become a member of the EITI.  As a result, the UK is now under pressure to follow suit. Although the UK was a supporter of EITI from its inception, it has never joined itself (partly because of opposition from the Business Department): a position which will be more difficult to sustain if and when the US fulfills President Obama’s commitment to join. That is exactly the kind of international peer pressure which OGP is designed to generate.

So the OGP is, to misquote Churchill, a modest initiative with much to be modest about. It was not conceived as the opening salvo of a new battle, but as a small step to encourage and support those countries round the world who want to move towards greater openness and transparency. There are some welcome signs that it is already making a difference. It may eventually lose momentum, especially as the politicians who put it together move on, and it may become too diluted by the undemanding criteria for membership. We hope not.

More than two thousand delegates have gathered today in Busan, South Korea, for the fourth installment of a succession of meetings aimed at making aid more effective.

There has been significant progress since the meeting in Accra in 2008 towards improving transparency of aid. This is important because it’s a pre-requisite for achieving all the aid effectiveness principles. Jamie Drummond from the ONE campaign explains this very well in the Huffington Post.

The challenge is to provide information to people at country level. Our existing aid information systems are mainly designed to enable donors to share information with each other, not to meet the needs of people in developing countries.

But the information needs at country level are hugely diverse, both between and within developing countries. Within governments, the information needs of the finance ministry are different from the needs of line ministries. The needs of parliamentarians, civil society, media and citizens are all different again. It is impractical for donors to try to meet the needs of every niche interest with their own subset of the data in a particular format.

뜻이 있는 곳에 길이 있다  (where there’s a will there’s a way)

Here’s the technical bit: the way to serve all these different needs for information without massive duplication and bureaucracy is to separate the data from the interface. An open, standardised, detailed, shared data layer can support a whole range of different applications, tailored to specific users.

That is why it is so exciting that the open data revolution is coming to aid. In 2008, in a side-meeting in Accra, a coalition of willing donors, developing countries, foundations and NGOs made a declaration which launched the International Aid Transparency Initiative. A lot of that data is now being published – countries accounting for nearly half of global aid are now publishing through IATI, and that proportion will grow in the coming months.

If you are in Busan this week, and you want to know how IATI works, the IATI secretariat will be doing a briefing at 5pm on Wednesday, in room KW202 (I’m making a guest appearance to show off some beta software, so do come along and laugh at me when it doesn’t work).

천릿길은 한 걸음부터 (A 1000-li journey starts with one step)

Transparency by itself does not lead to more accountability, less waste, or better coordination. That happens when people are able to use the information. The extent to which they are able to do so depends on their context, including the political and administrative climate. Open data won’t automatically make organisations responsive, but will greatly reduce the difficulty and cost for citizens of taking the data and turning it into something meaningful and useful.

With an open aid data platform now in place, huge opportunities are being opened. We can use the standard to introduce traceability of aid as it passes from organisation to organisation. We can improve the quality and detail of the data that is collected and publish it through these systems.

Reporting of aid data should be not just by donors but by NGOs, private sector implementing agencies and foundations. The mechanisms for sharing information can be extended beyond aid to other kinds of resources for poverty reduction.  We can add detailed geo-coding, to enable aid projects and programmes to be mapped, and better coordinated.  We can begin to compare across aid programmes and across countries. We can mix aid information with other data from other sources.

The twenty four donors who have signed IATI should be congratulated for their efforts to make data available. The payoff from that effort will come when we all start to use the data to understand aid better: to see what is working and what is not, and to hold the aid system to account, so leading to improvements in the effectiveness of aid. IATI removes the most significant barriers to entry for a wide range of diverse applications.

The next step is to nurture and encourage an ecosystem of civil society groups, parliamentarians, researchers, think tanks, academics, governments, private sector organisation, media and hackers, all accessing and using the information in different ways, and using this as a platform to push for improvements in how resources for poverty reduction are used. The new Open Aid Partnership is an example of an initiative of this kind: the door is now open for many more.

We can now look forward to the day when we take for granted the ubiquitous availability of aid data. We will soon forget that it was ever a struggle to find out about aid projects in a developing country, or to follow the money through NGOs and implementing partners. Having laid these important foundations, we will be able to move on to much more important and exciting innovations which support people in developing countries to use and repurpose this information and use it to change their world.

Much of the development policy world converges on Busan this week for the High Level Forum on Aid Effectiveness. This is the fourth in the series after Rome (2003), Paris (2005) and Accra (2008).  The Guardian has a good ‘explainer’ about the issues being discussed.

Behind the scenes here in Busan, the trade-off is between getting everybody on board, including new providers of south-south cooperation such as China, India and Brazil, and pushing the boundaries towards more effective aid from existing donors.

Liberian children hold Chinese flags before the arrival of China's President Hu Jintao

Busan offers the possibility of a globally inclusive agreement, especially bringing in the important providers of south-south cooperation such as China and India, and non-traditional donors such as foundations and the private sector.  But a broad consensus may only be possible if the text is sufficiently watered down. New donors are unlikely to sign up to an agreement which seeks faster improvements in development assistance by setting more explicit and demanding targets than were agreed in Paris and Accra. Most would not be willing to sign up even to long-established effectiveness principles such as untying aid, more predictability, and greater transparency and accountability.  Nor are they likely to agree to be bound by any kind of monitoring or enforcement regime.

Many of the organisations involved in Busan have a strong institutional interest in emphasizing the benefits of a ‘big tent’ agreement:

• Individual DAC donors will be glad to talk up the importance of drawing new players into the process. They can trumpet this as a big step forward, especially to domestic audiences which feel threatened by China’s growing global role. They can pretend to be disappointed that it has required them to accept a rather bland communique which steps back from their existing commitments, while being privately relieved to have been let them off the hook for the improvements in aid to which they have agreed in the past and which they have shown themselves unwilling to make.
• A dialogue with new donors could give a new raison d’être to the DAC, an OECD body which is otherwise staring into the abyss of obsolescence. The DAC is a club of traditional government donors which constitute a dwindling proportion of global aid; nobody any more believes that an exclusive group of donors should set the rules of the aid system; and anyway DAC members themselves have failed to implement the principles they have agreed.  It is not lost on the 150 staff of the DAC that hosting a dialogue between traditional and emerging donors could give the DAC a new lease of life.
• The Korean hosts will be looking ahead to how the Busan conference will be remembered. Building the bridge to new Asian donors would be a natural legacy. Korea has itself only recently joined the DAC and they would be very glad to shift the discussion away from compliance with a (largely European inspired) aid effectiveness agenda towards the value of a broader dialogue with emerging donors and the private sector.
• China would be happy to have a declaration which validates their approach to development cooperation, but they do not regard this as important. They are apparently sending a small, low-key, delegation of about six people to Busan, and it is rumoured that they will either not sign the outcome document at all, or that they will sign as a developing country but not as a donor. China believes that different rules should apply to ‘south south cooperation’, so in principle they do not regard any of this discussion as applicable to the aid they give. In any case, China gives very little actual aid (as defined by the DAC) – probably less in total than Switzerland. The vast majority of China’s involvement in developing countries takes the form of quasi-commercial trade credits which are not included within the scope of these aid effectiveness discussions.

Given these strong institutional interests which favour getting China on board, it is no surprise that the latest (5th) draft of the Busan Outcome Document is a largely anodyne document with few additional commitments by donors. The UK Aid Network has a concise update about this here. Unless this changes in the next few days, Busan will be remembered as the conference at which traditional donors retreated from the explicit, time-bound commitments and monitoring arrangements which they agreed in Paris in 2005.

There is one group of stakeholders with something to lose from this: the people of developing countries who are the intended beneficiaries of aid, whose voice is not strongly heard in the discussions. They are the people who lose out when aid is wasted because it is unpredictable, untransparent and unaccountable.  It is their services, not the aid bureaucracies, which suffer when there is duplication and burgeoning bureaucracy.  It is their businesses which are damaged by tied aid.  It is their governments which become answerable not to their citizens but to an unaccountable group of donors.  A decision to accept a weaker, more universal agreement in Busan will satisfy the donors, but the poorest, most vulnerable people in the world will pay the price.

As Gideon Rabinowitz of the UK Aid Network pointed out last week, the Accra communique was similarly disappointing at a similar stage before the 2008 conference.  That time round, a group of European development ministers arrived in Accra and insisted on significant improvements, causing outrage among other participants, not least the bureaucrats who had sat through endless drafting meetings over the preceding months only to find their work had been nugatory.  But this year, those donors seem to be much less inclined to use any of their economic or political capital pushing for improvements in aid.    So it will suit them to emphasize the importance of a new agreement which includes China, and hide behind this as an excuse for their own inability to summon the political will to make aid more effective.

There is, however, another approach which could both and secure broad international agreement and still lead to substantive improvements in aid effectiveness. We should learn from what has happened since the Accra High Level Forum in 2008, in particular on transparency which is the issue on which there has been most progress. Donors accounting for half of global aid are now publishing their aid data through the new International Aid Transparency Initiative, IATI. But this has not been achieved by the official DAC processes which are limited to moving at the speed of the slowest ship in the convoy. Instead, a coalition of willing donors has worked alongside the official process to agree and implement an international aid transparency standard.

There is a lesson here as we consider how to move forward from Busan. A possible approach is to accept an outcome document setting out principles which represent the ‘highest common factor’ among all the participants, which is buttressed by (and which could endorse and launch) various coalitions which are willing to move forward more quickly on particular issues (e.g. predictability, using country systems, and so on).  These coalitions can then be pathfinders, leading by example and exerting peer pressure on other donors.  Taxpayers in donor countries can put pressure on their governments to join these coalitions, so that their aid also benefits from the improvements which the coalitions are bringing about (in the way, for example, that the Canadian NGO Engineers Without Borders has put pressure on the Canadian government to join IATI.)  There is more hope of achieving real progress through a series of path-finding coalitions than by investing all our energy in a universal agreement which is acceptable to everyone and satisfies nobody.

Two key pieces of background evidence have just been published which provide the backdrop to the discussions in Busan.  First, the Broookings Institution and my colleagues at the Center for Global Development have published an updated Quality of Official Development Assistance index (QuODA), which scores donors on the effectiveness of their aid.  Second, Publish What You Fund has published an Aid Transparency Index ranking donors according to how much information they make available about the aid they give.

CGD and Brookings Quality of Aid Index  (QuODA)

QuODA is an assessment of the quality of aid provided by 23 donor countries and more than 100 aid agencies. It uses 31 indicators grouped in four dimensions that reflect the international consensus of what constitutes high-quality aid:

• Maximizing Efficiency
• Fostering Institutions
• Reducing Burden
• Transparency and Learning

QuODA itself does not provide an overall ranking of donors.  The reason is that your view about the overall effectiveness of a donor will depend on how much weight you place on each indicator.  But for what it is worth, here is how the ranking of donors looks if you give equal weight to each of the four QuODA dimensions:

Donors may quibble about which of the indicators are important, though all the indicators reflect solid academic research and experience about what makes aid effective, embedded in the international consensus about aid effectiveness to which they have signed up.  For anyone wanting to focus on particular indicator and dimensions of effectiveness, the data are published online in an interactive web tool.

My two observations about this are:

• almost every donor has something to be proud of (nearly every donor is in the top half in at least one dimension) but all donors have considerable room for improvement;
• the multilateral agencies do better, on the whole, than the bilateral agencies; this may be because they are less susceptible to pressures from national donor politics;  the World Bank, in particular, scores extremely well across the board

The Publish What You Fund Pilot Aid Transparency Index

The PWYF Aid Transparency Index, published today, dives deeper into whether donors publish adequate information about the aid they give.  They analyze 58 organisations on 37 dimensions of transparency, mainly relating to whether information is available about particular projects and activities.

The World Bank tops the transparency index too. Indeed, there appears to be a strong correlation between aid transparency and aid effectiveness more generally.  The chart below plots the PWYF transparency scores against the average of the three dimensions of QuODA which do not relate to transparency.

This correlation between aid effectiveness and transparency could come about for three reasons:

a. common causes: well-governed and well-managed aid agencies are likely to be both more effective and more transparent;

b. effectiveness causes transparency: aid agencies that are ineffective and know it are likely to want to be secretive; agencies that are effective are likely to want to tell the world more about what they do;

c. transparency causes effectiveness: agencies that are open and transparent are less likely to make decisions to use aid ineffectively because they will be held to account by politicians and the public.

Conclusions

The good news from both the QuODA index of aid quality and the PWYF Aid Transparency index is that it is possible for donors to live up to the goals they have set themselves to make aid more effective and more transparent.  Most donors do well on some indicators, and yet are a long way behind the best on others.  The bad news is that there is a long way to go before donors overall live up to the pledges they have given.

Time will tell whether yet another conference, and yet another communique, will make any more difference to donor behaviour than have the last three. However, there does now seem to be welcome momentum towards putting more information about aid into the public domain, and we may hope that this will, over time, provide both the information and political pressure needed to make aid more effective. If Busan succeeds in giving a big push to aid transparency, that may be the biggest contribution it can make towards the ambitious goal of ‘transforming’ aid.

Information, not coordination, is the key to aid effectiveness.  Some donors such as USAID are becoming interested in a more decentralized ‘Google Maps’ approach to aid coordination, to facilitate well-informed decisions by people on the ground. For this to work, donors need to do two things: publish more detailed project level information, and do so in an open, reusable, internationally consistent data format. Transparency aimed at a domestic audience is not sufficient.

We now know that the development system has met just one of the 13 targets it set in 2005 for making aid more effective. That is not surprising: the problems diagnosed in the Paris Declaration are real and important, but the solutions that have been pursued in its name have not been practical. There are better ways to achieve the aid effectiveness which the Paris Declaration envisages.

Here is an example of the problem, from Indonesia after the 2004 tsunami:

“Last February in Riga [close to Calang in Indonesia], we had a case of measles. The epidemiologists from Banda Aceh gathered, fearing that the measles would spread among displaced people, but the girl was cured in two days. Eventually we discovered that this child had been vaccinated three times by different organizations, each without a vaccination card or any type of control. The symptoms were the result of these measles vaccines”.

Informal translation of an article in El Pais (April 13, 2005)

This is a graphic example of a widespread problem in development and humanitarian aid: a coordination failure leading to a substantial waste of money.

Following Paris, a conventional wisdom has grown up on how this kind of problem should be tackled. The regional health department should call a big meeting of all the donors and NGOs who might be interesting in running an immunization programme. They should share information with each other about their plans: which vaccines they intended to administer, and where. Under the leadership of the ministry, the donors should agree a division of labour to eliminate overlaps and ensure that aid is used efficiently.

Similar committees would have met to plan and coordinate every other kind of intervention to avoid overlap and make the best use of limited resources.

You don’t have to have a degree in Political Science to be able to see why this committee approach does not work. A country director for a large government aid agency recently told me that he spent more than half his time in donor coordination meetings. Most of each meeting is taken up by donors listing what they are doing. (Not surprisingly, he has now quit.)

So what is the alternative?

Once an aid agency has been licensed by the health ministry to provide vaccinations, it could simply publish online, in an accessible format, details of its plans and activities. Another organization planning its own programme could then easily check how they can best fit with what other agencies are doing. With open information sharing, no child would be vaccinated against the same disease twice; and under-reached populations could be easily identified and served.

This is an example of an important general point about improving aid effectiveness. Aid staff on the ground should not be stuck in endless coordination meetings: they should have the information they need to make good decisions about how to have the biggest impact, within a regulatory framework established by government, without being constrained by inappropriate rules and incentives imposed on them from far away.

A Google Maps approach to development?

There is growing interest in a ‘Google Maps’ approach to development coordination. We have seen welcome moves towards mapping of aid projects, for example by the World Bank, USAID, and Canadian CIDA. But as the example of vaccination in Banda Aceh illustrates, the key to making this information useful is that sufficiently detailed data from many different organisations is available in one place.

Some of the momentum towards greater aid transparency is driven by the need for increased accountability to taxpayers in donor countries. This is a laudable goal, but if data publication is targeted on this purpose alone it misses even bigger potential benefits from transparency. The US Government is making gradual progress on its Foreign Assistance Dashboard and a geographical coding system: but on current plans the data will not contain enough substantive detail. It will record information which is good enough to get a broad sense of where aid is being spent (‘top level administrative region’) but will not record specific locations (‘street corner’). This approach may be enough to meet the needs of a US accountability agenda, but it will miss the opportunity to use robust project level data and geo-coding to track and coordinate aid, to close down the space for corruption and waste, and to link feedback from project beneficiaries to specific aid funders.

It is also important that aid information is published in a reusable open data format, which has been agreed by a large group of donors in the IATI standard. Several donors – including the World Bank, the European Union, DFID, Australia and the Netherlands – are now publishing their data this way. Other donors have plans to do so. While it is welcome that Canada is publishing more detail about its aid projects, as the website makes clear the target audience for this information is “all Canadians”. The information published by CIDA is of almost no use to people in developing countries because it is not published in a form which is compatible with data from other all the other donors. Open data – in the sense of being genuinely accessible and comparable – enables civil society, parliamentarians and citizens of developing countries to be part of the coordination and accountability from which they are presently excluded.

In contrast to Canada, the United States has said it will ‘cross-walk’ its aid data to the IATI standard, which is extremely welcome. But so far they have not done so. While the implementation of a Foreign Assistance Dashboard is an important step towards domestic US accountability, all this data will only be of use internationally to make aid more effective and accountable when it is also published according to the international data standard.

Of course, USAID and State Department have limited resources and should be spending their money as much as possible on aid rather than administration. But as the World Bank has found out with its Mapping for Results project, it is not tremendously complicated or expensive to geo-code aid projects – and it will be even easier if that is done at the outset by front line staff who have detailed knowledge of the projects, rather than retrofitted afterwards in Washington. Nor has it proved difficult or expensive to organize data into the IATI format: I am told it took UNOPS just four weeks to implement IATI, from start to finish. There are many other donors, and organisations such as the Development Gateway, AidData and aidinfo, who have experience in geo-coding projects and publishing information in IATI format, who would be glad to help to design procedures, set up systems, and even to share their computer code. Furthermore, the administrative savings from reducing duplication by publishing open data are estimated rapidly to outpace these modest implementation costs. This is not primarily a question of money, but of leadership, recognition of the value of transparency which serves international as well as domestic audiences, and a willingness to reach out to work with others.

We can – and must – make aid more effective. This means making sure that decisions on the ground are likely to yield the biggest possible impact, and for that we need not more coordination meetings but better information, greater decentralization, simplified systems, fewer perverse incentives and more accountability.

If you have comments please put them on the CGD website.

Does Britain’s remarkable political consensus supporting foreign aid obscure a more ambiguous overall footprint in the developing world?Though by no means unanimous, Britain’s cross-party agreement to protect the aid programme from budget cuts is admirable. It reflects an understanding that it is ultimately in the national interest to support development, as well as being the right thing to do.

But there is more to helping poor nations to develop than giving aid. Rich and poor nations are linked in many ways: through trade and investment flows, migration, the environment, military affairs and technology. Governments influence all these channels, for good and ill. They subsidise their own agriculture, undercutting poor farmers overseas. They send peacekeepers to nations that are healing after civil war. They tax petrol, slowing global warming. They promote technological change, but limit its spread through patents.

Poor countries do not want to depend on aid: they want the opportunity to trade and grow and play their full part in the world economy. Their ability to do so depends in part on how the rich and powerful behave. That’s why the Centre for Global Development produces the annual Commitment to Development Index (CDI) to assess rich nations on their overall impact on the developing world.

Interactive: the Commitment to Development Index

In the latest index, published on Tuesday, Britain ranks 12th out of 22 countries. As you would expect, Britain scores well on foreign aid (ranking 8th). British aid is respectable for both its quantity, now at 0.51% of national income, and for its quality — the Department for International Development (DfID) tends to avoid parcelling aid out in penny packets, which impose an administrative burden on understaffed recipient governments.

Britain’s place in the CDI, however, is hurt by weaknesses elsewhere. Along with France and the US, it is a major exporter of weapons to undemocratic nations such as Saudi Arabia, which this year deployed its military to put down pro-democracy protesters in Bahrain. That’s why the UK ranks 19th out of 22 on security.

Once again the Nordic countries and the Netherlands come top of the league. Generosity with aid plays a part, but so do progressive policies on the environment (especially, limiting greenhouse gas emissions) and migration (welcoming legal immigrants from developing countries). Japan and South Korea are the least development-friendly, with high barriers to goods and workers from poorer nations and low contributions to foreign aid and peacekeeping operations.

Given the Blair government’s high-profile commitment to Africa, it is interesting to ask whether Britain does well by that continent. In fact it does, which one can see by selecting “sub-Saharan Africa” in the interactive. Doing so zeros in on aid to Africa, barriers to African imports, secondments of troops to peacekeeping in Africa, and so on. The UK comes fourth, behind only Ireland, Portugal and Sweden.

As you can sense, we have packed a lot into the CDI. The interactive lets you explore the details. The index is based on publically available data, and on the Centre for Global Development site you can find all our calculations so you can see how the scores are produced. You can also browse through performance reports for each country, and background papers. For the technically savvy, there are online spreadsheets and databases.

The Centre for Global Development has worked hard to improve the CDI. But it is not an infallible measure of development impact and intent. You can argue about almost every indicator. Are big aid projects always better? What if carbon emissions fall for reasons that have nothing to do with government policy? And should it include economic policies, such as bank regulation and interest rate settings, which also have huge effects overseas?

We welcome such discussion. For us, the real goal is not an infallible index, but more awareness of, and readiness to improve, the full range of policies that affect the lives of the global poor. Aid alone is not the way to measure our footprint in the developing world. The CDI shows that every country can improve on many fronts.

David Roodman is a senior fellow at the Centre for Global Development and the architect of the Commitment to Development Index. Owen Barder is a senior fellow and the Europe director of the Centre for Global Development

Has the aid industry introduced the reforms it agreed in 2005 to make aid more effective? No, according to the survey published last week by the OECD DAC.  In this blog post we reflect on why this matters, and what it means for the forthcoming summit in Busan.

The development sector is in a mess. Developing countries have to deal with a large and growing number of partners, each with separate agendas, priorities, and requirements. Meetings, reports, milestones and systems multiply. Skilled staff are hired away from governments and from business to serve in local agency offices or NGOs. Funding is fragmented and unpredictable, which means that developing countries are often unable to bring together the scale of long-term, predictable finance needed to undertake significant institutional reform and service delivery. As just one example – in Vietnam, it took 18 months and the involvement of 150 government workers to purchase just five vehicles for a donor-funded project, because of differences in procurement policies among aid agencies.

None of this is news, nor is it disputed. The donor club of industrialised countries, the DAC, says:

“poor co-ordination and unpredictable aid waste funds that should be eradicating poverty in the world’s poorest countries.”

Six years ago developed and developing countries committed themselves to fixing these problems. The Paris Declaration on aid effectiveness set out five principles to make aid more effective, and a set of thirteen measurable targets which they aimed to reach by 2010.

Last Thursday, the Development Assistance Committee of the OCED (the DAC) published the results of the monitoring survey.  The DAC is not known for hard-hitting criticism of its members. But even this mild-mannered organisation feels compelled to call the results ‘sobering’.

Of thirteen measured targets to improve the effectiveness of aid, just one has been met. What was this one milestone which donors were able to reach? They lived up to their commitment to talk more to each other (“Strengthen capacity by coordinated support”).

The DAC reports that the areas of progress have been largely on the part of developing countries. These include putting in place sound national development strategies and results frameworks, and improvements in public financial management systems. According to the report, the areas of little or no progress are overwhelmingly on the part of donors: aid is still not on recipient countries’ budgets, is no more predictable, and is becoming increasingly fragmented.

When developing countries fall short of targets set for them by donors, we say they are ‘off track’ and start to talk about cutting off their aid.  What happens when donors fall short of targets they have set themselves?

The DAC points out that although the overall results are disappointing, some good progress has been made in some places. That’s true, and it is interesting that there is no obvious pattern.  For example, though Tanzania is highly aid dependent, it appears to have been effective at imposing more discipline on donors.  Some of the results suggest that the survey leaves too much room for interpretation:  for example, Japan’s relatively strong performance against the Paris indicators is difficult to reconcile with perceptions on the ground.

The Paris indicators are not a direct measure of aid effectiveness. They are measures of progress towards goals which are thought by the Paris signatories to be associated with better aid. But that connection is tenuous: for example, though Tanzania has done well at pushing donors to comply with the Paris principles, nobody seems to think that aid in Tanzania now delivers more bang for the buck than aid elsewhere (rather the opposite, if anything).

It should be no surprise that progress towards the Paris principles has been slow.  The aid system represents a compromise between the interests of donors and recipients, mediated by organisations and agencies with interests of their own. For example, donors have not been willing to make aid more predictable.  That’s because there is political value to them in being able to dispense or withhold aid according to the latest fad or political pressure, and aid implementing agencies enjoy having the power of day-to-day control. Though retaining this discretion is estimated to reduce the overall value of aid by 15-20 percent, the political and institutional benefits to donors apparently outweigh the disadvantages of supplying less effective aid – perhaps because the people who suffer from ineffective aid don’t have votes in donor countries. Making an international commitment to fix this could help a little, because it adds very slightly to the political cost of lack of predictability. But the political cost of failing to meet this commitment is evidently too small to make a difference to the political calculation. That’s what we see in the monitoring survey: the proportion of aid that is classified as predictable has risen from 42% in 2005 to – drum roll – 43% in 2010: some way short of the target of 71% by 2010.

Can the forthcoming summit in Busan in November change this? It is hard to see how yet another conference with yet another communiqué will change these underlying political dynamics. The latest news is that Ban Ki Moon and Hillary Clinton are both planning to attend. Does the political weight of a communiqué increase in proportion to the size of the motorcades at the summit?

The political constraints which lead to ineffective aid are genuinely difficult to overcome.   This should be ‘sobering’ to donors as a measure of their inability to fix long-standing and well-documented problems.  But it should also be ‘sobering’ to those same donors who travel around the world pressing developing countries to implement reforms in the face of much more substantial political constraints.  If donors cannot implement something as simple and uncontroversial as coordinated country missions or common procurement rules, why do they expect developing countries to be able to implement changes in land tenure or public enterprise reform?

We should give credit to the DAC for getting an agreement to reform, putting in place a monitoring system, recording the progress that has taken place, and stimulating the debate about aid effectiveness.  But it is neither desirable nor sustainable that the donor club should be responsible for tracking the donors’ performance against their commitments.  A more independent watchdog would surely have reported donors’ failure to meet 12 out of 13 targets with a greater sense of outrage.

Finally, all this is becoming increasingly anachronistic.  The Paris principles are most obviously relevant to countries that are low income and stable.  But there are now just thirteen of those: most of the world’s poor now live in middle income countries and fragile states.  The DAC represents the donors who are members of the OECD, but does not include China and other emerging powers, foundations, private giving and NGOs, many of whom do not share the DAC’s view about what makes aid effective.   The challenge for Busan is to define the role of aid in helping to build a sustainable, resilient and inclusive global economy.

Annoyingly the meeting was held under The Chatham House Rule which means I am not allowed to report who said what. (Tangential thought: I am considering ignoring this in future if the invitation does not make it clear that this is the basis on which the meeting is being held.)  I am allowed to tell you that the group included people from ODI (Simon Maxwell & Andrew Rogerson), a co-author of Philanthrocapitalism (Mike Green), DFID (Paul Healy Healey & Laura Kelly), the EBRD (Erik Berglöf, Gaspard Koenig & Hans Peter Lankes), and representatives from KPMG (John Burton), ActionAid (Lucia Fry), Save the Children UK (Jessica Espey & Kate Dooley) and BOND (Joanna Rey).

It turned out to be an interesting discussion.

First, there was considerable pessimism about the public’s appetite for aid. Opinion polls depend heavily on how you ask the question, but a common theme seems to be that the public’s concern for poverty and development is stable and quite high; while the public’s confidence in government aid is falling rapidly.  There are several reasons why these may be diverging, which are not mutually exclusive. Declining support for aid spending may be the effect of the economic downturn; it may reflect a trend towards public distrust of bureaucracies; it may be the long term consequence of aid’s failure to live up to its supporters’ excessively grandiose claims of what it can achieve. There was some debate about whether a greater focus on ‘results’ could reverse this.  Hardly anyone seriously argued that declining public support is merely a temporary consequence of the economic downturn which will reverse automatically when incomes start to grow again.

A second interesting theme was the tension between more effective aid, and aid which donors are willing to provide. It is possible that as the system shifts towards greater recipient country control of how aid is used (as envisaged under the Paris Declaration), so support for aid in donor countries declines.  If you can’t use aid to promote your economic, commercial, security and strategic interests, then you might not want to give it at all.  Bertin Martens memorably pointed out that the end of structural adjustment programmes in the 1980s (under which donors attempted to impose various policies on recipient countries) was followed by sharp decline in aid in the early 1990s.  If you see the aid relationship as an equilibrium between the interests of the donors and the interests of the recipients, and if the Paris Declaration is an effort to move away from this equilibrium by reducing the power of donors and increasing the power of recipient countries, then perhaps declining aid budgets today are a consequence these modest moves away from the equilibrium. There is almost no public support for budget support (a form of aid which embodies many of the Paris principles) and  budget support may now in retreat – so perhaps the aid system was temporarily pulled from its equilibrium by Paris, and may now be heading back to it again.  In other words, there may be a choice between an abundance of somewhat ineffective aid which balances the interests of recipients and donors, and aid which is less conducive to the interests of donors, more effective at reducing poverty, but much less abundant.  Aid agencies have a stronger internal interest in abundance than in effectiveness, and so will tend to support a return to the equilibrium in which aid is popular and plentiful, but not tremendously effective.

The third theme was the most interesting.  Mike Green recalled an idea from Empire, a ghastly book published in 2000 by Antonio Negri and Michael Hardt, which suggested that activists may organize themselves as a ” post-modern posse”.    Mike suggested that, in the absence of effective mechanisms for global governance to provide public goods in a rules-based system, we are left tackling these problems in temporary coalitions, or posses, which come together outside formal structures and without formal legitimacy. Examples range from the coalitions of the willing which come together to support military intervention, to the vertical funds which have proliferated in the aid industry.  (Mike was not suggesting that this was desirable, but pointing out that this may be what happens in a second-best world without effective global institutions).  This idea clearly resonated with the group, which recognised the applicability of the metaphor as a description of today’s development system. (Update: more on the ‘posse’ idea from Mike Green and Matt Bishop here.)

My own view, for what it is worth, is that:

• we should consciously reposition aid as support to those who are most marginalised to provide them with access to key services such as food, water, health and education, and move away from the idea that the purpose of aid is to accelerate economic development;
• that’s not because economic development isn’t an important objective; but it may not be the best use of aid;
• the main things that industrialised countries can do to promote economic development in the developing world may be changes in other policies ‘beyond aid’ such as trade, climate change, migration, climate change, cooperation on tax, tackling corruption and illicit financial flows; and arms sales;
• some organisations which profess to be interested in development are too heavily focused on aid and not enough on how we can improve these other policies.

It seems extraordinary that after 50 years of international aid, there is still no consensus on whether it works. Zambian economist Dambisa Moyo (Dead Aid) has argued that aid is not only ineffective, but is actually detrimental to development.  Bill Easterly (The Elusive Quest for Growth) says that ‘trillions of dollars’ of aid have had little effect.  Others, notably Jeff Sachs (The End of Poverty) and Roger Riddel (Does Foreign Aid Work?), have argued that there is plenty of evidence of the success of individual aid projects, and that it has brought about substantial improvements in people’s lives.  If we cannot even agree on whether aid works at all, how can we address the more important and nuanced questions such as how to make that aid more effective?

At the heart of this disagreement is not a dispute about the impact of aid but about what we mean when we ask whether ‘aid works.’

Microfinance is an example which mirrors the issues in the wider aid industry. Microfinance has often been touted as a bottom up solution to poverty. The Nobel Peace Prize 2006 was awarded jointly to Muhammad Yunus and Grameen Bank “for their efforts to create economic and social development from below.”  Give people access to credit, the story went, and they will be able to invest in businesses of their own. Instead of needing long-term support, the poor will be able to stand on their own two feet.  The Acumen Fund promises “Dignity not Dependence. Choice not charity.” This attractive prospect is one reason that microfinance has been so successful in raising donor funding, especially from foundations and private giving.

Following dozens of studies of microcredit and microfinance, there is little credible evidence that microcredit itself lifts people out of poverty. The two good randomized controlled trials find no impact of microcredit on poverty (though to be fair they have not yet been running for very long). As the evidence has challenged these grandiose claims, some in the microfinance industry have chosen to defend aspirations which are both more humble and more plausible.  First, there is growing recognition that much else besides access to credit is needed to enable poor people to run a successful business, and so microfinance can at best make a contribution to a wider set of circumstances needed for development.  Second, there is recognition that, even if microfinance is often used for consumption rather than investment, it is still a significant improvement in people’s lives if they have more control over their finances and are better able to deal with uncertainty and volatility in their incomes.  Third, microfinance may lubricate the process of experimentation and failure whichmay help successful firms and enterprises to emerge.

The rest of the aid industry would also benefit from a more nuanced account of its objectives. We often talk about aid as if it falls into two categories: humanitarian aid and development aid. But in reality this is a false dichotomy: most aid falls into neither category. More than 60 percent of aid is a long-term contribution to the provision of key services such as education, health, water and sanitation, and an investment in the institutions needed to provide them in the future. Improving people’s lives is a realistic and laudable goal. Measured against this more humble (but still very important) objective, there is plenty of evidence of the success of aid.  Aid has helped to abolish smallpox, to increase the number of children in primary school, and to give families access to clean water and improved sanitation.  Charles Kenny (‘Getting Better’) has convincingly argued that when measured by almost every standard other than income, the quality of life has improved substantially in developing countries. Foreign aid has made a significant contribution to these improvements.

It is tempting to make the bolder claim that investments in education and health also improve growth and development in the long run.  Perhaps they do – but, as with microcredit, the evidence for this relationship is weak. Why is it not sufficient to say that people everywhere should have access to these services – including financial services – whether or not this leads to long-term transformation of their economy and society?

Everyone wants developing countries to escape aid dependency, and most people recognized that this requires sustainable growth and jobs.  Because this is such a compelling objective, the development industry has been tempted to justify aid on these grounds.  But the evidence from opinion polls and focus groups suggests that the public is willing to support aid which demonstrably meets immediate human needs irrespective of whether this contributes to long-run growth.  By setting excessively ambitious objectives for aid, the industry risks alienating the public from their emotional connection with what aid can achieve, and asks to be measured by standards that it is unlikely ever to be able to show that it meets.

There are many flows of finance to developing countries which will contribute to investment and growth, including direct investment, portfolio capital flows and remittances.  The main drivers of growth will come from the country itself through private and public investment.  Aid is a small proportion of the finance for developing countries. But it is a precious resource because, unlike other sources of finance, it can help meet the needs of the most marginalized communities, women and girls, and people living in long-term chronic poverty.  If we want to see aid used effectively, we should demand that it is used for these purposes for which it has a unique contribution to make.  Just because growth is a priority does not mean it is a priority for aid.

Measured against reasonable claims about what aid can achieve, it is demonstrably effective.  As we have seen with microfinance, the industry damages rather than enhances its case by overstating what aid can achieve. By setting realistic objectives, we can both make aid more effective, and demonstrate the difference it makes.

(h/t Ian Thorpe)

Primary school close to our house in Addis Ababa

Living in Ethiopia for the last three years, I saw aid working every day. I saw children going to school, health workers in rural villages, and food or cash preventing hunger for the poorest people.  The academic debates about aid effectiveness seem surreal when you are surrounded by tangible, visible evidence of the huge difference aid makes to people’s lives.

But on the whole the sceptics are not disputing that kids are going to school because of aid. They are asking what effect that has on the country as a whole. Does it lead to economic growth? Does it drive up the exchange rate and so damage competitiveness? Do governments become dependent on donors and so less accountable to their own citizens?  Does aid keep the bad guys in power?

It is possible that aid is effective in terms providing people with basic services, and at the same time that it is not effective at increasing economic growth.  It is even possible that aid simultaneously does short-run good (better services) and long-run harm (worse institutions).

It was this difference between perspectives which made me want to respond to the call for evidence in an investigation into aid by the Economic Affairs Select Committee of the British House of Lords. This committee, which includes some well-known economists and other public figures, is examining the ‘Economic Impact and Effectiveness of Development Aid’.

My written submission is here.  It is just six pages long. ( I’m very grateful to Stephanie Majerowicz for her help putting this together.)

The submission begins by trying to address the question of what aid is for, which seems to be the source of much of the confusion about whether aid works. Aid is often regarded as having two purposes: humanitarian aid to alleviate suffering usually in an emergency, and development aid to promote economic growth and sustained prosperity. But this is a false dichotomy: most aid falls into neither category. About two thirds of British bilateral aid is spent on improving services such as education, health, water and sanitation. This aid is not a temporary humanitarian response to an emergency, but a long-term contribution to the provision of key services and an investment in the institutions needed to provide them in the future.  The success of this aid is not best measured by whether it leads to growth in the short or medium term, but by the improvements it brings about in the quality of people’s lives.

The submission then reviews the evidence about whether aid leads to economic growth (answer: we don’t know) and whether aid improves people’s lives (answer: yes it often does).  The more interesting question is not whether aid works, but which aid works.

But there are also possible adverse effects of aid, and these are potentially serious. The submission suggests that these may be mainly a consequence of how aid is given and that they can largely be eliminated if donors give better aid. But that requires donors to overcome domestic political obstacles to reform of aid.

The evidence finishes with ten suggestions for how to make aid work better.  They are:

1. Spend more through the multilateral system
2. Make aid more predictable
3. Make aid transparent, accountable and traceable
4. Build the accountability of governments to their parliaments and citizens
5. Focus on results and use this to simplify aid
6. Invest more in global public goods, especially new technologies
7. Focus aid on people in chronic poverty, and on women and girls
8. Leverage the private sector
9. Use innovative finance to increase the productivity of aid
10. Learn more and fail safely

It is a good discipline to be concise, but it is not possible to do full justice in six pages to the nuances of these issues. I have tried address the big questions with what I hope are balanced and dispassionate judgments.  I hope you will let me know in the comments if you think I’ve got these right.

Read the full submission here.

This blog post was also published on CGD Views from the Center.

Nick Kristof has a good article (if a little simplified) in the New York Times today about randomized trials, which he describes as ‘the hottest thing in the fight against poverty’.  This new wave of rigorous evidence about impact is helping us to understand which policies and programmes in developing countries work well (whoever pays for them) and which do not.

I especially enjoyed his digression about the importance of economists:

When I was in college, I majored in political science. But if I were going through college today, I’d major in economics. It possesses a rigor that other fields in the social sciences don’t — and often greater relevance as well. That’s why economists are shaping national debates about everything from health care to poverty, while political scientists often seem increasingly theoretical and irrelevant.

Economists are successful imperialists of other disciplines because they have better tools. Educators know far more about schools, but economists have used rigorous statistical methods to answer basic questions: Does having a graduate degree make one a better teacher? (Probably not.) Is money better spent on smaller classes or on better teachers? (Probably better teachers.)

I suspect not everybody will agree with this.

One reason that ‘fungibility’ doesn’t bother me much is that I think that it is a good thing for a government to be able to choose (and to be accountable for) its own spending priorities. To govern is to choose, so if we want to encourage the emergence of capable, accountable and responsive states we should think twice before trying to limit the ability of a government to make choices over its spending priorities. I also think there is a reasonable chance that they are better informed about their priorities than we are.

But suppose you don’t agree with me, and you think that donors should try to ensure that when they give aid, the overall effect is to increase spending on the thing for which they have given the aid.

You have broadly two choices.

Option 1: you can give your aid as a project. You use your own procurement system, pay the contractor directly and check that the clinic has been built, or that the teacher has been trained. So you know that your money has built the school. (Right?)

Option 2: you can give your aid through the government, either through the finance ministry or through the relevant line ministry. They pay for the work to be done, and you can still check that a clinic has been built.

It may look at first like a no-brainer: the project seems to give you more certainty that your money has been used as you intended. But that superficial view is pretty much exactly wrong. There may be good reasons for preferring project aid in particular circumstances, but the ‘fungibility’ of budget support is not among them.

Under option 1 the government is still able to make its own budget allocations. So if you build a clinic the government can, if it wishes, reduce health spending to offset your project spending dollar for dollar. Now it can spend that money on defence, or the President’s palace, or any number of other things. When you ask for assurances from the finance ministry that it will not spend the budget on line items of which you disapprove, it will probably point out that none of your money is involved and that you should mind your own business. There is no way to compare actual health spending with what it might have been without your project, so you can never determine what impact you have had on the government’s budget allocations.

Under option 2, by contrast, the government budget is at least partly your business. You might employ staff to understand the budget allocations and to discuss them with the finance ministry and with line ministries. Before making your grant you seek assurances about the future trajectory of spending you think is important. You might obtain assurances that spending on social services will continue to rise from one year to the next, if that is what you think should happen. If the government decides to spend money in ways you think unwise, or worse, you have some standing to have a conversation with the finance ministry and to ask it to reconsider, or even to make your aid conditional on the overall budget allocations (for example, donors attempted to constrain the growth of Uganda’s military spending in this way).

Here is an example of how our normal assumptions about fungibility can mislead us. A USAID assessment of Mozambique alleges that, “more than $100 million of donor funds were used in 2001 to bail out the failed privatization of the Commercial Bank of Mozambique (BCM)”. Let’s think about what this means. In what sense were ‘donor funds’ used to bail out BCM, rather than the government’s own revenues?

This assertion seems to require us to speculate that if the donors had not given aid to the government, the government would not have bailed out BCM. But is there any reason for thinking that if there had been no aid at all, the government would have felt obliged to spend its own resources on health and education first, instead of the bank bail out? Or would it have bailed out the bank just the same and provided fewer schools and clinics? And if all the donors had run health and education projects themselves, instead of giving aid to the government, what would the government have done with its budget savings in these areas? Would it not have used the money for the bank bail out?

The (explicit) claim that donor money was used for the bail out, and the (implicit) claim that this could happen because the aid was provided through the government budget rather than as stand alone projects, both seem doubtful. The bank bail out would probably have happened anyway: in which case the effect of aid was that there was more provision of health and education services than there would otherwise have been. If so, then in ordinary language we would say that donor funds were used for heath and education (not for the bail out) because that’s the difference the aid made.

Furthermore, in this particular case, the fact that the donors were mainly giving budget support almost certainly resulted in higher spending on social services than if they had been giving only project aid. The donors giving budget support had robust discussion with the government of Mozambique about its plans to bail out the banks, and thereby perhaps limited the resources used for the bail out. If the donors had been giving all their aid through projects, they probably would have not been able to have that conversation at all. If budget support gives the government less room to reallocate its spending because donors have more influence, this suggests that aid provided through the budget is less ‘fungible’ than aid provided as projects.

Whether or not you agree with these judgments about what might have happened in Mozambique, the example shows that our talk about ‘fungibility’ is somewhere between meaningless and irrelevant. We ought to be concerned about whether the clinics or schools got built. We can observe these outputs equally well whether we give project aid or budget support. We get into a mess when we start to speculate about what would have happened in an alternative universe in which we did not give aid, or in which we gave aid in some other way, which is what concerns about ‘fungibility’ invite us to do. We can’t predict whether those outputs would have been built without us, irrespective of whether we give project aid or budget support. Nor can we predict what would have happened to the rest of government spending whichever way we choose to give our aid.

Any statement about ‘fungibility’ requires us to compare the real world with some hypothetical world in which we did not give aid or in which we gave aid in some other way. Whatever we do to improve public financial management in the real world does not solve the problem that we can’t audit the hypothetical world. Even if we had perfect information about the real world – which is what we try to approximate by running our own projects – that wouldn’t tell us more about the alternative world, so it wouldn’t reduce the uncertainty about ‘fungibility’. If you are concerned about fungibility, greater use of stand alone projects is not a rational response.

If we are concerned about how the rest of government spending is allocated, the best way to have some influence is to give some of our aid through the government. Then at least donors can have a conversation with the government. (This isn’t merely a theoretical point. It actually happens. The US tends to be less influential over government budgets and public financial management in developing countries than other donors because it normally provides project aid.)

There are countries in which public financial management systems are incomplete and weak. In those environments we are inclined to be especially careful that the aid we give is used for the purposes we intend. It is common to assume that providing aid as a project makes it less fungible, and so less susceptible to being used to finance spending which is not consistent with our priorities. But this is nonsense. Governments can use the fiscal space created by aid equally well whether you give aid as a project or through government systems; when you give project aid you shut your eyes to the problem, but it doesn’t go away.

Pedants’ corner

Though this issue is usually known as fungibility of aid, to be pedantic the correct label is liquidity of aid since the concern is that aid may substitute for a different asset – namely domestic revenues – rather than another unit of the same asset.

My article begins with a quote from Brian Eno:

We expect that the next big thing will be a bigger version of the last big thing. What we don’t expect, yet what is most likely, is that the next big thing won’t look important to us at all – until it’s so important that we can’t ignore it.”
Brian Eno, Prospect, 26th November 2010

There are some interesting articles elsewhere in the same edition looking at the role of the private sector in development, and a rather eclectic mix of other articles.

There is a lot of detail below, so for busy readers here is a summary of the proposed ten steps for aid transparency.

1. Donors cannot achieve meaningful user-centred transparency just by putting project data on their websites.  Users need information which comes from many different organisations simultaneously.  Yet it is not realistic to try to maintain lots of different manually-updated databases which collate information for users. The answer is for organisations to publish online all the information they have about aid projects and programmes, in a common, reusable format, which can then be used as the basis for user-centric databases and applications. The International Aid Transparency Initiative (IATI) is the best chance for a generation of creating such a public infrastructure for information about aid. All donors, foundations, international organisations, NGOs and aid contractors should implement the IATI standard as the key first step to meaningful, user-centred aid transparency.

2. Any organisations which do not implement IATI voluntarily should be pushed to do so by the organisations and people who fund them. For example, official aid agencies should require every organisation to whom they give a grant or contract to implement IATI as a condition of handling public money.  Citizens should refuse to put money into a collecting tin if the charity is not implementing IATI.  Governments should consider making IATI compliance a precondition for charitable status and tax relief.  Developing country governments should make IATI compliance a precondition of local registration by international NGOs.

Google has a policy that it should eat its own dogfood

3. Donors, foundations and NGOs should ‘eat their own dogfood’ – that is, any information on their website and any analysis and data that they publish about aid should use be based on the publicly available data infrastructure.  This will give the organisations an incentive to ensure that the information they make available through IATI is up-to-date, comprehensive and accurate and that the system is fit for purpose.

4. Once donors and foundations are (a) publishing their data through IATI and (b) using IATI for their own websites and analysis, they should consider (c) helping other users, especially in developing countries, to make the best use of this information. But donors’ priority should be getting their own house in order by publishing their information in a reusable format, since this is something only they can do, and using that public data infrastructure themselves, before they help others to do so.

5. One of the highest priorities for new information about aid is that all aid spending should be classified in future according to the recipient country budget classifications as well as agreed international classifications.  The Technical Advisory Group for IATI should agree the mechanism for this as soon as possible.

6.  It seems so obvious that it shouldn’t need saying, but aid would clearly be more effective if we had more information about the future plans of donors, foundations and NGOs. Homi Kharas, in Measuring the Cost of Aid Volatility, estimates that the cost to aid recipients of historic unpredictability of committed aid flows is at least 15 percent. It could be much higher. Finance ministries, line ministries, the IMF, other donors, NGOs and the private sector would all do a better job with their money if they knew what was planned by others.  Organisations should publish whatever they know about their future aid plans, generally (with some possible exceptions such as for procurement) at the level of detail they know it.   This is likely to be the hardest part of IATI for many organisations, as few have mechanisms to keep systematic track of their forward spending plans.

7. A global system of traceability in aid, enabling money to be tracked from taxpayer to services delivered, via multiple layers of multi-donor funds, international and local NGOs and private sector contractors, is less difficult and expensive to implement than you might think.  Traceability of aid would bring about a huge step forward in efforts to make aid more effective and less prone to corruption and waste, and for building public support for aid.  Done right, it could also substantially alleviate the reporting burdens of aid recipients, NGOs and implementing agencies, and reduce donors’ costs of monitoring compliance.  Priority should be given to implementing this part of the IATI standard.

8. Donors, foundations, NGOs and implementing organisations should start recording and publishing detailed geographical information about aid projects and programmes using the newly-agreed IATI standard format for geocoding of aid, and they should require their implementing partners to do the same.

9. Some donors and agencies have defined, or are in the process of defining, their own internal standardised output indicators. Organisations should now make a big effort to reach an international agreement on a common set of standardised ouput indicators to facilitate international comparability across organisations.  This information can be reported through IATI.

10.  When we connect feedback from citizens in developing countries to a rich public data infrastructure about aid, we will have a much more realistic inderstanding of the impact and effectiveness of aid. That day  is coming sooner than most of us realise.

You will doubtless think me guilty of hyperbole when I say that the emergence of an open, international infrastructure for development information has the potential to transform the development business, much as the internet has transformed so much of our society, and for similar reason.  I’m sorry that this is an absurdly long blog post, but I hope it will convince you of the amazing opportunities which are there if we seize them.

Recap: two key themes

Two themes from my previous post are directly relevant to the next steps for aid transparency.

First, transparency needs to be centred on users, not organisations.  Only a few people are interested in the details of specific institutions. Most users want to know about all the resources and activities in their country, their sector or their community. They are mainly not very interested in the distinction between aid and other sources of finance. They want comprehensive information about resources from all organisations, whether or not it is classified as aid, so that they can monitor and influence how that money is allocated and used.  This means that it is not sufficient for each aid organisation to be individually transparent: the information has to be accessible in a form which enables users easily to see in one place comparable, consistent information from dozens of different organisations which they can add up and use.

Second, transparency should focus more on execution and not just allocation. Many parliamentarians, NGOs and academics in donor countries are primarily interested in how aid has been allocated across countries, sectors and activities. They often want to ensure that donors are living up to their promises. But in our analysis of stakeholder needs, people in developing countries repeatedly told us that they want to be able to see how money is actually being used. They want to know how much money is really arriving in their country or town; how much is taken in overheads and by whom; which organisations are contracted to provide particular services and on what terms; what outputs are produced; and what difference all this makes to people’s lives.

Organisation-centred transparency

Meaningful aid transparency cannot be achieved in the way that many aid agencies previously assumed.  While it is a welcome step forward that some aid organisations are now publishing online databases of all their aid projects and programmes, this does not meet either of the two key needs described above.  Agencies’ online project databases are an example of organisation-centred rather than user-centered transparency. As anyone knows who has tried to analyse aid spending in a particular place or sector, it is not feasible for a user to trawl through the websites of dozens of bilateral aid agencies, hundreds of multilateral agencies and thousands of NGOs, to identify the relevant activities.  Even if you could assemble all the details published by different donors, you could not create any kind of meaningful overview. Every project is described in different terms by different donors, in different currencies, languages and time-frames.  Often you can’t even tell whether donors are reporting contributions to the same project or describing different projects.  There is no way to remove double counting when money flows from one organisation to another. Nor do these project databases give us enough information about execution: they do not tell us how much money has arrived in the country, how much has been given to each subcontractor or implementing agency, or what outputs and outcomes have been achieved; and they don’t tell us anything about the agencies’ plans for future projects and programmes.

The magic database?

So user-centred transparency cannot be achieved by individual organisations putting their own project databases online, because that information cannot be aggregated across donors.  An obvious alternative is to build a database, or perhaps a few databases, to bring together comparable information from a variety of sources.

I’m writing this blog post in a café in Addis Ababa which is much frequented by ferenjis.  At the next table is Gary, a Canadian consultant who has been paid by CIDA and the World Bank on behalf of the donors to build a bespoke database of donor projects in the rural livelihoods sector in Ethiopia.  Gary has done magnificent work over the last year, visiting donor offices to collect information from each of them about what they are doing, and entering it manually into his database.  It has been an expensive exercise for donors but they already think it is has been well worth the investment to be able to have an overview of all aid-financed activities in the sector.

There are at least three other aid databases which already collect information about livelihood projects in Ethiopia. Yet Gary’s database does not draw information from any of them: he has had to construct it from scratch.  Why can’t he use the existing databases?  Because one of them is not publicly available, one publishes information with a 2 year lag, and the third was built three years ago and has not subsequently been maintained.   None of them meets exactly the needs for which Gary’s database has been designed.

Gary’s story is not unusual. There are probably other consultants like him in Ethiopia working in other development sectors, and there are hundreds more like him all across the developing world.  Donors are spending a lot of taxpayers’ money on consultants to do this kind of work again and again; and donor staff are also having to supply the same information repeatedly, in slightly different form each time, to each of these databases which one of them has commissioned.

It would be nice to think we could replace all this effort by building a small number of comprehensive and authoritative databases to meet all these different needs.  That would save everyone a lot of time and money.  But sadly it is not practical to build a one-size-fits-all database that does anything.  Any database primarily serves the perceived needs of the institution that built it, at the time it was built.

The OECD-DAC maintains the two aid databases which provide the most authoritative source of aid information.  (The DAC CRS database used to be the most comprehensive too, but in this respect it has been overtaken by AidData which contains everything in the CRS database and more).   The DAC databases were built for a particular purpose: for donors to share information with each other so that they can be held to account for meeting their promises. The DAC has never asked governments or citizens in developing countries what information they need about aid, because it is not part of their mandate to meet these needs. As a result, the DAC databases are not designed to provide even very basic information needed by developing country governments and stakeholders, such as the amount of aid which is actually spent in the recipient country, or donors’ plans for the coming year.

The introduction of country level aid management system in around fifty countries has been a welcome advance in recent years; but these too have only limited use.  They are generally designed to facilitate relationships between governments and donors, and they oftern serve this purpose perfectly well.  But there are many other important information needs which they do not serve. For example, they are not usually designed to be consistent with local budget classifications, so they cannot be used by finance ministries to support domestic budget planning.   Still less do they contain the level of detail needed by line ministries, for example to enable them to plan their activites to complement the investments made by donors.  Furthermore, the majority of country level aid management systems are not accessible by the public, so they do not meet any of the needs of parliaments, civil society, the media or individual citizens to enable them to hold governments and donors to account.

The education ministry in Cambodia told us that when they asked donors for detailed information about aid projects in the education sector many donors refused to supply the data on the grounds that they had already given a lot of aid information to the Cambodia Development Council database and they did not have sufficient resources to respond to multiple information requests. But the CDC database, which is among the best in the world for what it does, does not contain the level of detail needed by the education ministry, such as where donors planned to build schools or the type of text-books they proposed to supply.  These details were not needed by the Cambodia Development Council, and so are not included in the database, but are essential for the education ministry to manage their programmes well.

This is no criticism of the DAC database, or the aid management systems in developing countries. It just isn’t possible for a single database, either globally or for each recipient country, to meet the needs of every different stakeholder. That is why we end up with many ad-hoc databases built by consultants like Gary.   But if all those databases have to be built and maintained manually, the cost is prohibitive.

In the face of a growing proliferation of requests for data for different purposes many donors have, not unreasonably, decided they have to focus on priorities. They supply data to the DAC databases, because this is the donor club of which they are members.  They also generally supply data to the aid management systems, because these databases are clearly a priority for their partners in developing country governments.  For many donors, anything else they provide is on a ‘best endeavours’ basis – some donors do what they can to provide information in response to reasonable requests, but this manual exchange of information by fax and email, or by sneaker-net (i.e. a consultant going by taxi from one office to another) is slow, patchy and expensive.

This partial access to informatioin tends to reinforce existing power imbalances.  In 2008 civil society organisations from both donor countries and developing countries met in Accra and compared notes.  Representatives from northern NGOs reported that they generally could, with some effort and sufficient time, get information they needed from donor agencies in response to specific requests. By contrast the southern NGOs reported that when they asked donors for the same kind of information they often did not even enjoy the courtesy of a reply.

Meaningful aid transparency will occur when information is available in many different forms, in the detail and form required for particuar users, often combined with data from other sources. We can’t achieve this with a single international aid database, or a single database for each recipient country.  But if we build many separate bespoke, manually-populated databases to meet the needs of different users, we are left with a nightmare of duplicate reporting and inconsistent, incomplete and out of date databases which are too expensive and difficult to maintain.

A public data infrastructure

Fortunately there is a solution which – in common with many of the best solutions in life – lies somewhere in between.

If donors, foundations, international organisations, NGOs and implementing agencies publish all the up-to-date information they have about their aid projects, online in a common, machine-readable format, then it is possible for everyone to access that information easily, and to collate information from many sources, and to add up and compare across donors.  The reusable data format makes it possible to turn donor-centred information into user-centred information.

Once we have this information in a reusable format, any number of databases  and websites can be built quickly, and can be easily maintained.  Instead of spending a year building a database of livelihoods projects in Ethiopia, Gary could have done it in an afternoon; and the information would stay current automatically.

That is why the International Aid Transparency Initiatve is so important.  It solves the problem of turning donor-centred transparency into user-centred information. It is neither a new database, nor merely an encouragement to publish project details online.  It is an international public infrastructure for reusable data.  Donors accounting for for two thirds of global aid have now said that they will, during 2011, publish their data online in this common, reusable format.  (My former colleagues at aidinfo have done a very good short video explaining how IATI works.)

This will bring about a revolution in aid transparency.  If a country chooses not to open its aid management system to the public, that won’t be a problem any longer for citizens who want to know what is happening in their country, because it will be easy for anyone to build a copy of the database and populate it with exactly the same information from the same source.

More importantly, the creation of an international public data infrastructure for development unleashes possibilities which we could not even contemplate today. It will become easy to connect aid information to other kinds of data, such as government budgets, the distribution of poverty, or feedback from citizens.  It will unlock new analysis and insights, and allow different, less controlled, more user-centred ways of increasing accountability.

That’s why the most important step organisations can take towards meaningful aid transparency is to sign up to and implement the International Aid Transparency Initiative.  The UK has already started to publish its data in the IATI format, other donors are expected to do so in the near future.   Donors, foundations, international organisations, NGOs and private contractors should all follow suit voluntarily, or be required to do so by the people who fund them.  Government donors should make it condition of eceiving a grant or a contract that the organisation must itself implement IATI.  Bilateral agencies should not put money into an international organisation or multi-donor trust fund that does not comply with IATI.  Citizens should refuse to put money into a collecting tin unless that charity implements IATI.  And charities should not expect to continue to benefit from tax relief if they are not prepared to adhere to this international transparency standard.

Dogfooding

The raw information is not, by itself, very useful.  As well as pumping out data in a reusable format, it is right and understandable that many donors will want summarise and synthesize, to highlight key trends, draw out key lesssons, and tell their story.

As Ranil said on AidThoughts:

By all means, publish the data to allow people to interrogate it themselves. But also provide high-quality, penetrative analysis in a simple, easily understood form to support their understanding. They can always go beyond that if they wish.

I largely agree with this (notwithstanding Ranil’s suggestion to the contrary).   But I would add an important qualification: the principle of ‘dog-fooding’.

Donors should be mindful that the public increasingly expects the authorities to show rather than tell. Though most members of the public will never look at the information which underpins the summaries and narratives, they will trust the summaries more if they know that the underlying information is available for anyone who wants to check it and perhaps to construct an alternative interpretation.  So while donors should be encouraged to provide easy-to-understand analysis, they should also publish the raw data which supports it.

Furthermore, in the must-read paper Government Data and the Invisible Hand, Robinson et al from Yale proposed the following principle:

The new administration should specify that the federal government’s primary objective as an online publisher is to provide data that is easy for others to reuse, rather than to help citizens use the data in one particular way or another.  The policy route to realizing this principle is to require that federal government Web sites retrieve their published data using the same infrastructure that they have made available to the public. Such a rule incentivizes government bodies to keep this infrastructure in good working order, and ensures that private parties will have no less an opportunity to use public data than the government itself does. The rule prevents the situation, sadly typical of government Web sites today, in which governmental interest in presenting data in a particular fashion distracts from, and thereby impedes, the provision of data to users for their own purposes. [My emphasis]

This is a principle which can and should be applied to aid information.  If donor agencies were to agree that the information and analysis that they publish on their websites and elsewhere would be retrieved entirely through the publicly available IATI infrastructure, this would incentivise them to maintain their IATI data up to date and in good order; it would ensure that their analysis can be reproduced (and challenged) by others; it would increase public trust in the analysis; and it would reduce the risk of inconsistency between the summaries produced by donors and the analysis done by others.

Donors who resist the principle that they should ‘eat their own dogfood’ by using the publicly available data infrastructure for their own website and analysis have to explain why they think that the information they use is sufficiently important to be included in their analysis but should nonetheless not be publicly available for others to use.

The dogfood principle is famously practised at Google, which uses its own products internally, both before and after public release, to eliminate bugs and to make sure the organisation is always aware of the limitations of its products so that they remain focused on priorities for new features and improvements.

Helping citizens to use data

The Robinson et al paper quoted above argues that priority for government should be to publish reusable data, rather than to help citizens to use data in a particular way.

Perhaps it is reasonable to expect that the wealthy, educated citizens of America, supported by the technology of Silicon Valley, will be able to interpret and government data.  But is it sensible to expect that citizens, civil society organisations and parliamentarians in developing countries will be able to do the same?

Here’s Ranil again:

In recipient countries, both civil society and the Government needs to be helped to use the data available to work out how far the aid received in total and from each country deviates from their needs, and this again needs to be backed by a real form of accountability – and this is the hardest part of all.

I agree with this, of course.  The publication of raw data is no use unless citizens and their representatives are able to use it and to exercise real accountability over their governments, donors and service providers.  This will require investment in tools and technology and in capacity and skills, and we should expect a period of only partial success while we learn what works.

Perhaps I am more optimistic than other people because I believe that, once there is an infrastructure of publicly available reusable data, people will work out to use it.  I have a great deal of confidence in the energy and capacity of people in developing countries to sieze the opportunities of freedom when they can.

Perhaps I am too cynical in observing that many of the people – and Ranil is an exception to this generalisation – who argue most passionately for donor funding of capacity building and pilot projects and the like are also people who might expect to secure lucrative contracts from such efforts.

My anxiety about putting donors under too much pressure to focus on this is that it may reduce the priority that donors give to what only they can do, namely making available up-to-date, disaggregated, comparable, information about their aid projects.   If a donor doesn’t fund work supporting civil society groups to use aid information, then someone else can fill that gap.  But if a donor doesn’t make their information publicly available in a reusable format, nobody else can do it for them.

Furthermore, the most valuable contribution that donors can make to making it possible for citizens to use aid information is to reduce the costs of accessing and using it, by making the reusable data easily and cheaply accessible.   A modest investment which sharply brings down the costs for everyone of accessing data will have a much higher return than spending the same money enabling one particular group to assemble and use information for a particular purpose.

This means that I am in favour of encouraging donors to do what they can, with funding and expertise, to enable people to use aid information to increase accountability and so improve services; but I think it is a lower priority for donors than getting a comprehensive public data infrastructure working properly.

This means that donors should:

a. First, implement the International Aid Transparency Initiative so that there is as much information as possible freely available and meaningfully accessible to everyone;

b. Then use exclusively that public data infrastructure for their own websites, analysis and publications (the dogfood principle); this will create incentives for donors to ensure that the public information is up-to-date, comprehensive and accurate;

c. Then – and only then – invest in helping citizens to use the information in different ways.

This is a lexicographic ordering of obligations, meaning that no item on the list should be considered until the obligations above it have been discharged in full.

I do not mean to claim that helping citizens to use the data is objectively less important than getting the data out there; but I am saying that it is less important for donors to address this, since other entites can help citizens but only donors get the data published.

Budget classifications

By putting in place a public data infrastructure for development (namely IATI) we have opened up almost limitless opportunities to make more information more accessible at little cost to donor organisations and data users.  So now let’s ask how we should use these opportunities.

A key priority must be to make sure that aid information is categorised according to local budget classifications.  This has been agreed in principle in the IATI data standard, and the IATI Technical Advisory Group has identified several possible options for how it might be implemented.   The TAG should be asked to come to an agreement quickly on this so that donors can make it happen.  (The reasons why it is essential to be able to read aid information alongside national budget information were were set out in my earlier post so I won’t repeat them here.)

Information about planned future aid

The DAC databases are designed to keep track of what donors have spent, rather than future plans, reflecting their primary role of allowing donors to hold each other to account for keeping their promises.  Country aid management systems usually have more forward-looking information, reflecting their function as supporting the dialogue between government and donors.  But the forward looking information they contain is frequently patchy and incomplete.

Homi Kharas, in Measuring the Cost of Aid Volatility, estimates that the cost to aid recipients of historic unpredictability of committed aid flows is 15 percent.  Finance ministries, line ministries, the IMF, other donors, NGOs and the private sector would all do a better job with their money if they knew what was planned by others.   It seems so obvious that it is scarcely worth saying, but it is preposterous that a government cannot make an informed decision about where to supply new water points because they don’t know where donors and NGOs are already planning to provide services.  Lack of information about current and future aid spending leads to duplication and overlap in some places, and woefully under-served communities elsewhere.  We miss the synergy of complementary investments (investment in agriculture together with rural feeder roads, for example), and we create uncertainty for the private sector.

Furthermore, for people in developing countries, know what donors are doing and planning to do is a critical first step in injecting some local accountability.  The people we spoke to were not mainly interested in the past: they wanted to be able to find out what is planned and how they can become involved.

This is a challenge for many donors, for two main reasons.  First, aid projects often don’t get into their systems until they are into the implementation stage and beginning to disburse.  Before that, plans are often held as less structured information – such as in planning documents or email exchanges, and these plans are rarely collected into a central repository.  Finding a way to get this information systematically into IATI is therefore a non trivial task.

Second, some donors are worried about saying too much about their plans until they have considered their options in some detail, secured high-level or political approval within the agency, obtained approval from legislators who must appropriate the funds, and reached an agreement with the host country.  Donors do not want to announce the budget for a project before they put it out to tender,  as they don’t want the bids to congregate around the budget ceiling.

Neither of these problems is insurmountable, and given the importance of forward looking information we should aim to make it a priority to address them.  Concerns about pre-empting the decisions of the legislature seems to be a case of inventing obstacles (it is easy to include disclaimers, and governments talk about future spending plans all the time).  The genuinely hard problem is logistical: most donors don’t have much of this information is a reusable form.

The IATI mechanism is designed to enable users to collate information from many different sources.  This may be the solution for some organisations who do not keep forward looking information in their management information system.  These organisations may find it most practical to publish information about actual spending from their central finance system, while decentraliszing publication of planned spending to country offices or embassies.

The people and organisations who want information about future aid plans – such as developing country partners, NGOs and civil society organisations in developing countries – are not the most powerful stakeholders, and so it is no surprise that our existing systems are not designed to meet these needs.   Our systems are mainly designed to record and report past spending, because that is what donor countries have decided to monitor, and that is what they need to report to parliaments and auditors.

Organisations should adopt the principle (proposed to us by a statistician from a donor aid agency) that ‘if anyone knows it, everyone should know it’.  Though this is the part of the agenda that may require the most administrative change,  the benefits of sharing forward looking information are potentially huge.

Traceability

This is a simplified diagram by Homi Kharas of how aid flows. There are many more layers than depicted here.

When courier companies introduced barcode systems to track envelopes and parcels, they faced non-trivial implementation costs, but the savings have been enormous.   Barcode scanning has replaced a lot of manual recording, so streamlining administration, and has enabled companies to trace missing items easily.  It has provided management information to identify bottlenecks and so drive performance improvements. It has hugely reduced the companies’ customer support costs, since customers can see for themselves where packages have reached through self-service websites.  Perhaps more importantly, the fact that customers can track packages themselves has increased customer trust in courier companies, and some larger customers have integrated the tracking information from their courier company into their own management information systems.

A system of aid traceability is technically feasible, and while the implementation costs would not be negligible, the savings would be huge.  There is a placeholder for such a mechanism in the IATI standard waiting to be fleshed out.  My view is that this should be a very high priority.

How would it work? The underlying design principle is that each organisation disbursing money would report the details of its spending and that this would include the transaction identifier (or identifiers) corresponding to the source of funds for that spending.  For example, a multi-donor trust fund would publish each item of spending and include an attribution of that particular expenditure to the fund’s various income from donors.  Some spending would be linked to particular grant (e.g. where a donor had made a grant to the trust fund for a particular purpose), and other spending would be attributed pro-rata to various general sources of funding.

Once implemented, a system of traceability would not be a significant burden on aid recipients and implementing agencies. Each organisation and agency would be asked to publish information it already has: the source of the money it spends. If this is done consistently and the data published through IATI, it would enable any stakeholder to cumulate the information across the aid system and so obtain an overall picture of where aid is actually going.  It would be possible for the first time to trace money from taxpayer, through donor agencies, trusts funds, NGOs, governments and private contractors to implementation on the ground.  It will become possible to compare overhead costs and margins, to see whether supply chains are unnecessarily long, and to establish how much money actually reaches the intended destination.

The same traceability standard would also solve completely the problem of checking whether donors are living up to their multiple spending pledges on aid – for example to create new sources of finance for climate change.  (I’m largely hostile to these spending pledges, but that is a different matter.)  All a donor would need to do is designate each spending pledge as a different “source” of their money, and it would then be possible for anyone easily to trace whether each donor had in fact spent the money they promised and to see what had eventually happened to it.  This is a much simpler and more effective solution to ensuring that spending pledges are kept than the leading alternative, which is to set up brand new global funds for the sole purpose of enabling the money to be accounted for separately.  Traceability is a much cheaper, more efficient way to track spending pledges and prevent double counting.

Indeed, a standard for traceability could greatly simplify aid management and reduce the bureaucratic burdens of the aid system.  Intermediary organisations already have to provide information in considerable detail to their donors, to enable the funders to see how the money has been used and whether it has been spent in accordance with various constraints.  An NGO might have to comply with a rule from one funder its money is not used to finance capital equipment, and a different rule from a different funder that the grant is not used to finance travel to and from the United States.  (This is a real life example.)  So all organisations in receipt of grants or contracts are already having to apportion their spending across various sources of income so that they can show they have complied with the different obligations imposed upon them in grant agreements and conracts.  Traceability would greatly simplify reporting by NGOs and implementing organisations. Instead of manually completing forms and spreadsheets for each funder, they would simply publish the details of their spending electronicallly, with all their spending attributed to particular sources of income.  Donors would be able to access the information electronically through the IATI data infrastructure to confirm that their particular grants or payments were being used by grantees and contractors in the agreed way.  This would both simplify and streamline reporting by NGOs, contractors and other implementing agents, and streamline compliance monitoring by donors.

A system of tracability would also eliminate double counting by implementing agents.  I know a former MP from Mozambique who was asked to officiate at three separate opening ceremonies for the same school in his constituency, each with a different donor as the guest of honour to view the school for which – according to the invitation – they  had paid. Each donor was able to report to its headquarters that the money had been properly used for the purpose intended, and the result was this new school.

This scam is widespread in the aid industry and without traceability there is nothing in the system which prevents it.   Traceability would make transparent where administration overheads are too high.  It would show which organisations are not disbursing money, whether through incompetence or graft, and it would narrow the scope for corruption and waste.

The system of traceability proposed here would not require a central database or a complicated new set of reporting requirements.  All that is needed is that  implementing agents should have to identify the source of each transaction in a consistent way.  Donors could simply require this in their contracts and grant agreements.  Far from adding to the workload of NGOs and contractors, such a system could greatly reduce reporting and bureaucracy. And the IATI information infrastructure is ideallly suited to enabling these fragments of information reported by many different decentralised organisations, each individually meaningless, to be added up into a overall picture which is not only useful but potentially game-changing.

Geographical coding

The Ethiopian Government – one of the poorest countries in the world – has a GIS database of all the public health facilities in the country.  But there is no equivalent information about the location of health facilities provided by donors and NGOs.

World Bank health projects in Kenya overlaid on a map of poverty levels

The technology for geographical coding has changed out of all recognition in the last few years.  Everyone with a smartphone has the technology in their pocket to record the location of a piece of a school, a well or a clinic and to add it automatically to a database.

When aid projects in Nepal were geocoded, and then compared with a map of where poverty is most acute, the donors and government found there was no correlation. The aid projects were all concentrated around the offices of the NGOs and along the tarmac roads, far away from the people living remotely in mountains whose need is greatest.

AidData has a very useful summary of the benefits of geocoding and mapping.  More and more donors are seeing its value. I’m told that when the US Embassy in Yemen geocoded its projects it rapidly found that this was the framework they used most often for planning and mointoring their aid.  The Gates Foundation has similarly found it useful to geocode all its agricultural projects.  Yet neither organisation has chosen to publish this geographical information for others to use. The World Bank, working with AidData, has geocoded all of its active projects and made this information publicly available (see http://geo.worldbank.org/).   Their Mapping for Results programme is at the forefront in the development industry.  (I thought I saw a recent announcment by the US Government that it was moving to geocoding in ten pilot countries, but I can’t find any trace of that now.)

This is an example of increasingn returns to information.  The addition of geographical information to aid data enormously increases the value of the information that is already being collected.  Geographical information offers one of the most useful and intuitive way of organising information, and opens the way to new platforms for information sharing and gathering.

It is important that as more and more donors move to geocoding information, they do so in a consistent way.  That will increase the value of the information, and reduce the burdens on implementing organisations who will otherwise find themselves having to report the same information in multiple formats.  The IATI standard does not yet include a requirement to geocode data, but it does set out a common format for voluntarily doing so.

An important step towards meaningful aid transparency would be an agreement among all donors, NGOs, and implementing agencies to geocode all their activities from now on, and to publish that information through the IATI infrastructure.

Outputs and outcomes

The discussion so far has been mainly about spending, and the need to keep track of how money is spent.  But none of us thinks that is what is ultimately important. What we all really care about is what outputs are produced as a result of all this and what difference they make to people’s lives.

Some donor agencies have realised that it is very helpful to have standardised measures of outputs within their organisation. This enables them to compare performance across projects and programmes, and so learn what works best.  It enables them to identify wasteful or expensive programmes and put more aid into the most effective programmes.  It enables agencies to estimate totals of the outputs which their work is supporting across the world, which is useful as part of their accountability to taxpayers.

When the World Bank looked at the different ways it was measuring its textbook programmes, it found a vast range of different output measures (including, in one case, a text project whose outputs was specified in metric tonnes).   When one bilateral agency put together comparable measures of textbooks purchased by different programmes in different countries, it found that the difference in unit costs between the cheapest and the most expensive programmes was substantial – a discrepency of two orders of magnitude which could not be explained by differences of circumstance between the countries.  (Sadly this analysis was never published.)   We can only make these comparisons when we standardise measures of outputs.  In practice the process of arriving at standardised indicators has been fairly boring, but they have not been particularly difficult to implement.

Common output measures would be even more useful if they were standardised internationally across aid agencies. Then we could compare the cost effectiveness of different international organisations, including comparing bilateral donors, development banks and NGOs.   We could learn not only within aid agencies, but between them.

Internationally comparable output measures is, in my view, the most important step on the road to a sensible division of labour in the aid industry.   Specialisation will only increase the productivity of the system if organisations specialise in what they are good at, and we can’t know that until we have comparable measures of their cost-effectiveness.  When it is apparent to everyone how much it costs for different organisations to provide the same outputs, there will be public pressure on the worst-performing organisations either to raise their game or to focus instead on the things which they can do better.

There are inevitably squeals of protest from the aid industry about all this.  In part this is the modern equivalent of political pressure which led to the Calico Acts: vested interests resisting any kind of competition which might undermine their privileged position. Competition reduces the producer surplus, so you should expect incumbent producers to resist it.

But there are more creditable worries about introducing standardised output measures: that they may push donors to funding what can be measured rather than what is important, or that they will undermine the principle of country ownership by defining a rigid, global idea of what is ‘good’ in development.

I don’t find either objection persuasive.

I have no difficulty accepting that there many activities in development which have rather diffuse, difficult to measure and unpredictable benefits which are nonetheless worth doing because the potential benefits are large – I have, after all, spent the last three years of my life promoting aid transparency, which is an example of just such an activity.  But I don’t think the advocates of spending part of the aid budget in these ways should expect to be funded without having to make a robust case.  If we have good measures of the benefits of alternative uses of aid – such as vaccinating children – then someone who thinks that aid should be spent on capacity building or public sector reform should produce the evidence and analysis which justifies their view.   We should not be subject to levelling down, in which we refuse to do the best we can to quantify outputs whenever possible on the grounds that it might make other kinds of investment look relatively less attractive.

Nor do I believe that standardised output measures will undermine country ownership.  Aid donors already require recipients to provide a raft of information which they say they need for their domestic accountability.  Recipient governments, NGOs and implementing agencies would be overjoyed if donors could get their act together and ask for reports on the same, rather than slightly different, measures of output.

Some donors have shown that they understand this by moving to internal standardised output indicators. Before they become too attached to these, they should make a big effort to get international agreement to a common set of indicators which they are all willing to use. This would be a big step forward towards meaningful aid transparency, especially for those people whose primary interest is in understanding what aid achieves, and not simply in tracking how it is spent.

Citizen feedback

The aid industry has relied for too long on monitoring and evaluation by so-called experts, brought in from donor countries to conduct stakeholder interviews and review logframes.  The real experts on whether an aid programme is working are the people who are supposed to be benefiting from it.

Can we link information about public services to the aid programmes which funded them?

As we implement a public data infrastructure for aid, one of the most exciting new possiblities is that this will help us to find out, for the first time, information from citizens about their experiences of how aid is used and their priorities for the future.

The Maji Matone (‘Raising the Water Pressure’) programme in Tanzania  enables  citizens to use their mobile phones to give feedback on the state of rural water supply. The information is then forwarded to the relevant government authorities – thus enabling them to respond quickly – as well as to the media.  This kind of feedback is a great way to improve public services in developing countries.  But it will do nothing to improve the quality of aid unless this feedback about services can also be linked back to the specific aid programmes that supported those services.  If the information coming from Maji Matone about which water points are working can be mashed up with information coming from donors about which of those water points they paid for, then we can find out which donors’ provide the most useful and functioning water points.  It is ironic that the part of this jigsaw that is missing is not real-time  feedback from rural water point users in Tanzania, but the necessary information from donors to connect that feedback to their aid programmes, despite the money and technology at their disposal.  When donors move ahead with detailed geocoding, and publishiing that information through IATI, a big part of this problem will be solved.

The examples so far – from crowdsourcing in disaster relief to citizen report cards in health clinics – suggest that when citizens are able to get engaged, the benefits can be enormous.

A public data infrastructure for aid creates a platform which makes this possible on a large scale. Together with with growing access to mobile phones and the internet, it will change the power dynamics in the aid industry forever.  For the first time, it will be possible on a large scale for citizens to set priorities and give feedback about what is working in development.

Conclusions

The emergence of an open data infrastructure for development has huge potential to enable us to use aid much better.  I’ve proposed ten steps to improve that infrastructure, and to begin to take advantage of the opportunities it offers.   Here they are again, in short form:

1.  Putting a database of aid projects online does not result in user-centered, meaningful aid transparency unless the information is online in a common, machine-readable, reusable format.  Donors, foundations, international organisations, NGOs and aid contractors should implement the IATI standard.

2. Donors should require NGOs and and implementing agencies to implement the IATI standard as a condition of grants and contracts.  Citizens should demand it of charities.

3. Organisations should use the publicly available data infrastructure of IATI to power their websites and for other publications (the ‘dogfood principle’).

4. Helping citizen country citizens to use this data is important, but donors’ top priority should be getting their own data into the IATI system and using that public data infrastructure themselves.

5. Aid spending should be published categorized according to recipient country budget classifications (as well as the agreed international classifications).

6. Forward looking information about aid is administratively challenging for some donors, but hugely important.  If the donors have forward looking information then (apart from a few exceptions) they should publish it.

7. Donors should implement a global system of traceability in aid.

8. All organisations should start to record geographical information, in the agreed common format.

9. We need an international agreement on a common set of standardised ouput indicators.

10.  We need to connect feedback from citizens in developing countries to this public data infrastructure about aid.

This is a self-indulgently long essay about the importance of aid transparency, and the priorities for how it should be achieved. Busy readers may want to read the 8-point summary below.  And for a very clear and concise introduction to the importance of aid transparency, take a look at  this video by my (former) colleagues at aidinfo.

The 8-point summary

Here are what I think are the eight most important things I’ve learned in the last three years about transparency in general, and aid transparency in particular:

1. To make a difference, transparency has to be citizen-centred not donor-centred.
   Citizen-centred transparency would allow citizens of developing countries to combine and use information from many different donor agencies; and provide aid information compatible with the classifications of their own country budget.
2. Today’s ways of publishing information serve the needs of the powerful, not citizens
   Existing mechanisms for publishing aid information were designed by the powerful for the powerful. Until the aidinfo team started 3 years ago, nobody had ever done a systematic study of the information needs of all stakeholders, including citizens, parliamentarians and civil society, let alone thought about how those needs could be met.
3. People in developing countries want transparency of execution not just allocation
   There are important differences between the information requirements of people in donor countries and people in developing countries.  Current systems for aid transparency focus mainly on transparency of aid allocation, because that is what donor country stakeholders are largely interested in, and not enough on transparency of spending execution, which is of primary interest to people in developing countries.
4. Show, don’t tell
   Citizens in donor nations are increasingly sceptical of annual reports and press releases. In aid as in other public services they want to be able to see for themselves the detail of how their money is being used and what difference it is making. They increasingly expect to engaged, and are less willing to be passive funders leaving  the decisions entirely to ‘experts’. Donor agencies – whether government agencies, international organisations or NGOs – will have to adapt rapidly to become platforms for citizen engagement.
5. Transparency of aid execution will drive out waste, bureaucracy and corruption
   There is, unfortunately, quite a bit of waste, bureaucracy and corruption in the aid system.  There is good evidence that this kind of waste is rapidly reduced when the flow of money is made transparent. Corruption and waste prosper in dark places.
6. Social accountability could be Development 3.0
   The results agenda in aid agencies is currently too top down and pays too little attention to the power of bottom up information from the intended beneficiaries of aid.  Increased accountability to citizens may be the key to unlocking better service delivery, improved governance and faster development.
7. The burden of proof should be on those who advocate secrecy
   We have published a compelling business case for greater transparency, with all the uncertainties this kind of analysis entails. So where is the business case for secrecy, which would be far harder to quantify or defend?  Why does nobody even ask for it?  Why is the (inevitable) uncertainty in this kind of analysis allowed to count against the case for transparency, when the same uncertainty would deal a much greater blow against the case for secrecy?
8. Give citizens of developing countries the benefit of the doubt
   Transparency is necessary but not sufficient for more effective aid. But the fact that transparency alone will not solve every problem should not be an excuse for aid agencies to shirk their responsibilities to be transparent. Nor should we be too attentive to vested interests in the aid industry telling us that transparency is not enough. Citizens of developing countries will be more innovative and effective than some people give them credit for when we give the information they need to hold the powerful to account.

That’s the summary.  If any of that whets your appetite and you want the long version, read on.  In my next post, I’ll look at the ten steps that development organisations should take towards aid transparency.

Aid transparency: worthy but dull?

Some of my family and friends have wondered why I have devoted three years to a topic which is so utterly dull as aid transparency.  (Most of them are too polite to ask.)  The answer is that I think this matters, very profoundly, for development and for aid.

In my heart I’m a budget wonk.  I’ve worked on budgeting in the UK Treasury and in the South African Treasury. My opinions on the importance of budget systems and how they can be improved can clear a room in seconds.

King Charles I was executed because he refused to accept Parliament's right to control tax and spending

Budget accountability is not just a technical question. England fought a civil war on the issue of Parliament’s ability to control tax and spending. It is the defining characteristic of legitimate government: if the British government cannot carry its budget in Parliament, it falls.  The power of the US Congress to control spending is at the heart of the relationship between the legislature and the executive in the US balance of power. In Australia, Gough Whitlam was sacked as Prime Minister on the pretext of his failure to carry supply in the Senate.

My obsession with the technical and political importance of the budget is why I first became interested in aid transparency.

Here in Ethiopia, donors and NGOs spend more than the government raises in domestic revenues.  Yet there is no way for a member of parliament, a journalist, a civil society organization or – heaven forbid! – actual citizens to find out what foreign powers are doing in this country.

Donor behaviour makes a mockery of the idea that the heart of government is the allocation and execution of the budget.

It isn’t only a question of legitimacy and sovereignty: for anyone who has worked on public budgeting it is also a practical question of getting the maximum value for money.

For example: a friend was working for the Health Ministry in Malawi. They were trying to work out where to invest in building new community clinics. They know where their own clinics are, of course: but have no way to find out where donors and NGOs have built, or will be building, new clinics.  So there is no way for them to assess which communities do not have a clinic nearby.  In the end they had to guess.

Parliamentarians, the media and civil society need to know how much money donors are paying to governments, and on what terms, so that they hold the government to account for how that money is used. They need to know how much money is being spent by donors outside the budget process, how can they have an informed discussion about the government’s budget allocations.

My interest in aid transparency came about initially from anger at the way donors undermine budget systems in developing countries, and I am no less angry about that today. How dare we urge countries to improve their budget systems and lecture them about the efficient allocation and execution of their budget while refusing to provide them with the information they need to do so?  How dare we demand more productive public spending, while providing none of the certainty and stability they need to get the maximum value? How dare we lecture developing countries on the need to be accountable while denying citizens and Parliaments the information they need to make an informed judgment about budget allocations?

The right to information for taxpayers in donor countries

Intellectually, I understand also the idea that citizens in donor countries should have access to information about how their money is being spent.

But to be honest, until recently I found it difficult to be motivated by this. It just never grabbed me emotionally. Foreign aid is such a pitifully small amount of money – about half of one percent of national income in most donor countries – that it didn’t seem to me a great priority for the citizens of those countries to be given a lot of information about it. And I certainly did not want to use up a big chunk of a small amount of money to answer questions from freedom of information advocates, if the consequence was that we reduced the amount of money going to people who really need it in developing countries, for example to give them access to food, water, health or education.

I’ve changed my mind about the importance of this, for three reasons.

First, I am increasingly convinced that citizens of donor countries are, in the end, the only people who can insist on aid working better.  Many of us would like aid to be accountable and responsive to the needs and interests of poor people.  But that isn’t how the power relationship works, at least not directly.  Whether we like it or not, aid will always be responsive to the people who pay for it – and that means the taxpayers of donor countries, as intermediated by their political representatives.  Fortunately, these people do genuinely want their aid to be helpful to people in poor countries, though they presently have little idea what that means in practice.  If we want aid to be more effective, we have to get information from the people in poor countries who are supposed to benefiting from aid into the hands of the citizens of donor countries showing them what is working and what is not.

Expedia gives customers comparable information compiled from many different sources.

Second, the zeitgeist in industrialised countries is changing.  Twenty years ago, citizens were happy to delegate to aid agencies and NGOs the responsibility of spending aid well, and to be told from time to time what had happened to their money.  That’s no longer true: people increasingly expect to be shown, not told, what has happened to their money, and they expect to be more involved in making choices. Information that was impossibly expensive to collect and access even a decade ago can now be published online as a matter of course, and that is what people expect from their public services.  Technology enables people to be involved in the management of their services day to day, and not just every five years.

Aid agencies in the 21^st century cannot continue to act like old-fashioned travel agents – respositories of expertise and information about options, to whom the money was given and decisions delegated. If aid agencies want to retain public trust, mandate and funding, they will have to become like Expedia – a platform on which citizens can see meaningful, comparable and reliable information and then exercise choices themselves. Unless aid agencies respond to these changing expectations, support for their work is likely to continue to decline, perhaps disastrously.

Third, the access to information movement is powerful, effective and smart. We in development have much to learn from the work they have done about the most useful ways for information to be made public, for rights to information to be asserted, and for the balance between freedom of information and privacy to be respected.  Their ideas about the need for open, reusable, mashable government data is hugely more advanced than any thinking on these issues in development circles.  (I found this paper on Government Data and the Invisible Hand especially interesting and helpful.)

Different information needs in North and South

The first thing the aidinfo team did was to pull together a comprehensive analysis of who needs aid information and what information they need.  We were surprised – indeed, a little shocked – to find that nobody had ever asked this question.

The OECD Development Assistance Committee has been collecting aid statistics for five decades, and it is the global centre of excellence on aid information. But they have a specific mandate: to share information among donors about donor efforts.  They have a database designed for this purpose.  But they have no mandate, capacity or resources to provide information about aid to people in developing countries. (This is not a criticism of the staff of the DAC, who carry out their task with great professionalism; it is a reflection on the nature of the way that powerful interests are able to define the priorities for transparency.)

We worked with actual and potential users of aid information in developing countries and in industrialised countries to find out, for the first time, what information they need.  We found a hugely rich and diverse set of people wanting information about aid.  You can find our case studies here.

For me, the most interesting lesson was the contrast between what we heard from people in developing countries and people in donor countries.

In donor countries, we heard much the same from everyone: they want detailed information about where aid is going.  International NGOs wanted to check whether donors had kept their promises, whether to increase aid overall or to fund particular programmes.  They wanted to highlight cases where aid had been allocated badly – for example, redirected from poor countries to more politically and commercially salient middle-income countries. Researchers and academics wanted information about allocation, mainly try to estimate the impact of that aid, or to provide evidence about the motives which drive aid allocations.   Ministers, parliamentarians and their researchers spoke despairingly of their inability to give a coherent account of where their country’s aid is going, or to show whether aid is being used for their citizens’ priorities.  All this is extremely important.

Yet none of the people we spoke to in developing countries mentioned any of this.  For people in developing countries the questions revolve around execution, not allocation, of aid programmes.  When a donor announces that they are giving aid to – say – a housing project in their country, what actually happens to the money? How is the contract tendered? How much money gets skimmed off by consultants and in donor overheads? How much money arrives in the country, and how much stays behind in the donor country?  Does any end up in the pockets of ministers and officials? Who decides what is built and where?  How much money actually gets spent on construction, how many houses get built, and where are they?

Key lesson: people from donor countries are mainly interested in aid allocation, people in developing countries are mainly interested in execution.

This difference in outlook partly reflects different experiences and expectations: people in industrialised countries tend to assume that a spending decision, once made, will actually be executed with a reasonable degree of efficiency.  That is not the assumption made by people in developing countries.  The difference in outlook also reflects different accountabilities: people in developing countries cannot hold industrialised countries to account for the choices they make about their aid priorities, but they can hold local players to account for how the money, once allocated, is used and what is delivered with it.  So that is what they want information about.

“We may be illiterate but we are not stupid”

We would like to tell you the story of $150m going up in smoke,” said the young villager. “We heard on the radio that there was going to be a reconstruction programme in our region to help us rebuild our houses after coming back from exile, and we were very pleased.”  This was the summer of 2002. The village was in a remote part of Bamiyan province, in Afghanistan’s central highlands, and several hours’ drive from the provincial capital—utterly cut off from the world. UN agencies and NGOs were rushing to provide “quick impact” projects to help Afghan citizens in the aftermath of war. $150m could have transformed the lives of the inhabitants of villages like this one.  But it was not to be, as the young man explained. “After many months, very little had happened. We may be illiterate, but we are not stupid. So we went to find out what was going on. And this is what we discovered: the money was received by an agency in Geneva, who took 20 per cent and subcontracted the job to another agency in Washington DC, who also took 20 per cent. Again it was subcontracted and another 20 per cent was taken; and this happened again when the money arrived in Kabul. By this time there was very little money left; but enough for someone to buy wood in western Iran and have it shipped by a shipping cartel owned by a provincial governor at five times the cost of regular transportation. Eventually some wooden beams reached our villages. But the beams were too large and heavy for the mud walls that we can build. So all we could do was chop them up and use them for firewood.”

Claire Lockhart, “The Failed State We’re In”, Prospect Magazine, June 2008

In donor countries we heard quite a lot about the need to hold aid organisations to account.  On this view, aid agencies and NGOs should be able to show exactly how their money is used, and for what.  Many organisations already put quite a lot of information on their websites so that their stakeholders can look at their activities in detail.

Yet from developing countries, we heard nothing at all about the need to hold individual aid agencies to account. Few people in developing countries are concerned with the performance of the World Bank, or of DFID.  They usually want to know, from all that money from whatever source, how much is likely to arrive in their community, or into their sector, and how they can influence how that money will be spent.

Many developing countries have their own aid databases. These are often developed by the planning ministry or Prime Minister’s offices. I was very surprised to learn that they are almost never designed to provide information compatible with the country’s budget system; and that most of them are not available to the public.  So while these databases are very important and useful for the purpose for which they are designed, to enable developing countries to manage their relationships with donors, they usually do not meet the information needs of important stakeholders such as finance ministries, line ministries, parliamentarians and citizens.

The aid information systems we have today reflect the interests and needs of powerful and vocal stakeholders: donors and planning ministries. They do not reflect the diverse needs of parliamentarians, civil society groups, the media and citizens.  They are donor-centred, not citizen-centred.  They do not enable users to add up information from many different donors.  They are focused on aid allocation, not the details of execution.

But we should not allow ourselves to be daunted by this diversity of needs for aid information. These are are all different perspectives on the same underlying information: namely how aid money is spent by different organisations and what it pays for.  And although this information has not been organized in a way which makes it easy to access or use, it is information that every organization has, somewhere in their systems.  After all, every aid agency and every implementing organisation knows who they have written each cheque to, and for what purpose.

Donors must resist the temptation to try to predict and prioritise these different needs. If donors try to meet all the diverse needs of all potential users of aid information, they will inevitably devote their finite resources to meeting the demands of larger and more vocal interests.  (That’s why we currently have data systems designed for sharing information between donors, and with planning ministries, but nothing to give information to parliamentarians, civil society or citizens.)

Instead of trying to serve the needs of particular users, donors should publish the underlying data in an accessible format so that everyone can access it easily and analyse it from their particular perspective.  (David Eaves has written a good article about this, set in the broader context of public information.)  Only donors can publish the information they hold: so that is what they should concentrate their scarce resources on. Once they have made the information available in an easily accessible form, many other organisations and individuals will be able to use that information to serve a variety of specific users. I’ll talk in a subsequent blog post about what this means in practice for aid transparency, and the (very welcome) progress that is being made.

Corruption, bureaucracy and waste

Lai Yahaya reckons donors agreeing to aid transparency is like turkeys voting for Christmas

At the ONE Africa Symposium on technology and transparency the other day, Lai Yahaya, one of the founders of TransparentAid, said that donors and NGOs would resist aid transparency because greater openness in aid was like turkeys voting for Christmas.

When I began working on aid transparency I thought the opposite.  I’ve seen aid making a huge difference in many developing countries, and I believed then (and believe now) that if more people could see the difference aid makes, they would be more supportive of it. I thought public support for aid would continue to atrophy, and perhaps start to hemorrhage, as long as aid agencies are not able to show the public how aid is being used.  Better communication in the form of more press releases and glossier annual reports would not be sufficient: people need to be shown, not told, what difference aid is making.  So I thought radical transparency was needed to convince a skeptical public that aid is not all lost in corruption, bureaucracy and waste.  On this view, resisting pressure for transparency would be suicide.

Living in Ethiopia over the last three years has changed my view a bit on this.  A lot of aid is hugely effective and it transforms people’s lives.  The aid-funded Protection of Basic Services scheme has enabled the government massively to scale up health and education services.  The aid-funded Productive Safety Net Programme has not ended bad harvests, but it has made the population more resilient, preventing the large-scale famines we watched on TV in the 1980s. As well as these hugely successful government-to-government aid programmes there is amazing work done by a wide range of NGOs, funded both by individual donations and from government aid budgets.

But there is a lot of garbage in the aid system too.  Donors are held up with red-tape and bureaucracy. They dump money into multi-donor trust funds which the World Bank charges a hefty fee to administer, from which money is never disbursed.  Money moves from donor to international organization to trust fund to international NGO to local NGO, minus a haircut at every stage, so funding which starts as a river becomes a stream and then just a trickle. There are appalling examples of waste.  Many of the people working for aid agencies in developing countries are hard-working and committed, but they face a constant struggle to do the right thing in the face of ludicrous demands and ineffective systems imposed on them from headquarters.

Aid is precious, and waste is egregious. In Vietnam, it took 18 months and the involvement of 150 government workers to purchase five vehicles for a donor-funded project, because of differences in procurement policies among aid agencies.

If donors and NGOs were businesses in a competitive market they would have solved these problems by now, or they would have gone bust.  International NGOs (such as Save the Children and Oxfam) would not have half a dozen different national programmes operating independently here in Ethiopia: they would have consolidated them into one local office.  Donors are trying to harmonise and improve the the division of labour between them.  Some NGOs are outstanding, some are daft and some are downright harmful.  But change is slow for donors and NGOs because, in the absence of transparency, political constraints in aid are more powerful than business imperatives.

Transparency would change the imperatives and so help drive out waste and corruption. A 1996 study of school funding in Uganda showed that only 13 percent of the school grant from central government actually reached the schools; the other 87 percent was diverted either for private gain or by district officials for intermediate layers of bureaucracy. So the Ugandan government started to announce monthly transfers of funds in national newspapers and on the radio, and required primary schools to post information on in-flows of funds. When this information was made available to parents and teachers, the flow of funds improved dramatically, from 13 percent reaching schools in 1991–95, to over 80 percent of the money reaching schools in 1999 and 2000.

I was talking to the head of a small NGO here in Addis Ababa, whose funding comes mainly from the US Government.  I explained that under the transparency we were advocating, it would be possible to see in one place all the different things that different donors are funding in Ethiopia.  She was alarmed: “But that means we won’t be able to charge different donors for the same project”, she said. I said that seemed to me an advantage rather than a shortcoming of greater aid transparency.

An MP from Mozambique told me recently that he had presided over three separate opening ceremonies of the same school in his constituency, each with a different donor as guest of honour to be shown what they had funded. If there was more public information about what aid was funding, this kind of scam would be impossible.

The aid industry is far from perfect, and for as long as there are dark corners there will be corruption, bureaucracy and waste.  Overall I believe that aid works, but we can and must do much better.  When we see the true costs of the bureaucracy of aid, the costs of duplication and proliferation, and the shocking discrepancies between good organisations and bad ones, we’ll begin to see the most wasteful practices eliminated, and do a better job of funding the successful programmes. (Incidentally, in Ethiopia I think that is likely to mean putting more money through government and rather less through NGOs).

I am an enthusiastic supporter of aid. But I no longer think that aid transparency will prove to everyone that nearly aid is all efficient.  I now accept that there is more waste, bureaucracy and corruption than I wanted to believe, and this has strengthened my view that aid transparency is absolutely necessary to help to drive that out of the system.  But, unlike Lai, I continue to believe that unless donors become more transparent, and so do a better job of driving out the bad and making more space for the good, public trust in aid will continue to decline.  It is not transparency that will bring Christmas early, but secrecy.

Knowing what works: citizen accountability

John Githongo is a member of DFID's Independent Commission for Aid Impact

There’s a fashion among aid agencies for saying that we have to do a better job of finding out what works.  This manifests itself in greater emphasis on evaluation, especially on making more use of rigorous impact evaluation such as randomized control trials.  It manifests itself as linking funding more directly to results.  The UK has introduced the Independent Commission for Aid Impact, a step which I strongly support.

I think all this is essential to making the aid system work better.  I certainly don’t agree with the whining from aid industry insiders that measurement of results is burdensome or that it distorts decision-making in an unhelpful way. (I’ll write about that separately).

But I now believe that this approach, as it is being implemented, is too top down.  We can learn a lot from rigorous impact evaluations, and we need to do many more of them.  We need independent evaluation of aid agencies.  But there is something we need just as much, if not more: to know from the users of services themselves whether those services are effective and meet their needs.  Successful companies don’t decide their strategy according to impact evaluations, they respond to their customers.

I’ve become less sceptical over time of the idea of making aid and public services more accountable to the poor. A few years ago I was concerned that this might be a combination of political correctness and wishful thinking. It is hard to do, and it doesn’t reflect the realpolitik, which is that aid is always going to be accountable to the people who pay for it.

But we have growing evidence that greater accountability can make a huge difference to the quality of public services. In a randomized controlled trial in Uganda citizens gave feedback about health clinics through report cards and civil society meetings.  In the clinics where this happened, waiting time decreased; doctor and nurse absenteeism plummeted; clinics got cleaner; and fewer drugs were stolen. Most importantly, 33% fewer children under the age of five died. Improving accountability was much more effective than more expensive alternatives, such as paying for buildings, staff and medicines.

I’m on the board of Twaweza, an initiative based in East Africa which seeks to expand opportunities through which millions of people can get information and make change happen in their own communities directly and by holding government to account. One of their partners, Uwezo, aims to improve competencies in literacy and numeracy among children aged 5-16 years old in Kenya, Tanzania and Uganda by enabling parents to assess the progress of their children and increasing public accountability of education services.  Daraja is a Tanzanian NGO that aims to develop tools and encourage citizens to report waterpoint functionality in their areas. Twaweza supports Daraja to enable citizens to report which water points are working in real time, through text messaging; to share information about water point functionality to the public in accessible formats, primarily through the media; and to analyze and publicize responsiveness of the government to citizen notification.

As I’ve written elsewhere, I now believe (along with the World Bank Chief Economist for Africa) that social accountability can make services work better, and contribute to development.  The powerful combination of a growing civil society voice and changes in technology make it possible, perhaps for the first time, for poor people themselves to monitor service providers and government services.

This is a new field and the evidence base is not yet in place. The most recent and comprehensive review of the literature by Rosemary McGee and John Gaventa at IDS finds this:

…there are a number of micro level studies, especially in the service delivery and budget transparency fields. These begin to suggest that in some conditions, the initiatives can contribute to a range of positive outcomes including, for instance,

• increased state or institutional responsiveness
• lowering of corruption
• building new democratic spaces for citizen engagement
• empowering local voices

Reading this survey, my conclusions were that the evidence so far is largely circumstantial though quite persuasive, but that we know rather more about the impact of greater accountability than we know about what we can do to bring that accountability about.

Transparency and accountability

We have a lot to learn about the relationship between transparency and accountability. They are not the same thing. For one thing, transparency is not zero sum: if I make information available to one person, that does not reduce the information available to someone else. (The technical economic term for this is “non rival”.)  By contrast, accountability can be zero sum, or at least subject to trade-offs: if an organisation or service becomes more accountable to the citizens it serves, it may as a result become less accountable to other stakeholders such as the government, donors or the employees.  Till Bruckner made a similar point in a thoughtful post on the Devex blog.

We have many examples of how transparency can change power relationships and accountability. An obvious example is the publication of UK Parliamentary Expenses.  In this case, as in many others, vested interests attempted to limit the information that was published and to control the narrative. For example, MPs did not want to publish the details of the houses in respect of which they were claiming accommodation costs: they wanted to publish only the summaries of claims under each category. But it was the publication of precisely these details which led to the biggest public debate and, eventually, to criminal charges against some MPs, because it was the details which showed that some MPs were abusing the system.

If our aim is to increase the accountability of public services to the intended beneficiaries, and to drive out corruption and waste, we must be vigilant to ensure that the transparency we advocate challenges, and does not entrench, existing power relationships.  We should be sceptical when we hear that publishing the details would be ‘too much information’ to be useful, or that it would be ‘disproportionately expensive’.    These are precisely the arguments that vested interests use to try to limit transparency, to try to control the narrative, and to slow down the shift in power and accountability which greater transparency brings about.  If donor organisations claim that publishing this information is ‘too expensive’ the burden of proof should be on them to demonstrate that this is true.

I am all in favour of donor agencies summarising information to tell an accessible, compelling story about what they are achieving.  But they are not entitled to maintain monopoly control of the information. The same information should be available to everyone, to enable others to examine the evidence and to construct a competing narrative if they wish.

Our existing arrangements for publishing aid information risk reinforcing, rather than challenging, existing power relationships.  Donors provide information through the DAC databases, which are designed for donors to share information with each other about their efforts.  Less reliably, they also provide information to country-level aid management systems, which are designed to enable developing country governments to manage their relationships with donors and which are, for the most part, unpublished.  Aid transparency in the future must be designed to allows citizens and civil society groups from both donor countries and developing countries to access this information in a meaningful way, to enable them to hold both governments and donors to account.

The aid industry is falling over itself to point out that transparency by itself is not enough. For example, Duncan Green says:

Don’t just throw money at transparency and accountability initiatives and expect a revolution. Unless the domestic politics is right, especially linking state and civil society actors into accountability coalitions, it may not make that much difference.

In a technical sense, it must be true that greater transparency is a necessary but not a sufficient condition for greater accountability.  But while I do not claim that transparency alone will bring about an accountability revolution, I have a lot more confidence in the ability of people of developing countries to use information to change their own lives.

I dislike and distrust the argument we hear from the aid industry that it is not enough simply to give people access to information, for five reasons:

1. first, it is clearly the responsibility of donors to be transparent about what they do, and nobody else can publish this information for them. Donors should focus first on the parts of the problem that are their problems to solve.
2. second, the possible need for complementary interventions is used as an excuse to move slowly on transparency (on the grounds that transparency will not make a difference unless those other institutions are in place). This is a classic case of the best becoming the enemy of the good.
3. third, the burden of proof should be on those who advocate secrecy.  We have a compelling business case for transparency, despite the uncertainties.  But there is no business case for secrecy and nobody has ever asked for one.  The uncertainties would be just as great in either case, so why is the uncertainty allowed to count against transparency but not against secrecy?
4. fourth, the evidence suggests that transparency does work surprisingly well. We should give the resourceful people of developing countries the benefit of the doubt. Consider the example of transparency of school budgets in Uganda – there was no civil society capacity building programme, or any of the other stuff that NGOs say might be required, yet the amount of money reaching schools went from 13% to over 80% in a few years.  There is not yet a rich enough evidence base, but there do seem to be quite a few cases in which, once people have access to information they are able to use it to improve the services they receive without (shock! horror!) a logframe, an end-to-end theory of change or capacity building support from international NGOs.
5. fifth, this concern seems nakedly self-serving.  Much of the aid industry’s core business is “capacity building”, “linking state and civil society actors into accountability coalitions”, “stakeholder analysis”, “empowering marginalised communities”, “civil society support programmes” and so on. Just as journalists don’t like the idea of people using the internet to share information without it being intermediated by media organisations, because it undermines their sense of identity and self-worth and jeopardises their livelihoods, the aid industry doesn’t like the idea that simply giving people access to information might be enough to enable them to change their world.

I’m enthusiastic about organistions working to help communities in developing countries to access and use information as it becomes available, and especially to help them to add value to it by mixing it with information from other sources, and using it to demand better service and advocate change.  I’m proud to be on the board of Twaweza, and I think donors should allocate a modest budget to supporting this kind of work.  But I remain more optimistic than many of the vested interests in the aid business that, even if this kind of international support is not as forthcoming as they would like, transparency by itself will still make a big difference. My belief, which is supported by the (admittedly rather sketchy) evidence so far, is that once you liberate the information people will find ways to use it.

Conclusions

I’ve spent the last three years working on how greater transparency and accountability can improve the way aid works, and my thinking about these issues has changed.  In this blog post I’ve tried to explain why. We have, for the very first time, found out what information people want and what they would do with it.  We have thought about how they could get access to it. We have more and more evidence about the impact of transparency and accountability.  And more people have begun to think about this and work on it than ever before. We have, collectively, come a long way.

In a later post I’ll reflect on the (very impressive) progress that has been made on this agenda, and on the next steps.

To conclude, here is a recap of the 8 most important things I have learned:

1. To make a difference, transparency has to be citizen-centred not donor-centred.
2. Today’s ways of publishing information serve the needs of the powerful, not citizens
3. People in developing countries want transparency of execution not just allocation
4. Show, don’t tell
5. Transparency of aid execution will drive out waste, bureaucracy and corruption
6. Social accountability could be Development 3.0
7. The burden of proof should be on those who advocate secrecy
8. Give citizens of developing countries the benefit of the doubt

Development is in our national interest

It is increasingly the conventional wisdom that it is in the national interest of industrialised countries to promote development in the rest of the world. US Secretary of State Hillary Clinton made a speech saying so a year ago at the Center for Global Development:

… development was once the province of humanitarians, charities, and governments looking to gain allies in global struggles. Today it is a strategic, economic, and moral imperative – as central to advancing American interests and solving global problems as diplomacy and defense.

The UK Foreign Secretary, William Hague, also argues that development is a key part of Britain’s strategic and security interests (for example, here and here).

We’ve come a long way over the last twenty years. In January 1991 my father, then a British High Commissioner, sent a despatch to the then Foreign Secretary in London to mark the end of his last post in Africa, arguing that it was in the UK’s national interest to pay more attention to Africa’s development.  His despatch said:

There is an overwhelming case on financial grounds alone for acting sooner rather than later, collectively, to provide the resources required for removing most of the debt burden from African countries (provided that they are committed to active economic reform), for arresting environmental degradation, and for restoring the physical and human infrastructure sufficiently to permit diversification of economic effort and its re-direction into areas that will eventually become self-financing – as well, incidentally, as making a more positive contribution to world economic activity.

At that time, the foreign policy establishment was very suspicious of any argument based on ethical or moral imperatives: it believed that foreign policy should be based on narrowly-defined national interests.  In 1980 the Brandt Report had argued that it was in our “mutual interest” to pay attention to development and inequality, but in the decade that followed Britain’s aid programme, and our attention to developing countries, had declined.  Twenty years ago, when my father was making a case for paying more attention to development based on our national interest as well as our values and moral obligations, his view was regarded as so subversive that the foreign office limited the circulation of the despatch. Today it is received wisdom which is regularly the basis of speeches by the US Secretary of State and the British Foreign Secretary.

We should celebrate the fact that there is, belatedly, recognition among policymakers that promoting development is in our national interest, as well as being the right thing to do.  But I am concerned that we are letting the pendulum swing too far, by placing this argument at the centre of the public case for aid.  We should use every argument at our disposal for doing the right thing, of course; but if we focus too much on aid being in our national interest, we are danger of undermining the effectiveness of aid and of failing to address the real concerns of sceptical citizens.

The nature of public doubts about aid

If I had a nickel for every time someone said to me, “I don’t think we should spend money helping starving people because I don’t give a toss about them,” I wouldn’t have any nickels at all.

The foreign policy establishment may have been sceptical about focusing on the ethical dimension of foreign policy, but the public never was.  Neither the British nor the American people lack compassion for their fellow human beings.  My father’s prescient efforts to awaken policymakers’ interest in development were made several years after Live Aid, which had showed that the public needs no lessons in generosity.

I readily concede that the public is often sceptical about aid. I have witnessed focus group discussions which anybody who is interested in development would find alarming, anyway at first. In such a discussion, the person who says “charity begins at home” will initially get lots of support. But as the discussion goes deeper, it turns out that they are sceptical not because of any indifference to the plight of others, but because they are not convinced that aid works. In many such groups you’ll hear Bauer’s famous remark that aid is “poor people from rich countries giving money to rich people from poor countries.” Many people are worried that aid ends up in the Swiss bank accounts of despots and dictators, or of corrupt consulting and construction firms.  Yet when the same focus groups are given evidence of the benefits of particular aid programmes, their mood changes sharply, and they soon ask: “Why don’t we give more aid like that?”

The idea that “charity begins at home” clearly resonates with many people.  In part the phrase expresses the idea that we have stronger social ties and obligations to people who live in our neighbourhood than we do to people on the other side of the world.  But few people really believe, on reflection, that we should pay no heed to people dying of hunger or for lack of medical facilities just because they are far away.  Perhaps “charity begins at home” resonates for another reason: we can observe at first hand whether the effort we make to help our family and neighbours is actually working, whereas with foreign aid we can’t, and we have a sneaking suspicion that this means that it isn’t.

The most popular critique of aid in recent years, Dead Aid by Dambisa Moyo, does not challenge aid on the grounds that the plight of the poor is not our concern. It is a poorly argued book in many other respects, but it would be wrong to accuse Dr Moyo of callous indifference. Indeed, all the famous aid sceptics, from P. T. Bauer to Bill Easterly, explicitly accept development as the objective: they simply question whether foreign aid is a good way to achieve it.

The dangers of relying on national interest

So perhaps the public does not need to be persuaded that development matters, but needs instead to be convinced that aid makes a difference.  Even so, it seems reasonable to say that we should use every argument at our disposal for aid: we should appeal to the public’s self-interest as well as their moral values, and we should at the same time set out the evidence that aid works.

But there are two big risks to this approach which should lead us to think carefully about the balance of how we make the argument.

First, if we promote aid principally on the grounds that it supports our security and commercial interests, we should not be surprised when people expect that this is how aid should be used.

In the long term our national interest coincides with our moral urge to promote development and to reduce poverty.  But in the short term there is often a trade-off between development and poverty reduction on the one hand, and our commercial, security and strategic interests on the other.

During the Cold War a huge amount of aid was wasted currying favour with despots for geo-strategic reasons and accordingly propping up failing industries and businesses.  Even today, less than 40% of aid is spent in the poorest countries.  This makes a kind of sense if your aim is to increase your influence in emerging economies and in fragile states like Pakistan and Iraq.  There are many poor people in these countries, but all the evidence suggests that these are not the places in which aid is most needed and can do the most good.  A significant portion of aid (though none of the UK’s aid) is still tied to firms in donor nations. This makes sense if the aim is to support the donor’s commercial interests but not if the aim is to have the greatest possible impact on the reduction of poverty.  It is legitimate and proper for donors to want credit for their aid, to enhance both their international reputation and their image and influence in the recipient country. But this goal leads donors to give too much aid through bilateral aid programmes, on which their national flag can be stamped, and too little through more efficient multilateral institutions and other shared funds, resulting in unnecessary duplication, overheads and transaction costs.

We do not have institutions that can protect our long-term national interest in development and poverty reduction from the pressures to use aid to pursue these short-term strategic, security and commercial interests.  In a world of short time horizons, our immediate interests tend to prevail over our longer-term goals.  So the more we justify aid chiefly on the grounds of national interest, the greater the danger that our short-term national interest will dictate the way aid is used, with negative consequences for the effectiveness of aid and for our longer-term interest in poverty reduction.

If the public were unsure whether they cared enough about global development to give aid, then it might be worth deploying aid in ways which are most obviously in the national interest, even if that required sacrificing some of its effectiveness.  (For many years, the Danish government justified tying aid to Danish suppliers on precisely these grounds.)  But if the public is already convinced that development is important, and their doubt is primarily about whether aid is effective, then it makes no sense to use aid in less effective ways in an effort to win greater public approval.

The second reason why we should be cautious about focusing too much on our national interest when justifying aid is that we are in danger of setting ourselves up to fail.

Take an example which is, literally, close to home for me. School enrolment here in Ethiopia has risen from a quarter of all children fifteen years ago to more than four fifths of children today. About a third of Ethiopian children – 8 million boys and girls – are at school as a direct result of foreign aid.  My house in Addis Ababa is a few hundred metres from the local primary school, so I see boys and girls going past my window to school every day.

If the British public could see as I do how their aid money is being used, they would, like me, be encouraged and touched by the good that aid does.  This is a direct, demonstrable benefit of aid, and one which appeals to the British sense of justice and empathy for our fellow human beings.   It would soften the heart of the hardest sceptic.

Kids going to school near my house in Addis Ababa. A third of Ethiopia's education system is financed by aid.

Why then is there such widespread doubt that aid works?  In part it is because people at home cannot look out of their window and see it working.  But it is also because we have made extravagant claims about what aid will do. Even if it is true that aid leads to faster economic development, and that it thereby reduces the risk of global health contagions, organised crime and drug smuggling, this would be impossible to demonstrate statistically.  (It would be like trying to show that the EU has prevented war in Western Europe since 1945: plausible, very probably true, but unprovable.)

People are right to be doubtful about the validity of some of the more grandiose claims for what aid can achieve.  Perhaps it seems too modest to say that we pay for millions of children to go to school, and for people to have access to clean water and basic health care. But this is a reality which we can prove beyond any doubt; and for most taxpayers it will seem well worth the modest amount of money we spend on it.  And it is probable, even if unprovable, that all this works in favour of our own long-term interests as well.

The public and the politicians who represent them will inevitably devote only a modest amount of time to thinking about development.  If we use up scarce bandwidth making an argument with which few disagree – that poverty matters – we waste the opportunity to make the argument of which they are yet to be convinced: that development policy and aid can and do make an important difference to the lives of the poor.

The aid that was used to prop up Mobutu in Zaire during the Cold War may have served a foreign policy interest, but it did little or nothing to reduce poverty and raise living standards in that country.   Money used today to buy food aid may be a convenient subsidy for American and European farmers but if we bought the food locally we could feed twice as many people with the same money and at the same time support the growth of sustainable agriculture in developing countries. The more we use aid to support our strategic and commercial interests, the less effective that aid is likely to be in the fight against global poverty, in which we have an important long-term interest.

It is in our national interest to see faster development and the end of global poverty, and we should not be shy about saying so.   But we should think twice before using this as the central plank of the case for more effective development policies and more aid.  People do not need to be persuaded to care about global poverty: they do need to be convinced that there is something we can do about it.  Just reminding them that it is in our national interest to promote development fundamentally misses the point.  The more we defend aid mainly on the basis that it is in our national interest, the more likely it is to be bent to our short-term commercial and strategic interests, the more ineffectively it will be used, the harder it will be to demonstrate its benefits, and the greater the justification for public scepticism.  Give the public some credit: they don’t need to be persuaded to care about poverty.  Aid does work:  and the first and most pressing task is to demonstrate to the public with persuasive evidence that this is so.

Max cites a forthcoming paper by Andrew Dorward and Ephraim Chirwa (ungated version here).  Dorward and Chirwa argue that:

Malawi’s agricultural input subsidy programme addresses a low maize productivity trap that leads to food insecurity and poverty, and constrains economic growth and, paradoxically, diversification out of maize and agriculture. This low productivity trap arises as a result of severe seasonal credit constraints affecting very large numbers of poor, food deficit farming families, together with thin and high risk, high margin input and maize markets. The key successes of Malawi’s subsidy programme arise where it relieves both affordability and profitability constraints to increased staple crop productivity from increased input use, and in doing this both raises land and labour productivity and improves food security for large numbers of poor households through some combination of increased real wages and reduced food prices.

The only part of Max’s post that I disagree with is his remark that  ”we should leave our economic theory at the door and instead focus on what works empirically.”  As Jonathan points out in the comments, economic theory tells us that government intervention may be an appropriate response to market failures.  While recognising the success of the programme so far, we should not stop asking whether the same results could be achieved more cheaply and more sustainably with some other, even better approach.

A more relevant challenge is: why did some donors oppose this programme, and what have we (and they) learned from that error?

Dr Bingu wa Mutharika fought and won the 2004 election on a platform of guaranteeing food security. HIs proposals for a targeted subsidy was overturned by the Malawi Parliament in favour of a universal subsidy, which was introduced in 2005.

Election Poster for Bingu wa Mutharika

Donors are – on paper – committed to respecting government ownership and supporting the governments’ development programme.  Yet despite clear national commitment, endorsed in a democratic election, donors generally opposed the introduction of fertilizer subsidies, consistent with the World Bank’s position throughout the 1980s and 1990s. The donors argued against the government’s proposed scheme because they thought it would be too expensive; it was insufficiently targeted on the poor; it would undermine private sector development; and because they doubted the capacity of the government to implement it.

When Malawi introduced its programme in 2005, the IMF and the US Government opposed it outright, on the grounds that it would damage the private sector. The World Bank, EU and UK Department for International Development adopted a more nuanced position: they argued that instead of a universal programme there should be “smart subsidies” which should be tightly targeted to reduce the costs, and that the programme should include an explicit exit strategy.  DFID eventually supported the programme after extracting an agreement from the government that it would use private fertilizer suppliers.  Some of the Scandinavian donors and UN agencies supported the programme from the outset, partly influenced by the apparent success of a local Millennium Villages Project.

The apparent success of the Malawi fertilizer subsidies is primarily a story about the Malawi government, not donors; though the scheme could not have been afforded, especially through the 2008 price hike, without donor funding.  But it does give rise to two questions about donor policy and behaviour.

First, are donors still labouring under too simplistic a view of the role of government in the economy? Donors continue to be sceptical of agricultural subsidy programmes (which is rank hypocrisy, given the subsidies they provide their own farmers).  This seems to be partly because we have an insufficiently rich analysis of the nature of the market failures and how they are best addressed; and partly because donors still suffer from the sustainability delusion, which requires them to oppose perfectly sensible government policies and programmes for which there is no identifiable exit.  If the UK government were only allowed to implement inherently time-limited policies there would be no National Health Service.

Second, how should donors reconcile their own views of a policy with their commitment to respect country ownership? Donors are committed to support developing countries’ own development strategies.   But what happens if they disagree either with the thrust of those policies, or with particular details?  Should they refuse to finance them? Should they act as “critical friends”, identifying the shortcomings of the policies and seeking to get them changed?  Should such opposition be private or public? How is that consistent with respecting country ownership? If they do try to change the policy how are they held to account when – as was apparently the case in Malawi – they are wrong?

I’d like to suggest two ways in which donors can better respect country ownership. First, where they have an opinion about a policy, they should produce publicly their analysis and evidence, to allow this view to be discussed as part of the public debate, rather than exert political and economic power behind closed doors.  Second, there should be a version of the Salisbury Convention in aid: if a government is pursuing a policy for which it has an explicit mandate in a reasonably democratic election, the donors should not try to undermine it.

UPDATE: Smart commenters below ask two questions.  First, is it premature to say this has been a success, until we have a year of bad rains?  Second, were the donors as hostile as my blog post suggests?  If you have insight into either question, please leave it in the comments below.

Go to the website of any aid agency and you’ll find a cornucopia of information about the good work that it is doing. The problem is that it doesn’t publish this information in a usable form. Visibility is not the same as transparency.

Members of the US Congress rightly complain that they cannot get a complete picture of US foreign assistance, which is delivered by 26 government agencies. As Congress has discovered, to get a complete picture of what the US is doing you need up-to-date, comprehensive data from each aid agency in a common format that enables it all to be added up, reconciled and compared. It is very welcome that the US government is putting a system in place to do this.

Now put yourself in the shoes of ministers or parliamentarians in a developing country. They face the same problem as members of Congress, writ large. Aid to their country is channelled through bilateral aid agencies, multilateral organisations and thousands of NGOs. Aid goes from one organisation to another – minus a “haircut” at each stage – before any services are provided to anyone. How can officials or MPs get useful, up-to-date, comprehensive information about all this spending and all these activities? Certainly not by trawling through thousands of separate donor websites.

Read the whole thing here.

The question came up in the most recent edition of Development Drums. Claire Melamed argued that the fact that so many of the world’s poor now live in middle income countries (which, by definition, have experienced a reasonable amount of economic growth) suggests that growth by itself is not enough to reduce poverty. Andy Sumner, in the same programme, said that there is some evidence that economic growth tends to increase inequality in societies that are already unequal, whereas the benefits will be more broad based in societies in which the starting point is more equal.

This graph by Maxim Pinkovskiy and Xavier Sala-i-Martin is very interesting. It shows the growth rate and the number of people living on less than a dollar a day in sub-Saharan Africa. The data are notoriously incomplete, but on the basis of these estimates, as the authors say (apologies for the econ-speak): “Poverty seems to co-move with GDP almost perfectly.”

Graph by Maxim Pinkovskiy and Xavier Sala-i-Martin

This graph implies pretty strongly that if you want to reduce poverty in Africa, you should concentrate on economic growth.

The entire article is well worth reading for its upbeat assessment about both growth and poverty reduction over the last fifteen years.  They say:

The sustained African growth of the last 15 years has engendered a steady decline in poverty that puts Africa on track to meet the Goals by 2017. If peace is established in the Democratic Republic of Congo, and it returns to the African trend (which is what happened to other African nations that were formerly at war), Africa will halve its $1/day income poverty rate by 2013, two years ahead of the 2015 target.

Moreover, African poverty reduction has been extremely general. Poverty fell for both landlocked and coastal countries, for mineral-rich and mineral-poor countries, for countries with favourable and unfavourable agriculture, for countries with different colonisers, and for countries with varying degrees of exposure to the African slave trade. The benefits of growth were so widely distributed that African inequality actually fell substantially.

This shift has profound implications for development policy.  It highlights the importance of ensuring that growth reduces poverty.  It raises questions for the allocation of traditional aid, and about the legitimacy and effectiveness of intervention by outsiders to influence the distribution of income within other countries.

In a new episode of Development Drums, I discuss these issues with Andy Sumner and Claire Melamed (Head of the Growth and Equity Programme at ODI).  We discuss what  the new data tell us, and what it means for aid and development policy.

You can listen to Development Drums on your computer at the website (http://developmentdrums.org) or download it (from here) to your MP3 player.  Alternatively, you can subscribe to Development Drums on iTunes free of charge (search for “Development Drums” in the iTunes store).

Shanta Devarajan asks if we have found Development 3.0

Shanta Devarajan, the World Bank Chief Economist for Africa, describes in an important new blog post the evolution of development policy in terms of changing ideas about market failures and government failures.   In the 1950s and 1960s, he says, development was about addressing market failures by providing public goods, addressing externalities, and redistributing income to poor people. Starting in the 1970s, attention shifted to government failures such as weak capacity, rent-seeking, political patronage and corruption.    Today, he says, many of the most egregious failures have been addressed, but the remaining failures directly hurt poor people.

On Shanta’s view, these failures arise from two kinds of imperfection in the public sector: that governments have difficulty monitoring and enforcing performance (leading to absentee teachers, clinics without drugs, etc) and imperfections in the political system which prevent it from serving the poor.

Shanta says that changes in technology and the rise of civil society can change all this:

Our understanding of government failure has coincided with two other developments.  One is the rise of civil society’s voice in public discourse.  The second is the technology revolution in poor countries.  There’s a message here.  Can we use technology and the voice of civil society to address these government failures?  Rather than imposing conditions, we can empower poor people to monitor service providers.  With some 80 percent of Africans having access to a cell phone, it is not difficult to have parents (or the students themselves) send an SMS message if the teacher is not in school, or there are no drugs in the clinic or the purported road maintenance program is not happening.  This could do more for helping governments and donors get value for money than all the fiduciary controls we put in place.  While we are at it, why don’t donors (including the World Bank) use technology to have the beneficiaries monitor and supervise development projects?

Can this work? Is social accountability a new model for development?

There is increasingly good evidence that transparency and accountability make a significant difference, in some cases surprisingly transformational.  There is an increasingly impressive collection of individual case studies, rigorously evaluated, which demonstrate the effectiveness of this approach.  For example, Jacob Svensson and Martina Björkman conducted a randomized field experiment in Uganda to test the effect of increasing community-based monitoring. They found that when communities more extensively monitored providers, both the quality and quantity of health services improved, including reducing infant mortality by a third.

There have, however, been no significant comparative studies bringing this evidence together.  Until now.  Rosemary McGee and John Gaventa have just published an extensive review of literature and experience across the field.  There is a lot of material to digest, but here is the core of what they find:

…there are a number of micro level studies, especially in the service delivery and budget transparency fields. These begin to suggest that in some conditions, the initiatives can contribute to a range of positive outcomes including, for instance,

• increased state or institutional responsiveness
• lowering of corruption
• building new democratic spaces for citizen engagement
• empowering local voices
• better budget utilization and better delivery of services.

Reading the study, my conclusion is that we know rather more about the impact of greater accountability than we know about what we can do to bring that accountability about.

I currently work on transparency, because I think makes an important contribution to the ability of citizens to hold governments and donors to account and so improve service delivery and accelerate poverty reduction. There have been some good examples of how this can work in practice, which are summarised in Appendix 1 of this cost benefit analysis for the International Aid Transparency Initiative (page 23 of this pdf; disclosure: I’m a co-author).  The most famous example is this study of the impact of information on funds flowing to schools in Uganda which found a strong relationship between transparency and funds flowing to schools, though the evidence was subsequently challenged.   So while there is increasingly good evidence to confirm the intuition that transparency plays an important role, we need to understand a lot better how, and in what circumstances, transparency works, and particularly to understand better what else needs to be in place.

One issue on which Shanta is clearly right is that role that technology can play in supporting greater accountability. We know that technology does not end poverty, but we are seeing more and more examples of how technology – especially mobile telephony and text – has enabled and supported changes from mobile banking to wholesale agriculture markets. Just as technology underpins changes in markets (think of newspapers, or bookselling), so it can underpin changes in political economy and social accountability.

So is this, as Shanta says, Development 3.0?

Development is a long, slow, uncertain process and the road is bumpy and winding.  Transparency and accountability are not a one bound and we are free solution, any more than the ‘big push’ or the Washington consensus which Shanta labels Development 1.0 and 2.0 respectively.  But this time there is an important difference.  The ‘big push’ and the Washington consensus were blueprints for a better world. Social accountability, by contrast, does not start with a preconceived idea of how resources should be used or services should be delivered: it seeks to change the dynamics of the system to make it more responsive and more likely to converge by itself on solutions which better serve poor people in developing countries.

A big challenge will be whether development agencies themselves are able to adapt.  Their models for project cycle management are based on a top-down view: you specify the world you are trying to create (the “goal”) and then you articulate a series of outputs and activities which you expect will bring this about.  It will be a big change – intellectually, organisationally and culturally – to modify their systems, incentives and procedures to a world in which donors work instead to help the citizens of developing countries to determine their goals and priorities and build their own systems to achieve them.

If what Shanta is calling Development 3.0 means that instead of offering a one-size fits all solution we should work to close the broken feedback loop so that communities themselves can find the answer, then I think this may indeed be a change of perspective on development worthy of a major version number.

But how do we value diversity in the aid business, when the prevailing consensus, embodied in the Paris Declaration, is that proliferation of aid agencies is a growing problem which is making aid less effective?

The aid system could in principle benefit from the emergence of new kinds of donors (specialised multilaterals such as GAVI, new donors such as China and Brazil, philanthropic foundations such as Gates, private non-profits such as Marie Stopes) working alongside conventional bilateral and multilateral aid.  Different kinds of organisations could bring particular strengths which complement each other’s work.

However, in practice these different types of organisation do not seem to be playing to their strengths. Like kids playing football, everybody follows the ball instead of holding their position on the pitch.

Proliferation is a significant problem

We will come to the benefits of diversity among donors. But first let’s acknowledge that proliferation is causing real problems on the ground. Developing countries are having to deal with a large and growing number of partners, each with separate agendas, priorities, and requirements. Meetings, reports, milestones and systems multiply. Skilled staff are hired away to serve in local agency offices or NGOs. Funding is fragmented and unpredictable, which means that developing countries are often unable to bring together the scale of long-term, predictable finance needed to undertake significant institutional reform and service delivery. Donors lose influence, because they undermine each other; and yet developing countries are not able to keep track of, let alone exercise sufficient ownership and control over, an increasingly fragmented system of aid delivery. Public accountability is impossible, since nobody has a clear view of what resources are being used, by whom, or for what purpose. Donors face rising administrative costs when agencies proliferate, and the costs of coordination and harmonization rise exponentially with the number of aid agencies.

Here are three real life examples of the problems that are caused by the proliferation of aid agencies:

• In Vietnam, it took 18 months and the involvement of 150 government workers to purchase five vehicles for  a donor-funded project, because of differences in procurement policies among aid agencies. (source: Knack/World Bank)
• In 2007 alone the EU countries launched 22,000 new aid projects inn developing countries, with an average budget of €0.7-1 million. The total costs of preparing new projects by EU donors (not the money needed to fund them, just the administrative cost of putting them in place) is estimated at between €2-3 billion per year. (source: EU)
• In the aftermath of the tsunami disaster a local doctor in Banda Aceh, one of the most affected areas, wrote: “In February, in Riga (close to Calang) we had a case of measles, a little girl. Immediately, all epidemiologists of Banda Aceh came in, because they were afraid of a propagation of measles among displaced people, but the little girl recovered very fast. Then, we realized that this was not a normal case of measles and we discovered that this girl has received the same vaccine three times, from three different organizations. The measles symptoms were a result of the three vaccines she received.” (source: Djankov et al)

(For more examples of proliferation badness, take a look at ‘The Governance of the aid system and the role of the EU’ by Owen Barder, Simon Maxwell, Mikaela Gavas and Deborah Johnson.)

Different types of agency could make different contributions

These problems are caused by a growing number of aid agencies doing broadly the same thing.  That proliferation imposes substantial costs on donors and on recipient countries and this makes aid much less effective.  The question is whether there are also benefits to having this large number of agencies, compared to delivering the same amount of money through fewer channels.

In principle a greater variety of different types of donor, if they focused on their specialisms, could strengthen the aid system, because they can make different kinds of contribution which could complement both existing donors and each other.

Here are some ways in which different types of donor can make different contributions:

• Philanthropic foundations, such as Gates, Ford, Hewlett and Rockefeller, are still tiny in comparison to government aid agencies, but they are increasingly important in particular sectors, notably health.   In their recent book, Philanthrocapitalism, Matt Bishop and Mike Green argue that the growth of philanthropic giving should be welcomed, because these foundations bring a “businesslike approach to solving society’s problems”.  According to this view, philanthropic donors bring new attitudes and ways of working. Foundations are frequently founded by successful entrepreneurs, so they may be more inclined to operate along business principles, such as making decisions based on evidence, tightly controlling overheads, adopting new technologies, and focusing more sharply on results. They may be willing to take more risks and accept more failures in return for bigger success than risk averse governments. Foundations may be more able and inclined to work closely with the private sector, which plays a key role in development, which official agencies have not found easy to do.  Because foundations do not depend on public support for future funding, they may be willing to support unpopular causes, or investments which do not easily capture the public imagination (e.g. supporting statistical systems in developing countries).
• New government donors such as China and Brazil are playing an increasingly important role (though the Economist was wrong to suggest that Brazil’s aid budget is comparable to that of Canada and Sweden).  This has caused concern among traditional donors, who worry that their implicit cartel is undermined by donors that are less concerned about governance and human rights, and that are prepared to be more open about its desire for access to raw materials and minerals. These new donors do not feel constrained to follow the DAC development model, and in many ways developing countries prefer the approach which tends to respect the sovereignty and ownership of developing countries. These donors rarely poach skilled staff; and they do not overstretch developing country governments with meetings, reports and workshops.   They are also willing to invest in sectors that the DAC donors have moved away from, such as infrastructure, irrigation and university scholarships.
• The number of private charities is also growing, funded both by institutional donors and by private giving. Here in Ethiopia there are about 3,500 NGOs, spending about $1.5 billion a year (compared to the Ethiopian government budget which is about $4 billion a year). Private aid through charities tends to focus on supporting communities and individuals rather than governments. It tends to be more opportunistic and closer to the ground. These organisations can bring about results more directly although it is harder to bring about systemic change this way.
• Specialised multilateral global organizations – such as the Global Fund against AIDS, TB and Malaria (GFATM) – continue to grow in number. In principle, they can bring apply specialist skills and expertise, they can learn more systematically and spread knowledge more quickly, they can bring together a number of different donors, the public and the private sector to work in a more joined-up way on a particular issue, and they can raise money from the public because they can be more specific about what they do.

This changing landscape could benefit the aid system …

In an ideal world, if these different development actors played to their strengths, and stuck to their specialities, this growing diversity could strengthen the international aid system as a whole. Foundations could act like venture capitalists: taking bigger risks, and backing it up with rigorous evaluation and evidence, but leaving long-term financing of scaled up successes to official aid donors. Official aid agencies could focus on long term funding and resource transfer, and they could provide sustained support for institutional change and capacity. Private aid could focus on achieving community and individual level results. Specialised global organizations could provide particular expertise not available through generalist support. The growing number of official donors could build up expertise in particular countries or topics, and specialise in these, and they could respond to evidence generated by foundations and NGOs about what works, by taking those activities to scale.

If these actors could all focus on their strengths, and if the aid system enabled them to work together well, these changes in the development landscape might substantially improve the effectiveness of development assistance.

… but in practice it does not work like that

That’s all very well in theory, but most people working in the aid business will tell you that back on planet earth, it doesn’t work like that.

Rather than differentiate, development organisations have strong incentives to converge.  So instead of specialisation we get duplication.  The philanthropic foundations say that they have a more entrepreneurial, risk-taking approach; anecdotal experience suggests that in many cases they prefer the implicit validation of being part of a multi-donor group.  (This may be a form of political correctness: agencies seem to think that the Paris Declaration on Aid Effectiveness requires that they be part of a shared funding arrangement rather than doing anything alone.)

For example, consider the bandwagon on restoring funding of health systems.  Increasing the funding of health systems is something of which all right-thinking people should approve.  The arrival of the big global health initiatives, particularly GFATM and GAVI, coincided with a collapse in funding for health systems which led to many unnecessary deaths in developing countries. Donors are now seeing that the shift away from health systems to vertical funds was an error (one which was predictable and predicted), and the pendulum is swinging back to funding health systems.  The institution with the mandate and greatest capacity for supporting developing countries to strengthen their health systems is the World Bank. So why are the Global Fund and GAVI being allowed on the health systems bandwagon?  The logic of establishing these specialised multilateral agencies was that they would bring particular depth and expertise to specific activities which would be available from more generalised aid agencies. If we offer competition to World Bank concessional loans in the form of grant finance through GAVI and and the Global Fund, most developing countries will look to these institutions instead.  As a result of the proliferation of health funds offering grant finance for health systems, the core role and capacity of the World Bank is eroded, and we put at risk the benefits of specialisation by GFATM and GAVI.   Similarly, the International Finance Facility for Immunisation (IFFIm) was set up to enable donors to secure the benefits of front loading spending on vaccination, for which there is a clear economic rationale.  Now it is proposed that it should also finance health systems: if there is an economic rationale for using IFFIm on health systems, I’d like to hear about it.

What’s missing?

The growing number and diversity of development organisations could be a source of strength in the aid system, if different organisations could stick to their specialities and if they worked in an aid environment which enabled them to work together effectively.

In competitive markets, firms tend to focus on their strengths, because this is how they make the biggest profits. Firms that diversify into another line of business either need to make a success of that new work, or they will start to make losses and eventually decide to withdraw or they will go bust. So appropriate specialisation is the consequence of individual decisions by profit-maximising firms, and not a result of a collective compromise.

Unfortunately, the political economy of aid encourages the opposite behaviour.    The “operating system” which supports the work of aid agencies creates pressures against specialisation.  For example:

• Organisations which work collaboratively and holistically across a wide range of activities are likely to attract more donor funding than organisations which are effective in a particular niche.  One reason for this is that many donors either don’t have, or don’t systematically use , information about impact and cost effectiveness when they make resource allocation decisions – so there are rewards for aid organisations getting involved in as many activities as possible, and no penalty if this mission creep makes them less effective.
• Lack of transparency and access to information about who is doing what means that organisations cannot make sensible individual decisions about how they can increase their own impact with finite resources and avoid duplication.
• There are no mechanisms by which innovative ideas can be pioneered by foundations or NGOs and, if they are successful, taken up and taken to scale by official donors and multilateral funders. There too little venture capital to support innovation; too little rigorous analysis of what actually works; and the mechanisms for taking successful programmes to scale are too unpredictable and capricious.
• Donors, NGOs and foundations are all under pressure from well-meaning activists to be engaged in everything everywhere.   For example, last year the Lancet criticized the Gates Foundation saying that it should “do more to invest in health systems and research capacity in low-income countries, leaving a sustainable footprint”.  DFID is criticised for a perceived lack of investment in agricultural research.  In a sane world it would be perfectly sensible for the Gates Foundation, which has very little in-country presence, to fund technological research in health and agriculture, but not to invest in health systems in developing countries; and for DFID, which has an extremely professional presence on the ground in developing countries, to invest in developing country systems but not to spend money on research, in which it has no discernible comparative advantage.  We could have the same total spending on both research and systems, managed by organisations specializing in those activities and reducing coordination and transaction costs.  But development activists and politics apparently make such a division of labour impossible for both organisations.
• The Paris Declaration on Aid Effectiveness and Accra Agenda for Action are being implemented in ways which create strong peer pressure on donors to collaborate and harmonise, to engage in pooled funding and joint activities, rather than to diversify and specialise.  Where there are efforts towards a better division of labour (e.g. this EU initiative), the approach is based simply on getting down the numbers by committee, rather than creating incentives which push development agencies towards focusing on the areas in which they have a comparative advantage.

What should we do?

The proliferation of development organisations, which could be a great strength, is instead becoming a growing handicap for the aid system, because the system is not well adapted to taking advantage of that diversity and encouraging appropriate specialisation.

Some possible measures that might address this are:

• a step change increase in transparency about aid.  The International Aid Transparency Initiative offers the promise of this, as it will provide up-to-date, detailed information about aid projects in an accessible form.
• agreement to an international standardized system for describing and measuring outputs and unit costs, to facilitate cost-effectiveness comparisons across development organisations;
• explicit use of unit costs and cost-effectiveness in aid allocation decisions, in a way that penalises organisations which are engaged in activities in which they are relatively ineffective
• the development of a mechanism for “venture capital” funding with an associated process for scaling up success;
• self-restraint by development activists who do more harm than good by trying to push every development organisation to be involved in everything.

As ever, I’d welcome further suggestions in the comments section.

Though the effects of aid on development are uncertain, there is a huge amount that industrialised countries can do – or not do – which affects how quickly countries develop.  The policies of rich countries on trade, investment, migration, the environment, security and technology can make a huge impact on how quickly poor countries are able to develop.

Yet we tend to judge industrialized countries too much according to how much aid they give, and too little to how they behave in all these other ways.

The Center for Global Development provides an essential service by ranking the rich each year so we can see how we are doing.  They use a series of quantitative measures on all these dimensions to create a composite picture of how a country’s policies affect development. The 2010 results are now in.

The overall rankings in the 2010 Commitment to Development Index

For people in the UK who feel smug about the UK’s approach to development, the Commitment to Development Index makes pretty sobering reading. The UK is in 16th place, out of 22 countries in the index.

The UK has fallen ten places since 2005, when it was in joint fifth place, after only Denmark, Sweden, Netherlands and Norway.

The UK is one of only three countries to have got worse rather than better since the index began in 2003. (The other two are Denmark – which started at the very top, and Switzerland.) And this isn’t a point about the change of government: Britain was 16th last year too.

Given that the UK has a relatively generous and effective aid programme, why does it come so far down the league of overall impact on development?

In short: arms exports.

The Commitment to Development Index uses three measures of a country’s security policy.  It tallies the financial and personnel contributions to internationally mandated peacekeeping operations and humanitarian interventions. It rewards countries that base naval fleets where they can secure sea lanes vital to international trade.  And it penalizes arms exports to undemocratic nations, on the grounds that putting weapons in the hands of despots can increase repression at home and the temptation to launch military adventures abroad.

The UK is by far the worst of the the 22 nations in the index on selling arms to poor and undemocratic governments.  UK arms exports, weighted for undemocratic and unaccountable states, are four times worse, as a share of GDP, than the next worst arms exporter, the United States.

The bars shows the scores from 2003 to 2010in each of the 7 dimensions

As well as being stand-out bottom of the pack on arms exports, the UK does badly on migration policy, because it takes too few unskilled immigrants and students for its size; and technology policy both because Government R&D spending is unduly focused on defence, and because the  UK tends to pursue intellectual property rights policies that are not in the interests of poor countries, such as allowing patents on plant varieties, and pushing to incorporate into bilateral free trade agreements “TRIPS-Plus” measures that restrict the flow of innovations to developing countries.

Critics of aid often argue that we should focus more on helping countries to develop, rather than what they call ”handouts’ to poor countries.  In that context, they usually mention the need for more open trade with developing countries.  That is certainly important. The Commitment to Development Index suggests that they should also be advocating changes in UK policy to: reduce arms sales to undemocratic countries, accept more unskilled immigrants, increase the number of foreign students, remove patents on plant varieties and stop arguing for TRIPS-plus.

The UK gets credit for its environmental policies, mainly because it has done relatively well on limiting carbon emissions and because of high petrol taxes. Global warming has a disproportionately negative impact on developing countries, so these measures have an important impact on developing countries.

Many British people are proud of the UK’s commitment to reducing poverty in developing nations, and Britain’s model of an independent development agency within Government led by a separate Cabinet Minister is widely admired.  But is it working?    Judging by the scores in the 2010 Commitment to Development Index, the UK is  doing a better job at securing and spending a rising aid budget than it is at getting the rest of government to pursue development-friendly policies.

1. higher taxes on the wealthy
2. a curb on speculation and market volatility
3. more money for aid and global public goods.

But as I explained in February the Robin Hood tax isn’t a very good way to achieve any of these perfectly reasonable objectives. They would be much better pursued separately.

This analysis was confirmed by this new research published today by Neil McCulloch at the Institute for Development Studies.  He finds that:

1. a significant proportion of a foreign exchange tax would be passed on to consumers (so it would not be not a tax on the wealthy);
2. most empirical evidence shows that higher transactions costs are associated with more, rather than less, volatility.

He also finds that a financial transaction tax is feasible and that a tax on foreign exchange transactions could raise £7.7 billion in the UK, or $26 billion if implemented worldwide.

Unexpectedly, he then concludes that the UK Government should implement a currency transaction tax.

If the Robin Hood tax is not a tax predominantly borne by the wealthy, nor will it reduce market volatility, what’s the case for it?

If we want to increase our spending on aid and global public goods – which I support – we should do so by way of making the case in the public spending process.  Development activists should not try to bypass the systems of democratic control of spending priorities, nor should they advocate taxes which do not make good tax policy on either distributional or microeconomic grounds.

Would you spend it on stopping the slash-and-burn of forests?  Perhaps on switching to nuclear energy?   More energy-efficient buildings?  Building cleaner power stations?

According to a recent paper by David Wheeler and Dan Hammer, climate change experts at the Center for Global Development, the answer is (drum roll): you would do much, much better to spend your money on a combination of family planning and girls’ education in developing countries.

This table, based on data in their paper, shows how many tonnes of CO2 would be abated for your $1m:

The logic, of course, is that if there are fewer people on the planet, then we will generate fewer greenhouse gas emissions.  Population policies are important because there are many people in developing countries who want smaller families, but don’t have access to the family planning services they need to achieve this.  Education is important because educated girls want (and are more able to insist on) smaller families.  That’s why these interventions are important and cost effective, both individually and especially when done together.

Win – win

This approach is particularly attractive because, in addition to helping to slow global warming, there are other, very significant benefits for the citizens of developing countries of access to family planning and to education for girls.

The other day I reported here that if donors invested about $180 million a year to provide modern contraception to every Ethiopian woman who wants it, this could set off a virtuous circle of rising income per capita, lower desired family size, greater use of contraception, lower numbers of children, and so rising income per capita.  My back of an envelope calculation found that a decade of access to modern family planning would have roughly the same effect on incomes in Ethiopia as the entire international aid programme in Ethiopia does today.

As well as environmental and economic benefits, there are important social and health benefits for women and their families, which strengthen the case for these investments over and above the cost-effectiveness figures shown above.

Making choices

Of course in an ideal world we would do all of these things.  But although it is inconvenient to acknowledge it when you are busy trying to save the world, resources for averting climate change are limited. We should make informed choices to reduce carbon emissions in the most cost-effective and sustainable way we can with the resources available, to secure the biggest and broadest benefits.   These figures from the Center for Global Development imply that investment in family planning and girls’ education would be a far better investment than the UN Reducing Emissions from Deforestation and Forest Degradation (REDD), which aims to spend $30 billion a year on incentives for developing countries to reduce deforestation and forest degradation.

We would get three or four times as much bang for our buck – in terms of climate change benefits – from population policies and girls’ education as we would from even the most cost-effective investments in forestry (stopping slash-and-burn), and in addition we’d get the broader economic and social benefits for the people of developing countries.

So why isn’t this, in fact, where we are spending the climate change money?  Something to do with the power of industry in the environmental lobby? (Update: See Eliot’s comment below)

(The figures in the table above are calculated from Table 2 and and Table 5 of The Economics of Population Policy for Carbon Emissions Reduction in Developing Countries, David Wheeler and Dan Hammer, Center for Global Development Working Paper 229)

The main conclusion is that as would-be change-makers, we should not try to design a better world: we should concentrate on building better feedback loops.

You can view and listen to the presentation by clicking the image below. This narrated presentation lasts 18 minutes (beware: as soon as you click you’ll hear my voice, so don’t do this if you are in a meeting!).

Alternatively, you can download the presentation as a pdf file here.  But this won’t make as much sense, as there are a couple of videos in the presentation.

If you like this presentation, you may also like my previous narrated presentation about aid effectiveness after Paris.

Please let me know what you think in the comments below.  Am I right that we should focus more on feedback loops?

These are serious and important concerns.  In particular, if measuring results is simply bolted on to the existing systems for the allocation and management of  aid, the danger is that we add to bureaucracy with little real benefit.  But if better measurement of results is used instead by aid agencies to simplify the way they manage aid programmes, rather than just adding new reporting, then the results agenda creates the opportunity to reduce bureaucracy, decentralise decision-making, increase country ownership, increase the focus on outcomes that really matter, step away from linear, deterministic thinking about how results are achieved, focus more on relationships and institutions, and really liberate development workers to work on what really motivates them – delivering change on the ground – and less on managing the bureaucracy at home.

This post sets out how a focus on results might unlock changes in the way aid is managed, which could lead to significant improvements in aid effectiveness.

Let’s deal first with the question of motivation.  In a recent post I reported Dan Pink’s claim that people are generally not motivated by money to do cognitive and creative tasks. This led Nandini to ask:

How do you reconcile these views with those in Cash on Delivery aid, where incentives are clearly being proposed to motivate government officials to get the job done?

I do not think that most people who work in development are in it for the money.  Most of the aid workers could earn much more, and live more comfortable and less stressful lives, if they did something else. Aid workers don’t want to get rich: they want to help make the world a better a place.  And though they are often teased for being self-righteous, it is a genuinely noble and admirable motive.

I also know many fine public servants in developing countries who are similarly motivated by service to their country. They often burn with national pride and want their country succeed. They want to address social injustice and poverty.  They are hard working and often paid very little. They too would be insulted by any suggestion that they are in it for the money.

That isn’t to say that there aren’t some officials in both developed and developing countries who are corrupt and greedy.  In some developing countries where civil service salaries are very low, some people are not fortunate enough to get over Dan Pink’s hurdle of “being paid enough that they don’t have to worry about money”.  For these people, money may be a motivator, but for reasons I’ve set out elsewhere, I think aid plays a relatively minor role in changing their behaviour.

If the people making these decisions are not motivated by money, what is the point of linking aid to results?  The answer is that incentives still matter. People who work in NGOs spend a big part of their time writing grant applications, and sucking up to donors, not because they enjoy it but because they want to increase the funding for their organisation.  Within aid agencies, people spend a lot of time doing things they don’t really value, because that is what they have to do to be allowed to spend money on the programmes they care about.   Clearly people working in development are  responding to incentives, not related to their own incomes but because they want to expand and sustain the programmes they think are important.  So incentives matter, and they do change people’s behaviour.

Incentives to be ineffective

Within the current aid system, donor agencies and their staff face powerful incentives to give less effective aid. For example:

• Some donors give “tied aid”, even though this is estimated to reduce the value of aid by 15-30%. Tied aid is a consequence of domestic political pressure. Some donors allege that tied aid necessary to maintain public support for their aid programme (e.g. US food aid).
• Conditions are often imposed on aid, not because anybody believes the conditions really make a difference to what happens – all the evidence suggests to the contrary – but they enable donor governments to claim that they are “doing something”.  Though we know aid works best when we the developing country has real ownership over their policies, in practice the aid system regularly undermines this ownership by setting conditions and imposing its own systems of accountability and control.
• Donors like to retain the flexibility to turn the aid tap on and off at short notice (a practice often disgracefully known as using a “short leash”) so that they can respond to domestic political pressures, even though the lack of predictability is one of the biggest impediments to aid effectiveness.

This behaviour is driven mainly by the proper and important need for aid agencies to show to their taxpayers that their money has achieved something. Because aid agencies have found it hard to show a clear link to results, sometimes for quite respectable reasons, a complicated bureaucratic culture has grown up to trace how inputs are used, to set milestones and benchmarks, to and to encourage very high levels of engagement with recipients about how they propose to go about spending the money. But this behaviour, while a completely understandable and rational response to the need to be accountable, reduces the effectiveness of aid.

If taxpayers (and their representatives: politicians) cannot observe the results of aid, in a far away country about which they know little, they will be inclined to insist on getting whatever second-best information can be assembled to satisfy themselves, and to demonstrate to taxpayers, that the aid has been well used.  The consequence is that aid is made less effective.   For example:

• There are political costs (and risks) to making long term aid commitments, and to untying aid, but in the absence of measures of results there is no political cost to the invisible loss of effectiveness that unpredictability and tied aid create.
• Donors know that country ownership is essential for aid to be used well, but they nonetheless feel that they have to impose their own systems to determine how aid will be used and to track implementation.
• There are political and strategic benefits to giving aid in every country and every sector; but in the absence of measures of results nobody knows how much inefficiency this proliferation creates, nor is there anything to force donors towards a better division of labour.

It is as though we plant a tree and then dig it up again once a week to see how the roots are doing; and then we wonder why it isn’t growing very fast.

We cannot wish this problem away.  It is right and inescapable that donors must be accountable to taxpayers.  Donors cannot avoid these pressures simply by making international agreements to do better in future (which is why those agreements are implemented only sketchily and slowly, if at all). Nor will they meet the need for accountability merely by improving their communications or changing the narrative.  A stronger link between aid and results looks to be the only sustainable way to solve this problem.

The risk of additional bureaucracy

The audit culture in aid is beginning to create a backlash among development professionals.   Earlier this month, the Institute of Development Studies organised a meeting to “take the first step towards resisting the audit culture of philanthropic foundations and government ministries.”  And in an important essay which is getting a lot of attention, Andrew Natsios (a former Administrator of USAID) wrote about what he sees as the most disruptive obstacles to development work in agencies such as USAID: layers and layers of bureaucracy.  He argues that an emphasis on measurement is at odds with the fact that transformational programs are often the least measurable and involve elements of risk and uncertainty.

And if that is how the staff of donor agencies are feeling, imagine how much worse it must be for hard-pressed officials in developing countries, and NGOs trying to keep their overheads to a minimum.

Some people have a reasonable fear that push for better measurement of results, and a better link between aid and results, is a further and troubling manifestation of this bureaucratic tendency.  There is a significant risk of additional bureaucracy if the need to measure results is simply bolted on to the existing systems. But if donors are willing and able to use the stronger link to results to simplify the way they manage aid, this offers the best – perhaps the only – opportunity to step away from “command and control” management of aid.

Will measuring results make the system better or worse?

The argument for greater use of linking aid to results is not based on the simplistic notion that we should motivate aid workers or officials in developing countries with monetary rewards (which I don’t believe).  Instead it is based on the idea that if we can tackle the problem of lack of information about results, it becomes possible – and indeed desirable – to allow decentralised decision-making by people on the ground who know much more about what is important and what works; so respecting country ownership, and liberating developing countries and aid agencies from much of the bureaucracy of the aid system.

Cash on Delivery aid is a possible example of this approach.  It is a market-like mechanism, in that the donors set a price that they are willing to pay for certain types of result, and they allow governments to decide for themselves whether and how to supply those results.  But it is rightly a long way from a pure market solution.  I would like to see it tested because I hope that if aid is linked explicitly to an independently-verified measure of the results that we care about, this might enable donors to change the way that they relate to recipient governments and the way they manage aid.   There should be no reason to agree milestones and benchmarks, no need to set targets; no need for policy conditions or inspections of public financial management.  There does not need to be a simplistic, linear model of how results are achieved, monitored at every milestone and benchmark.  Financial commitments linked to results could be long-term and predictable.  Developing countries could choose their own priorities, and take responsibility for their own progress.  Cash on Delivery might enable donors to respect country ownership, and the diversity of approaches countries will take, while still being able to report to domestic taxpayers what difference aid has made.

Simon Maxwell is right to point out that too much development thinking simplistically assumes that inputs are translated into outputs and outcomes, as implied by the logframe approach.  But this is surely a critique of the existing approach in which inputs, activities and outputs are obsessively described and tracked and rather too little attention is paid to the actual outcomes.  A results-based approach, by contrast, would enable the development partners to step away from deterministic models, to invest more in relationships and institutions, to be politically savvy and opportunistic, to learn as they go, and to deliver results in ways that are messy, unpredictable and imprecise but which actually work.

Simon Maxwell is also right to highlight the importance of institutions and capacity in developing countries.  Many existing approaches to development pay too little attention to this:  because of our need to track inputs and activities we tie up partner governments in red tape and try to direct proceedings from the outside or – worse – bypass government systems to deliver services through NGOs and the private sector.   This undermines institutions and systems.  By contrast, one of the motives behind Cash on Delivery is that it enables developing countries to figure out their own way to deliver results, and so to strengthen their own national institutions and policy making. Because in this model donors are focused only on results, they do not need to intervene intrusively in how countries make progress, so enabling the institutions of developing countries to draw in outside expertise they actually need, want and use; innovate; test ideas; set their own priorities; adopt their own approaches; and learn.

Sceptics are certainly right to ask if a results-based approach will focus on the wrong results: there is a risk that we will link aid to short term, measurable indicators instead of sustained institutional and economic change.  That is certainly a shortcoming of today’s aid system, which sets targets for all kinds of short term activities which may or may not be important (“set up an anti-corruption commission” or “reduce double shift working by teachers”) and creates a huge industry of people designing ways to monitor these indicators, while accepting with apparent equanimity that we lack even the most rudimentary information about the things we ought really to care about, such as whether corruption is being reduced or children are learning at school.   It is possible that, under the banner of results-based aid, we could simply reinforce this short-term interventionism by linking money to short-term indicators that donors currently believe might matter. But if we resist this bureaucratic temptation and instead link aid to results that really do matter – such as reductions in maternal mortality or improvements in access to clean water – then we reduce, not increase, the risk that the aid system is too focused on the wrong things.

Conclusions

The hypothesis is that by addressing particular information failure – lack of information about results – and if necessary dedicating some resources to it, we might be able to break away from the coping strategies which donors have had to adopt, which create a lot of pressures which make aid far less effective and which waste a lot of time and money on nugatory work.  But this will require some imagination on the part of aid agencies to think about how they can simplify their existing systems for managing aid when they link aid more robustly to results.  Development professionals are right to worry that if results monitoring is simply added to existing systems, the effect will not be greater simplicity but more complexity and bureaucracy.

In my view, it is disrespectful to aid workers and to officials of developing countries to suggest that they are motivated by money.  That is not the logic behind linking aid to results.  It also disrespectful to occupy so much of their time on bureaucratic administration, recording information about inputs and processes, milestones and benchmarks, when they would generally make a greater contribution if they were free to deliver development results.

Aid is made less effective by the incentives which aid agencies face, which they in turn transmit to their staff.  In large part, these unhelpful incentives are a consequence of lack of information about results.  If we can measure results better, and if we can use this to simplify the management of aid (and not simply bolt additional reporting on to existing bureaucratic processes),  this will enable more decentralised decision-making, respect country ownership, make the jobs of aid workers and government officials more rewarding, improve the effectiveness of aid, and so reduce poverty faster.

Overall, this spending review is a seismic political event, which will be talked about for many years to come.   It will reduce planned spending by £81 billion ($130 billion) a year, and remove about half a million public sector workers from the government payroll.

In that context, the coalition government’s decision to increase international development spending is remarkable.  Here is the Chancellor of the Exchequer, George Osborne:

I can also confirm that this Coalition Government will be the first British government in history, and the first major country in the world, to honour the United Nations commitment on international aid.  The Department for International Development’s budget will rise to £11.5 billion over the next four years.   Overseas development will reach 0.7% of national income in 2013.

This will halve the number of deaths caused by malaria. It will save the lives of 50,000 women in pregnancy and 250,000 newborn babies. Whether working behind the counter of a charity shop, or volunteering abroad, or contributing taxes to our aid budget, Britons can hold their heads up high and say – even in these difficult times, we will honour the promise we make to the very poorest in our world.

The chart below, which shows aid as a share of national income since 1960, shows that this really is historic.  Britain will, for the first time, meet the international aid target of 0.7% of national income, joining Denmark, the Netherlands, Norway and Sweden.

UK ODA as share of GNI since 1960

In cash terms, Britain’s official development assistance (ODA) will increase by 50% over the four years to 2014.  Most of this will continue, as now, to be channelled through the UK Department for International Development (DFID), whose budget will increase by 47% in cash terms (37% after taking account of inflation).

The increase will occur mainly in 2013, when British aid will increase by a third from £9.1bn to £12.0 bn.

To get a sense of the political priority that development has been given in this spending review, consider that the National Health Service will increase by just 1.3% in real terms over the same four years; and many government departments face reductions of 20% to 30%.

The Daily Express opposes foreign aid

This is a considerable act of political bravery on the part of the Conservative-Liberal coalition. Today’s Daily Express (see right) is among the British newspapers demanding that, in the context of a spending review in which many public services face declining budgets, aid should be cut too.

The government has defended aid on the grounds that it is both morally right, and in Britain’s interest.  They have also said that they will step up efforts to ensure that the aid budget is both transparent and effective.  Chancellor George Osborne said that the aid budget is “protected from cuts but not from scrutiny.”  The announcements included:

• A significant reduction in the admin budget.  Running costs (a definition of back-office costs used by the OECD DAC) will be reduced to 2% of total spending by 2015, half the global donor average of 4%.
• A new Independent Commission for Aid Impact will assess all ODA spending to ensure best value for money and effectiveness.
• DFID will end bilateral aid to China and Russia.

Andrew Mitchell, the Secretary of State for International Development, is quoted as saying:

We are proud of the fact that we are keeping our promise to spend 0.7% of GNI on aid. However, in the current financial climate, we have a particular duty to show that we are achieving value for money. Results, transparency and accountability will be our watchwords and will define everything we do.”

Of course, the development experts have quibbles and concerns, such as whether aid will be spent disproportionately in support of Britain’s security priorities, and how DFID will manage a fast rising aid budget while staff numbers are being reduced.  These are, in my view, reasonable questions to ask; and I will be among those continuing to ask questions about whether and how aid spending can be used most effectively; but it seems churlish today to focus on these issues rather than the big picture of a substantial demonstration of political and financial commitment to overseas aid.

The coalition government should be congratulated for their commitment to the UK’s overseas aid programme, and for their efforts to improve the transparency, accountability and effectiveness of aid to have the maximum possible impact improving the lives of people in developing countries.

For more commentary, see

• Lawrence Haddad from IDS
• Claire Melamed from ODI
• Julian Borger in the Guardian on the implications for foreign policy

Peter Gill's new book, Famine and Foreigners

Peter Gill talks on the latest Development Drums podcast about his new book, Famine and Foreigners: Ethiopia Since Live Aid.

The Ethiopian famine of 25 years ago killed more than 600,000 people. Peter Gill was the first journalist to reach the epicenter of the famine in 1984 and he returned at the time of Live Aid to research the definitive account of the disaster, A Year in the Death of Africa .

Twenty five years later, Peter Gill has returned to Ethiopia to tell the story of what has happened since then in Ethiopia. His book draws on interviews with leading Ethiopians and with foreign aid officials. He interviewed Prime Minister Meles Zenawi and the leading development economists, Joseph E. Stiglitz and Jeffrey Sachs. Most important of all, Gill has traveled throughout the country and interviewed many of Ethiopia’s citizens.

In this edition of Development Drums, I ask Peter to recall what happened in the famine of 1984, and how Ethiopia has changed in the quarter of a century that followed.

You can listen to Development Drums on your computer at the website (http://developmentdrums.org) or download it (from here) to your MP3 player.  You can subscribe to Development Drums on iTunes free of charge (search for “Development Drums” in the iTunes store).

A Social Impact Bond is a contract with the public sector in which it commits to pay for improved social outcomes. On the back of this contract, investment is raised from socially-motivated investors. This investment is used to pay for a range of interventions to improve the social outcomes. The financial returns investors receive are dependent on the degree to which outcomes improve.

This idea is being tested to pay for a project which aims to cut re-offending by prisoners in Peterborough. Here it is described in the Financial Times:

The £5m bond is being used to fund the St Giles Trust, a third-sector organisation with a record of reducing reoffending by up to 40 per cent. It engages with offenders in jail and then supports them once out – something the probation service does for those on longer sentences but not for short-term prisoners.

If St Giles fails to cut reoffending at Peterborough, investors will get nothing back. If the reoffending rate reduces by 7.5 per cent they start to get a return. As it rises, the justice ministry will pay more, up to a maximum 13.5 per cent a year.

…  The justice secretary was careful yesterday not to paint the social impact bond – “a small scheme, although I would hope to have it on a much bigger scale across the country if we can make it work” – as the big answer to that. But payment only for results would be a key part of his green paper on reducing reoffending, he said.

Kenneth Clarke talks to inmates at Peterborough prison

The logic of these bonds is that the private sector invests in schemes if they are convinced it will deliver certain kinds of results.  But because the results are social benefits, they don’t generate cash which can be used to provide a return to investors.  So the government steps in to translate the social impact into a financial return for the investor.  It is this government promise to turn social impact into financial returns which unlocks the possible engagement of a much wider range of organisations in finance and delivery of social outcomes.

The concept is explained at more length in a publication by Social Finance, Towards a New Social Economy.   Social Finance’s role has been to get the contract put in place, and then attract capital into the fund. They are not themselves an investor in social impact bonds: their goal is to develop ways to enable finance to work better in social areas, both to raise more money and to allow it to be more effective. According to the FT:

If this is a revolution in social financing, it will not happen overnight. It will take three to four years for absolute proof the Peterborough project works, “but we believe there is the potential for hundreds of millions of pounds, even billions, of investment for social change through these sorts of structures,” Mr Eccles says.

Could something like this work in development?

One way this could work in development is as follows.

"I have a cunning plan"

A group of donors could make a binding commitment to pay a certain amount for particular outcomes, such as the number of  kids who complete school, or every household to get access to clean drinking water. (This is the kernel of the Cash on Delivery idea proposed by my colleagues at the Center for Global Development.)   Suppose you are a Minister in a developing country with a great plan for getting kids into school.  If the donors have promised to turn social results into financial returns, could you then persuade private investors – perhaps social investors or development finance institutions  - to front up the money to enable you to implement your plan?  (If not, might it be that you need a better plan?)

If your education scheme works, and the outcomes are achieved, donors hand over the money and investors get a financial return.  If your scheme doesn’t work, donors don’t hand over the aid, and your investors don’t get their money back.  Donor aid budgets are spent elsewhere.  You might have a little less luck raising money next time you have a cunning plan.

In general, a promise by donors to turn social returns (such as more kids vaccinated, reduced maternal mortality, more access to clean water) into a financial return might unlock a bigger range of sources of short-term financing for development. Possible financiers might include private sector institutional investors in search of commercial returns, social investors, high net worth individuals, foundations, development finance institutions (such as the World Bank and African Development Bank), or perhaps socially conscious individuals who want to put in a small amount of cash through an online service, with the expectation of just getting their money back, and nothing more, if the development results are achieved.   As well as (perhaps because of) the greater diversity of sources of finance, this might unlock more innovation and diversity in how those results can be achieved.

This could lead to a big change in the aid relationship and the role of aid agencies.  At the moment donors bundle together two potentially separate roles:

• providing finance for development;
• selecting among approaches for meeting development goals and supporting and monitoring their delivery.

The social impact bond approach would enable those two potentially distinct roles to be unbundled.  Donors could concentrate on identifying results for which they are willing to pay, putting a suitable price-tag on them, and ensuring that measurement of results is fair and accurate.

Once donors have made a commitment to turn social results into financial returns, developing countries could turn to a much wider range of organisations to help them design and deliver services, and a much bigger range of sources of short-term finance.  It would be up to the countries themselves to decide which social objectives to target, and how they wanted to go about doing it, subject to the discipline of being able to convince an investor (but not necessarily donors) that their plan makes sense. This approach would respect country ownership and prioritisation, and yet ensure that aid money was used only where it was really delivering results.

No substantial consideration has yet been given to whether and how social impact bonds might be used in the context of international development.    The closest analogy so far has been the International Finance Facility for Immunisation, but in that case there is no link between performance and the payout to investors.  In domestic policy, the Peterborough project to reduce re-offending is the only example so far of social impact bonds, though others are planned.

Those of us who are interested in international development should track the progress of these experiments and, if they are a success, think about how we might adapt the idea of social impact bonds to attract more diverse finance into development, as a way to improve the effectiveness with which aid money is used to reduce poverty.

Narrative 1: Glass half full: we need a big heave

The dominant story from the summit was that development can be achieved if the world would only come together with a big heave. On this view, the glass is half full. We have made good progress towards the MDGs (supported by the new MDG report card by ODI; and their excellent new Development Progress Stories website); and with more money, we can do more.  Jeff Sachs, whose Millennium Villages Project exemplifies the idea of a big, coordinated push, called in the FT for aid to be scaled up through pooled donor funding, “to scale up what has been proven to work”. (Oddly, he chose the Global Fund rather than the World Bank as his example of effective multilateral institution.)

The new report of the Commission for Africa advocates a further big heave

A new Commission for Africa report, Still Our Common Interest, agrees. The original 2005 report was probably the most authoritative (certainly the most weighty) argument for a big heave; and it concluded (among other things) that donors should treble their aid to Africa.  The updated 2010 report reiterates that view, celebrates the progress that has been made, and calls for donors to increase their aid, including – very oddly – a proposal for a new Global Fund for Education.

Probably the biggest announcement this week, which sits squarely in the big heave narrative, was for a new UN Global Strategy for Women and Children’s Health.  As I argued here the other day, the focus on women and children’s health is welcome, but this is no strategy: it is another list of spending commitments, which the UN press release says is worth $40 billion. The only interesting feature of it is that it lists commitments by private companies and NGOs as well as official donors.  All very big heave; all very retro.

Narrative 2: More accountability leads to better institutions

While the UN institutions and the NGOs promote the big heave, donor governments, particularly the US and UK, are beginning to tell a different story which focuses on the need for more transparent and accountable institutions, both in developing countries and in the international development system.  This was most evident in President Obama’s speech which announced a new US development strategy.   President Obama explicitly distanced himself from the big heave:

“This is the reality we must face — that if the international community just keeps doing the same things the same way, we may make some modest progress here and there, but we will miss many development goals.”

Both the US and the UK government argue that the efforts of donors should be measured not by what is spent, but by what is achieved, both by aid and by other policies.  Cynics might think this is preparing the ground for aid cuts in the face of tight government budgets, though this does not appear to be the motive of the UK government which has committed to increasing aid to 0.7% of GDP by 2013.

The emphasis in the new US policy on growth as the permanent path out of poverty is not as new as the President’s speech implies; but the renewed emphasis will be welcome to those who think that the importance of growth is sometimes forgotten. As Lant Pritchett writes:

The “development is about more than growth” backlash, which had important elements of truth, easily got carried away into “development isn’t at all about growth” and it is good to see economic growth back front and center of development objectives.

A more novel feature of the new US policy is the emphasis on investing in systems and institutions, for service delivery, public administration, and other government functions, and the importance of country ownership.  This is new for the US.  For many European donors it is this reasoning that brought them to give more of their aid through governments as budget support, so this new US approach will be seen as a welcome conversion.

What is striking about this narrative is the emphasis it puts on transparency and accountability as ways to make institutions work better.  President Obama set out the argument in his General Assembly speech the following day:

The arc of human progress has been shaped by individuals with the freedom to assemble and by organizations outside of government that insisted upon democratic change and by free media that held the powerful accountable.   … In all parts of the world, we see the promise of innovation to make government more open and accountable. Now, we must build on that progress. And when we gather back here next year, we should bring specific commitments to promote transparency; to fight corruption; to energize civic engagement; and to leverage new technologies so that we strengthen the foundation of freedom in our own countries, while living up to ideals that can light the world.

This emphasis on accountability seems to resonate closely with the approach of the UK Government.  The UK International Development Secretary, Andrew Mitchell, set out a similar argument in his first major speech, in which he emphasized outputs and outcomes rather than inputs, and launched the new UK Aid Transparency Guarantee.   Paul Collier and Jamie Drummond, writing in the Guardian, make a similar point about the need for transparency and accountability in the use of natural resources.

The 32 page outcome document, Keeping the Promise, sets out the usual long list of activities which “with increased political commitment .. could be replicated and scaled up for accelerating progress”.  But experienced communiqué watchers (like Lawrence Haddad) also detect a new theme: the need for more citizen-led monitoring of delivery.  For example, the outcome document calls on donors to:

[Work] towards greater transparency and accountability in international development cooperation, in both donor and developing countries, focusing on adequate and predictable financial resources as well as their improved quality and targeting; …. To build on progress achieved in ensuring that ODA is used effectively, we stress the importance of democratic governance, improved transparency and accountability, and managing for results.

Until now, I think many people working in the development community have seen transparency as an add-on, at best a way of retaining public support for aid while they get on with figuring out how to use the aid money wisely (and at worst an annoying additional bureaucratic burden).  Perhaps I am tempted to read too much into these speeches, because my day job is working towards more transparent and accountable institutions, but it was striking to see Raj Shah, Administrator of USAID, talking about the use of new media to build an online platform to help the government to reach its development goals.  I think it is now clear that, for the US and UK at least, transparency and accountability will play a more central role in their development strategies, both as drivers of change in developing countries, and forces for improvements in the effectiveness of development agencies and institutions.

A sign that this narrative is beginning to take shape is that it is already under attack.  In an interesting article in The New Republic, David Rieff is sceptical of the idea that donor nations can offer a path out of poverty:

The problem is not with the analysis but rather with the president’s implicit claim that we know how to offer peoples and nations such a path. … The stark fact is that only if one fetishizes the idea of civil society as a kind of universal ideological solvent, and believes that, in tandem with scientific innovation, the road to our collective salvation is now open to us, can such optimism be justified.

An interesting feature of this narrative is that it emphasizes the need for a wider range of instruments (known either as beyond aid or – ghastly term – policy coherence).  For example, in his speech, President Obama said:

Development is helping nations to actually develop — moving from poverty to prosperity.  And we need more than just aid to unleash that change.  We need to harness all the tools at our disposal — from our diplomacy to our trade policies to our investment policies.

Andrew Mitchell’s speech in June said something similar:

21st century development is a complex tapestry of trade, investment and enterprise, climate change, economic growth, debt relief, financial services, intellectual property and advancing new technologies.

Bill Easterly argued in the pages of the FT that trade, not aid, is needed to promote development. I’ve argued elsewhere that we don’t know very much about whether and how aid promotes economic and development, but we do know that it enables people to live better lives while that transformation is taking place.  So it may be that these beyond aid policies are the best hope for promoting development, while aid should focus primarily on improving lives in the meantime.

Narrative 3: The challenge is increasingly inequality, not absolute poverty

In my view, by far the most interesting and important paper to be published around the summit was The World’s Poor Aren’t Where We Think They Are, by Andy Sumner from IDS. Here’s the key conclusion:

In 1990, we estimate that 93 per cent of the world’s poor people lived in low income countries. In contrast, in 2007 we estimate that three-quarters of the world’s approximately 1.3bn poor people now live in middle-income countries (MICs) and only about a quarter of the world’s poor – about 370 million people live in the remaining 39 low-income countries, which are largely in sub-Saharan Africa.

The paper also shows that just 12 percent of the world’s poor live in fragile low-income countries.  Take a look at this Guardian data visualisation tool.

Data visualisation by the Guardian

This change in the reality on the ground has profound implications for development policy, and my sense is that the discussion in New York is not yet grappling with these issues.  Readers of Paul Collier’s book The Bottom Billion will recall his analysis that the world’s poorest people lived in about 50 very poor countries which he said were stuck in a series of poverty traps.  Policy should be focused on helping those countries to escape that trap. But if three quarters of the world’s poor live in middle income countries, the challenge is to reduce inequality in these countries.  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.

It is not clear that additional resources from abroad are an important part of the answer to this. At The Guardian, Jonathan Glennie says:

The world needs to find new ways to help other countries respond to persistant poverty and increasing inequality. The era of aid as we know it is ending. Let’s hope that a new era of development cooperation takes its place.

For some people this suggests that we should reconceptualise development as the ability of all the world’s citizens to live decent lives, rather a problem of economic industrialisation of poor countries. This view has the advantage of focusing on people and communities, rather than countries.  A recurring theme of the Chronic Poverty conference, which took place just before the MDG Summit, was the right of all citizens to a basic standard of living, and there is growing interest in the possible role of various kinds of social protection (social safety-nets, conditional and unconditional cash transfers, family grants and so on).

Similarly, a new report from Phil Vernon and Deborrah Barksh at International Alert asks us to get “beyond the MDGs”.  They call for a

… a new narrative, based on a vision of a world in which people can resolve their differences without violence, while continuing to make equitable social and economic progress, and without lessening the opportunities for their neighbours or future generations to do the same. This vision would be both enabled and recognisable by five core factors: equal access to justice, political voice, security, economic opportunity and well-being. These would in their turn be underpinned by a self-reinforcing set of values and institutions.

On this view, poverty is a problem of political and economic marginalisation which can affect communities within industrialised, industrialising and low income countries.  It calls for a different kind of policy agenda, which is as much to do with empowerment and political voice as the transfer of resources and investment in public services.

Conclusion

These seem to be three quite different views of development.  There is a substantial gap between advocating a big heave of more aid to ignite a cycle of industrialisation in the poorest countries, a focus on more transparent and accountable institutions in developing countries and in the development system, and political change that protects the rights of society’s most marginalised groups in whatever country they happen to live.

But while there are tensions and trade-offs, these views are not intrinsically contradictory, and in a subsequent post I’ll look at how these three narratives can be stitched together into a coherent whole.

This video by AidData explains brilliantly what geocoding means, and why its important. Take a look:

Serious kudos to the World Bank, Development Gateway and AidData for doing this work. Geocoding is going to have a huge impact on improving the accountability and effectiveness of aid.  By geocoding these World Bank projects manually, the team has demonstrated that geocoding aid is feasible. As Development Gateway’s Steve Davenport says in the video: “This is not that difficult”.

If the new standards for publishing aid information that are being designed by donors under the International Aid Transparency Initiative include appropriate standards for geo-coding of all aid activities, then it won’t be necessary for these projects to be coded by hand in future.  The people funding the projects would geocode their projects from the outset, and this information would be included in the data feeds, so everyone will have more comprehensive, more accurate and more precise about who is doing what, and where.

If you want more background, aidinfo’s paper Show Me The Money explains how geo-coding, traceability and transaction level details make a powerful combination for improving the effectiveness and accountability of aid.

H/T: my colleagues at aidinfo

More details are on the aidinfo.org blog.  In short, the donors agreed

• Data will be published more quickly, with an agreement that information will be published as soon as possible, and at a minimum, quarterly. More timely information is a top ask of stakeholders in developing countries.
• Data will be published in a common, open format, so that it is readily accessible, comparable and easy to find.
• More detailed aid data will be published, increasing its relevance to users.

None of this is going to be easy for donors. It will require some investment in collecting better information and quality assurance, and it will require a significant change of culture as they move to the assumption that the details of all aid projects will be publicly available automatically.  But we know that the benefits hugely exceed these costs.  So kudos to the donors for taking this important first step on the road to comprehensive aid transparency.

Two particular highlights of the meetings from my point of view were:

• The five country pilots demonstrated the feasibility of automatic electronic data exchange between donors and developing country governments, and for the creation of data in standard IATI format; and
• The developing country representatives at the meeting were clear and vocal in their insistence that donors should publish details of how they are spending aid.

There is a long way to go, and there is a comprehensive work programme for phases 2 and 3 of IATI.  But last week donors took an extremely important first step for which they deserve credit.

Read more on the aidinfo blog.

Though the point is often made, it it isn’t true. According to OECD DAC statistics, since aid began in the 1960s donors have given a grand total of $502 billion to sub-Saharan Africa, which is worth about $866 billion in today’s prices. (Table 29; excludes debt relief.)

This is not trillions of dollars – not even one trillion dollars.

The G-20 countries have, over the whole history of aid, given less aid to sub-Saharan Africa than they spent on fiscal stimulus in the single year of 2009.

(This fact comes from my recent article, An Open Letter to Aid Skeptics, in the latest edition of the Center for International Relations Forum journal (pdf).)

First up, Roger Riddell says we need a radical rethink of foreign aid:

The gap between what it does and what it could do is widening fast. … The central problem of the aid system is that there is no system.  … Almost since official aid was first given, politicians have both warned of aid’s systemic problems and proposed alternatives. These include raising aid funds through an automatic compulsory mechanism based on the ability to pay; pooling aid resources and allocating them on the basis of need; and, if there are grounds for believing that the recipient government is unable or unwilling to use the aid funds transparently, “ring-fencing” the aid in a fund to be administered independently.

Most of these good ideas have been eclipsed by the focus on increasing aid levels. A common response to anyone advocating these solutions to aid’s systemic problems is the counter-argument that they are part of the very nature of the aid system, and that it is naive to suggest that it can be changed. They warn that if governments are unable to decide for themselves how to give aid and then check on its use, then they simply won’t provide it.

There are two ways to respond to these arguments. One is to point out that that aid’s systemic problems are getting worse and fast and frustrating progress on the core objective of ending extreme poverty. Resolving key systemic problems would probably have a greater effect on extreme poverty than expanding the amount of aid given. The other is to draw attention to high-level discussions where the sorts of changes needed to fix aid are being presented as politically viable.

The authors of Philanthrocapitalism, Mike Green and Matt Bishop, also think that the aid system needs reform, but they have a very different view of the direction of travel:

Like it or not, we have to find new ways of making the aid money go further and find new ways of financing development that do not depend on the political will of a few rich countries. Philanthrocapitalism, by tapping the expertise, creativity, money and other resources of the private sector, has to be central to a new development strategy. First, to pilot and test ideas to make aid smarter and more effective. Second, to leverage more private capital – full for-profit, ethical investment and donations – to fill the gap.

As we have argued before, this means thinking about aid not as the exclusive preserve of government but as a partnership with philanthrocapitalists, rich and less rich alike. This challenge is urgent and the rich countries are being slow to take it up - Britain’s new government, in particular, seems set on business as usual (although there are plenty of disgruntled voices on the right who would like to see an axe taken to the aid budget).

Both arguments start from the view that the challenges to aid are the result of political pressures in donor countries.  Roger Riddell argues for a more centralised, technocratic aid system which can be isolated from undue political influences.  Mike and Matt want to see much greater involvement from a range of other actors, especially the big philanthropic foundations.

I think they are both partly right, and both partly wrong.

Roger Riddell is right to say that the systemic problems of aid are the result of politics; and he is right to disagree with the pessimistic idea that these problems are insurmountable.  But he wants to address these problems but putting the aid system at arm’s length.  I don’t think this is a viable solution: it wishes the problem away.  It is like saying that we can solve the global climate change problem by handing over control of energy policy to an international panel of wise people.  The politics matters, and we can’t make them go away by asking technicians to give us the answer; so we have to figure out how to change the politics.

The aid system today is characterised by aid institutions (official aid agencies, international organisations and charities) trying to mediate between the preferences of the people who give them money and their view of the interests of people in developing countries.  Aid agency staff typically want to do as much as they can for people in developing countries: if you ask most aid agency staff who their “client” is, they will tell you it is the world’s poor, not their own taxpayer. But they feel they can’t do many of the things they would like to do (such as improve the allocation of aid, reduce conditionality, make long-term commitments, scale back paperwork and process, focus more sharply, untie aid etc) because they have to take account of the preferences of the people whose money they are spending.  They see themselves as a firewall, serving the interests of the poor by protecting the aid programme as best they can from what they consider ill-informed or selfish wishes of their taxpayers. This behaviour is not confined to official donor agencies: many NGOs say one thing to their supporters, and do something quite different (think, for example, of the difference between what Kiva actually does and what most people think that it does).   In my view, trying to deliver effective aid despite public opinion  is fundamentally misconceived and unsustainable; this model is beginning to fray at the edges, and could well fall apart.

The alternative approach is for aid agencies to recognize that the public wants to see aid used as effectively as possible; and to build an informed conversation about how that can be achieved.  The stakeholders see the issues from different perspectives: for example, the public sees the benefits of spreading its aid across many countries and sectors, while aid agency staff see the ineffective duplication this creates.  The solution to this is to share information and build a common view, not to try to disempower the public.  If the aid bureaucracies believe that long-term commitments of aid to strengthen national systems is more effective in the long run than the series of smaller ad hoc projects that the public seems to prefer, then they should  produce the analysis and evidence and persuade their stakeholders.   Both Roger and I believe that more aid should be given to the poorest countries; he believes that this decision should be taken out of the political process, while I believe we have to win the public round by explaining why that would be better.

In the long run, public opinion will determine how much aid is given, to whom, and by what means: we cannot and should not try to sidestep the argument by putting the administration of aid beyond the reach of public opinion.  The only sustainable way to make aid more effective is to change the political pressures by producing persuasive evidence and analysis.   If Roger’s approach is to insulate aid from political pressure, my approach would be work to align those political pressures with more effective aid by making aid more transparent and accountable.

By contrast, Mike Green and Matt Bishop want to improve aid, and attract more resources, by making more use of the expertise and money of the private sector.  I agree with them that there is huge potential for the growing diversity in the aid system to improve the effectiveness of development system, if different organisations focus on the contributions that they can make.  Foundations could act like venture capitalists: taking bigger risks but leaving long-term financing of scaled up successes to official aid donors. Private aid could focus on achieving community and individual level results. Specialised global organizations could provide particular expertise not available through generalist support. The diversity of official donors could provide innovation rather than a monoculture of ideas. Official aid agencies could focus on long term funding and resource transfer, and support for institutional change.

Unfortunately it is not clear that all these different actors really are focusing on their strengths, and there is nothing in the aid system that pushes them to do so.  The foundations do not display the higher risk appetite that we would expect them to have (despite their rhetoric).  The approach of official aid agencies to the division of labour does not appear to be intended to drive specialisation (from which the benefit of division of labour derives) but simply to limit spread.   Diversity of approaches and innovation are essential, but this must be accompanied by mechanisms which kill off bad innovations and take good ideas to scale; otherwise the effect is simply to add to costs and fragment systems.

In their book, Philanthrocapitalism, Mike Green and Matt Bishop give several examples in which philanthropic foundations have made significant and worthwhile contributions. The role of the Rockefeller Foundation in promoting the Green Revolution is a compelling example.  But from these successes they extrapolate a wildly rose-tinted view of the work of foundations.  As with official aid, there are successes and failures; there are good practices and bad.

My impression is that, at their worst, foundations are much less effective, and behave even worse than official donors.  For example, I have seen:

• massive unpredictability and volatility of foundation grants; many foundations make grants worth 5% of their capital asset value each year, which is the minimum imposed on them by US tax authorities.   In years when asset prices are volatile, many foundations pass on this volatility to grantees – they do not (as they could, if they chose) use their capital to smooth out the grant-giving and make it more predictable and stable.  In 2009 I know of some foundations which imposed in-year cuts exceeding 25% on their grantees, leading to cuts in services and imposing huge costs in developing countries just at the time when the world economic crisis created needs for additional funding;
• reinventing the wheel and failure to learn – it is one of the advantages of foundations that they can be innovative and unconventional; unfortunately, both the benefactors and staff of many foundations suffer from an inflated sense of their own abilities, and foundations often repeat basic mistakes that have been made for many years, rather than building on the experience and wisdom of organisations that have made these mistakes before;
• capriciousness and personality-driven priorities – both the staff and benefactors of foundations get ideas into their heads from which they cannot be dissuaded.  There are many examples of ludicrous decisions and instructions from foundation staff to grantees based on nothing more than their prejudices or personal preferences.

Of course, official aid agencies also suffer from these problems to some extent.  But they also benefit from a degree of public accountability which puts them under pressure to be more effective.  I think Matt Bishop and Mike Green underestimate the problems that foundations suffer as a result of their lack of accountability.  In many cases benefactors became rich in markets; and they often trusted their instincts. But when they got a judgement wrong they were soon punished by the market, and they were able to change course.  Now that they are philanthropists, they do not have any such feedback.  When they make the wrong decision, everyone is too afraid to tell them, for fear of losing the opportunity to apply for the next grant.  There is no mechanism for identifying and rewarding their most effective staff; nothing that forces foundations to concentrate on what they are really good at.

In many ways we have the worst of all worlds: with some notable exceptions, foundations do not in practice take enough advantage of the opportunities that their lack of accountability give them (for example, taking bigger risks, or supporting unpopular causes) but they do suffer from the weaknesses that lack of accountability imposes on them.

So I think Mike and Matt are right to say that development relationships should not be the exclusive preserve of government, and that is should increasingly be an effective partnership with philanthrocapitalists, NGOs, private sector organisations and individuals.  But without some more effective governance arrangements in the aid system, we will not reap the potential benefits of this partnership.  We need stronger pressures for the different partners to make their specific contributions effectively, which in turn demands greater transparency and stronger accountability for all organisations.

Both articles start from the premise that the aid system needs to be improved; on this I think we all agree.  But Roger’s solution – putting aid beyond politics – is unlikely to be effective, and is undemocratic.  If we believe that politics constrains effective aid decisions, we should square up to trying to change the politics, not trying to insulate ourselves from it.  And Mike and Matt’s answer – passing the baton to very rich Americans – is no answer either.  These stakeholders certainly have a contribution to make, but to be effective their contribution must be part of a system that is likely to get the best from all partners working together, and holds everyone to account; otherwise we risk having all the disadvantages of the free market with none of the benefits of market discipline.

Disclosure: the organisation for which I work receives grants from the Gates Foundation and Hewlett Foundation.

“We are now at a crossroads. On the one side, is politically motivated or ineffective aid – much of which still exists today. On the other, and looking to the future, is aid fit for the 21st century. Twenty-first  century aid is liberated from rich countries’ political incentives and is targeted at delivering outcomes  n poverty reduction. Twenty-first century aid innovates and catalyses developing country economies, and is given in increasing amounts directly to government budgets to help them support small-holder  farmers, build vital infrastructure, and provide essential public services for all, such as health care and education. Twenty-first century aid is transparent and predictable. It empowers citizens to hold governments to account, and helps them take part in decisions that affect their lives. In recent years we have seen more of this good 21st century aid but we need to see a lot more still, and soon.”

There is a lot to like in this paper:

• the combination of making the case for more aid, and for making improvements in how it is delivered;
• the emphasis on making aid more predictable, transparent and accountable
• the focus on helping to support the evolution of effective institutions, particularly state institutions
• a whole chapter devoted to addressing the critics of aid
• the call for developing countries to do more to end corruption and increase transparency and freedom of expression
• a clear case for giving more aid to reach the Millennium Development Goals.

It is an interesting straw in the wind that the paper does not dwell on the Paris and Accra agendas for aid effectiveness. I see this as growing recognition that while the objectives of of those declarations are laudable, the top-heavy, committee-led process for achieving them is unworkable and ineffctive.  I wonder if transparency and accountabilty would have featured so much in a paper written even one or two years ago.

Yes, and …

Writing a paper about everything in development would have been an impossible task, even for someone as talented as Jasmine.  So when I say that there are points I would have liked to see made more prominently, or done differently, I do not mean this as a criticism of the paper, but rather some nuances and reflections that I would like to add.

First, there is only a brief acknowledgement (p15) of the importance for development of policies other than aid.  My view is increasingly that the most important levers for industrialised countries to help accelerate development are changes in policy (eg trade, climate change, migration, intellectual property, corruption); and that contribution of aid is likely to be modest.  Even so, I think aid makes a huge difference to improving people’s lives while development is happening, and that this is reason enough to increase and improve it.

Second, I would have been interested in some reflections on how the role of aid should change in the face of broader changes.  What are the implications for the way we use aid of of the rise of philanthropic foundations?  What difference is made by the emergence of new donors such as China?  What is the role of business, corporate social responsibility and social entrepreneurs?  How does aid fit with other financial flows, including remittances and direct investment?  My own view is that we should focus aid more sharply on reaching the parts that other flows won’t reach: the poorest countries, the chronic poor and marginalised within those countries, and investments with no immediate financial return, but the paper could have put aid more clearly into this context.

Third, I think those of us who want to see more and better aid should recognise more explicitly the serious challenges that the aid system now faces.  As Duncan Green says “the pro-aid camp is fearful of giving fuel to the enemy if it acknowledges the failings of aid.”   The paper suffers from a certain amount of self-censorship of this kind.  There are scattered references to the problems,  such as this:

“Aid that does not work to alleviate poverty and inequality – aid that is driven by geopolitical interests,  which is too often squandered on expensive consultants or which spawns parallel government structures accountable to donors and not citizens – is unlikely to succeed.”

I would have liked a more thorough examination of these (and other) problems. We have to acknowledge that some of these problems are getting worse, not better. (In places it reminded me of the way that some politicians appear on TV when things are going badly wrong, with a talking point that says “things are pretty good, though of course we could do even better; but we really need to get our message across better”.)

On his blog, Duncan Green makes much of the point that this paper sets out the case both for increasing aid and for making it work better.  I don’t think this is as unusual as he suggests (“More and better aid” was one of the demands of Make Poverty History, for example).  But I do agree with him, and with Jasmine, that this is the right position.

Despite those quibbles, I thought this was a very good paper. It explains the debate about aid clearly, and it sets out very well coherent and plausible agenda for why aid should be increased, and how it should be improved.  But I’m not sure who Oxfam thinks will read it, and unfortunately I doubt if it will change anybody’s mind in either direction.

The slide borrows a format from Wired Magazine – it shows what I think is expired, tired and wired in foreign aid.

Of course, some of this is a bit exaggerated but I think it makes the point.   As I argue in the presentation (you can click it then jump forward to slide 20), the items in the Wired column aim to put  power in the hands of citizens in developing countries, and to enable them to put pressure to improve the services they get and the way that the aid system works.

Further suggestions please in the comments below, preferably in the Wired | Tired | Expired format.