Why is fragmentation a problem?

Emmanuel Frot and Javier Santiso write about why fragmentation is a problem for international aid:

.. the real issue at the heart of fragmentation is too little competition. Numerous donors only multiply monopoly costs, without bringing the benefits expected from competition.

This has implications for how the donor community tackles fragmentation. The current approach is institution-based. Donors and recipients meet in international meetings, and pledge to act. Progress is monitored by a multilateral institution (OECD’s Development Assessment Committee) that cannot constrain donors to implement their pledges, except through a delicate game of naming and shaming.

We wonder about the efficiency of this approach. To deal with a too heavy administrative weight by creating new administrations is somehow ironic. It remains to be proven that these new institutions will lower transaction costs and manage to implement a labour division that donors are often reluctant to effectively achieve. The problem with this approach is that it basically ignores why aid is fragmented. It does not attempt to change the incentives donors and recipients face, and so is unlikely to radically change their behaviours. In particular, it disregards the lack of competition that creates fragmentation.

I think this is exactly right. Fragmentation is a good example of a more general problem, which is that there are insufficient forces within the aid system to force it to evolve towards better arrangements. Evolution requires both variation and selection, and while fragmentation may be conducive to more variation, there are no forces that then drive out the bad and expand the good.

2 thoughts on “Why is fragmentation a problem?”

  1. Yes, this is great. They’ve totally nailed it. I talked about incentives in a similar fashion a while ago, again getting into why donors cluster: http://aidthoughts.org/?p=323

    One final thought. For many donors one of their incentives is to maintain their reputation as a ‘good donor’ in order to get preferential access to the ‘best’ sectors and projects. As such, naming-and-shaming will have some impact, *so long as a donor wants to do this with Government cooperation*. thus naming and shaming has a bigger impact on the donors like Norway and DfID who care about this than those who patently don’t in practice, like USAID and the EU.

    Maintenance of reputation is one incentive. However, as the authors imply, there are many other, bigger incentives.

  2. Very good point. This debate touches on the “networks and markets” approach. A tender procedure, according to agreed standards might be simpler than creating all these new monopolies.
    I would like to expand on Ranil’s remark: The Good Donor initiatives do NOT include direct effectiveness indicators, as this would be seen as micro-management. Instead they use the participation in the aid monopolies with little or no oversight (flexible funding), meaning with little leverage to get evidence of results.
    The current process leads to donors to be shamed in more of the same behavior.

Leave a Reply

Your email address will not be published. Required fields are marked *