Helmut Reisen points out that the global development finance system is dysfunctional:
A prerequisite for effective ownership and efficient aid delivery, at the core of the Paris Declaration on Aid Effectiveness, is to map the rising complexity of multilateral development finance, to help identify areas for consolidation, address fragmentation and poor co-ordination at country level, and help identify comparative advantages for institutional role assignments among multilateral agencies. Such mapping identifies overlaps – leading to reduction of multilateral remit or proposals for consolidation; rivalries – leading to clarification of roles; and absences of co-ordination – leading to the design and implementation of co-ordinating structure.
I don’t think that mapping comparative advantage is the way forward. In the real world, firms do not try to analyze comparative advantage: they focus on maximising shareholder value and the ones that don’t succeed go bust or get taken over. Focusing on comparative advantage is the outcome of effective decisions, not the input. The problem in the aid industry is that there is no feedback mechanism to drive organisations towards their comparative advantage. The solution to this is to create stronger incentives – such as measuring results, greater transparency, funding outputs rather than inputs and increasing accountability – to force organisations closer to their comparative advantages. The “Gosplan” approach has been tried in development and it doesn’t work.