Multilateralism at risk - Beyond Globalisation - 2-3 April 2004, Brussels

Session 7: Multilateral aid - a developing country perspective - Summary

Multilateral aid is generally considered more effective by causing less fragmentation and overlap, being less sensitive to national (political and commercial) donor interests, and imposing less administrative burdens on recipient countries than bilateral aid. At the same time there is often strong criticism directed to multilateral aid institutions for being bureaucratic, inefficient, lacking coherence in actions, and for using a “one size fits all approach”. Given that developed countries provide an increasing share of their development aid through multilateral institutions, it is important to analyse the advantages and disadvantages of multilateral aid. This session therefore focused on comparing bilateral and multilateral aid, and on how developing countries are affected by these types of aid. The session also discussed trendsand challenges in multilateral and bilateral aid.

The first speaker in this session, Mark McGilivray, discussed the trends in multilateral development assistance in comparison to bilateral aid, and analysed whether multilateral development assistance can be seen as good, bad, or plain ugly. Also addressed were the issues of effectiveness of multilateral aid, selectivity, poverty focus, and aid concentration. It was concluded that multilateral and bilateral aid do not differ a lot with respect to concentration, referring to the fragmentation of aid across different countries. On the effectiveness of multilateral vs. bilateral aid, the evidence is mixed. For instance, a higher proportion of multilateral than of bilateral aid goes to Sub-Sahara Africa. Yet, on selectivity –referring to the proportion of aid going to countries with low per capita income and high levels of governance, thus implying greater effectiveness- bilateral aid outperforms multilateral aid.

The first speaker further commented on the issue of security and aid policy. The questions raised were whether development aid is at risk per se, and whether security promotion will replace poverty reduction as the principal objective for aid. It was believed that defence ministries and foreign affairs ministries in general have more influence than their development cooperation counterparts. Therefore, there is a risk that those ministries will try to control the development cooperation budgets. In the mid-1980s we have already seen a commercialisation of aid when donors, faced with an erosion of public support, tried to justify their aid programmes by their commercialisation and by seeking to get trade advantages through these programmes. Other key questions raised were whether multilateral aid is at risk, whether donor governments will shift funding from multilateral aid to bilateral aid and whether bilateral donors will move into the area of multilateral agencies or multilateral agencies will become a clone of bilateral agencies. There is some evidence, though little, that this is occurring. Moreover, it was suggested that one can identify a decreasing aid flow to UN agencies being crowded out by increased aid flows to the EC by EU Member States.

The second speaker, Edward Sefuke, discussed how bilateral and multilateral aid affect developing countries. He argued that bilateral aid could have an advantage over multilateral aid by being better informed by intelligence on the ground, which the IFIs don’t have. Bilateral aid is also more democratically accountable, and thus more influenced by civil society in both developing and developed countries. Moreover, bilateral aid is seen as more flexible than programmed multilateral aid, capable to react faster to emerging situations, and having more potential for “customised” aid. The disadvantage is that bilateral aid often becomes chaotic on the ground, with respect to nature, speed and focal areas, with too many donors not being able to co-ordinate their activities. Multilateral aid, on the other hand, is seen as being more predictable because of the programming element often attached to it. However, coming from various sources with different motivations, competences, and views, multilateral aid often tends to have non-coherent objectives. The speaker concluded that perhaps the hybrid of multilateral and bilateral action is what developing countries need. EU assistance has an advantage here, containing both these elements, and also having structured dialogues with recipients. Disadvantages to EU aid are however long procedures and very difficult and detailed criteria for aid access. Another type of hybrid (bilateral/multilateral) development cooperation is for a developing country to have one agreement with many like-minded donors in order to be able to apply coordinated and harmonised procedures and formats. Peer review of donors could then control default on pledges and delays in disbursements. To conclude, the speaker asserted that whether aid is multilateral or bilateral maybe isn’t the real question, because what matters is the capacity of aid to deliver. There might be systems of harmonisation of bilaterals and multilaterals that can actually do that, without necessarily shifting from bilateral to multilateral.

The first discussant, Robert Devlin, commented on the issue of aid effectiveness and pointed out that poorest country allocation criteria, used by the first speaker, have crucial shortcomings. He also argued that the European Commission is closer to a bilateral than a multilateral donor as its regional membership influences the allocation of resources. He moreover stated that for an assessment of the effectiveness of bilateral vs. multilateral aid, crucial issues to investigate are whether projects have achieved their objectives; whether any ex-post evaluation has taken place; and whether the distribution of aid by sector is optimal. It is also important to assess which agencies promote needs driven vs. demand driven aid; which agencies are driven by political and geopolitical criteria; and which agencies are best in order to co-ordinate aid on the ground.

The second discussant, Wierish Ramsoekh, highlighted trends, threats and opportunities in development aid. Recent trends in Dutch development aid include a broadening of the scope of development co-operation (e.g including security), and more involvement of civil society. Aid has also become more “business like”, with emphasis moving from ownership to partnership. On the future threats and opportunities in development, one can observe a common threat which is to bring politics into development as a way of dealing with effectiveness of aid. In addition, the multilateral development architecture has become fragmented and overlapping, and thus further streamlining, consolidation and cooperation is needed. Moreover, the division of labour between the UN and the WB has become increasingly directed towards the WB, which could be seen as a threat undermining the position of the UN. 

In the round table discussion strong criticism was directed towards EC aid for not being efficient; having lower standards and quality of aid; and for using procedures that neither the EC nor developing country recipients support. The EC representative however, believed that geopolitics, security, and external relations influencing aid given by bilateral donors make aid equally inefficient. Furthermore, it was believed that the EC has a unique selling point with its system of Delegations being able to better respond to local conditions and problems, and thus being capable to establish a better dialogue with the recipient developing country than other donors such as the World Bank.

Session 7: Speakers

Chair: Henri-Bernard Solignac Lecomte (OECD Development Centre, Paris, France)

Speakers: Mark McGillivray, Professor, WIDER, Helsinki, Finland, Edward Sefuke, First Secretary of economics, Embassy of Zambia in Brussels

Discussants: Robert Devlin (Integration and Regional Programmes Department, IADB, Washington, the US), Wierish Ramsoekh, Dutch Ministry of Foreign Affairs, the Netherlands

Session 7 - Papers and Presentations All files are downloadable files are Word documents unless specified otherwise.
	Multilateral Development Assistance: Good, Bad and Just Plain Ugly? - Mark McGillivray (PDF)

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