EU-LDC Themes - Development Co-operation - Research
|
Introduction:
Effectiveness of aid
Research
Relevant Links
Introduction:
Effectiveness of aid
As poverty is still
widespread after so many years of development assistance and as the
trend in official development assistance (ODA) has been declining
over the last decade, the discussion on the effectiveness of aid has
gained importance.
The research on the effectiveness of aid addresses both the role
of policies in recipient countries and the role of donor policies.
Regarding the influence of recipient countries’ policies on the
effectiveness of aid, the debate focuses on the question to which
extent good governance and sound economic policies (such as an open
trade regime, fiscal discipline and avoidance of high inflation) are
a pre-requisite for the effectiveness of aid. Regarding the
influence of donor policies, central issues are the ways in which
aid is provided (e.g. tied or untied aid) and the coherence of
policies. Policy coherence can take place on three different levels.
In the context of the EU, policy coherence implies that 1) the
development policy of the EU should be coherent with the recipient
countries’ objectives and with policies of other donors; 2) the
development policy of the EU should be coherent with other EU
external policies (e.g. trade policy); and 3) the development policy
of the EU should be coherent with its domestic policy (e.g.
agricultural policy).
For a description of EU development co-operation, see the policy
section.
Research
This section contains
several documents dealing with the issue of aid effectiveness. The
documents are grouped under the following three headings:
Evidence
on the effectiveness of aid in general
New Perspectives on
Aid Effectiveness,
D. Roland-Holst, F. Tarp, 2002; paper presented at the Annual Bank
Conference on Development Economics (ABCDE), June 24-26, 2002, Oslo
While aid has promoted
growth in the past, the authors argue in this paper that aid could
have been made more effective. They state that aid should focus more
on the micro-economic aspects of development and that aid should be
decentralised to increase ownership. The authors suggest a number of
precepts for design and implementation of more effective development
co-operation. Donors should put more efforts into achieving
coherence between different policies. Furthermore, as the
relative importance of aid has changed with rapid growth of trade
and private capital markets,
there is a higher need for public aid agencies to increase
co-operation with new agents in the development scene including NGOs.
The authors argue that public aid agencies should focus on their
core priorities, sharpen their implementation skills and develop a
strategic capacity to develop complementary relationship with these
actors.
For the
document click here.
The Role
and Effectiveness of Development Assistance, Lessons
from World Bank Experience,
I. Goldin, H. Rogers, and N. Stern,
World Bank Research Paper, 2002, World Bank, Washington
This study was published in the run-up of the International
Conference on Financing for Development held in Monterrey, Mexico
from 18 to 22 March 2002. The main finding is that foreign aid works.
According to this study, foreign aid is increasingly a catalyst for
change, making it possible for poor people to increase their incomes
and to live longer, healthier and more productive lives. The
increased effectiveness of aid can be attributed to changes in the
goals and forms of development co-operation, but even more to
improvements in the policies, institutions, and governance of
developing countries.
For the document click here.
Aid
Effectiveness Disputed,
H. Hansen, F. Tarp, Journal
of International Development, Vol. 12, p. 375-98, 2000
This paper analyses the macroeconomic impact of aid on growth by
evaluating existing empirical cross-country studies. They divide the
existing studies into three generations, with each generation using
a different economic model. In their survey (which includes 131
cross-country regressions) the authors find a consistent pattern of
results namely, aid increases aggregate savings; aid increases
investment; and there is a positive aid-growth link, which is found
to be robust in all three generations of work.
The authors
find that aid can also have a positive impact on economic growth in
countries with a weak policy environment. Although there may be
differences in the extent of the positive aid-growth link, the
authors argue that these differences cannot be explained by a single
variable, like sound economic policy of the recipient countries, as
some studies have claimed. They conclude that the
unresolved issue in assessing aid effectiveness is not whether aid
works, but how and whether we can make the different kinds of aid
instruments at hand work better in varying country circumstances.
For the document click here.
Aid
Instability as a Measure of Uncertainty and the Positive Impact of
Aid on Growth,
R. Lensink, O. Morrisey, CDS Research Reports, 2000.
This paper focuses on the stability of the donor-recipient
relationship and the stability of aid flows to developing countries.
The authors argue that uncertainty of aid inflows can have an
adverse effect on the level of investment (especially public
investment) and thus on growth. The main finding of the empirical
analysis of the paper is that aid uncertainty is consistently and
significantly negatively related to growth. The policy implication
resulting from this study is that stability in donor-recipient
relationships enhances the effectiveness of aid, by making it easier
for recipients to predict future aid inflows, that may permit more
investment and better fiscal planning.
For the document click here.
Policies
in recipient countries
Assessing
Aid,
World Bank, Policy Research Report, 1998, Washington
In this study the authors examine how aid can be used more
effectively. Based on a series of econometric studies, the report
concludes that aid has been highly successful in reducing poverty in
countries with sound economic management and government institutions
whereas aid has been unsuccessful in countries without sound
policies and institutions. The definition used in the World Bank
study of sound policies and institutions is broad and includes an
open trade regime, secure private property rights, the absence of
corruption, respect for the rule of law, presence of social safety
nets, and sound macroeconomic and financial policies.
For those countries without sound policies and institutions the
report suggest that aid should be channelled through NGOs and that
aid should support forces that promote reform of the existing
policies and institutions. According to the report, supporting NGOs
and reformers requires less finance, which implies that more
financial aid can be channelled to poor countries with a sound
economic environment. The report also notes that conditionality of
aid to policy reforms has not always been successful. Conditional
lending only works if there is a strong domestic commitment to
reform.
For the document click here.
Donor’s
policies
Development
Co-operation Review: European Community,
OECD Development Assistance Committee (DAC), 27 September 2002, OECD,
Paris
In this report the DAC
discusses the Official Development Assistance (ODA) of the European
Community. It touches upon the changes that have been made since the
prior Development Co-operation Review of the European Community in
1998. The DAC claims there is still room for improving the impact of
development aid. Furthermore, the report criticises the incoherence
between development aid initiatives and internal policies such as
the Common Agricultural Policy (CAP). There are also challenges in
the implementation of development aid. The DAC gives several
recommendations which can be grouped under five headings:
strengthening the EC’s comparative advantage in promoting
development; promoting the sustainability of poverty reduction;
improving policy coherence; strengthening the focus on results and
aid effectiveness; and improving implementation of the aid programme
with a view to enhance country ownership.
For the document click here.
Improving the
Governance of European Foreign Aid – Development as an element of
Foreign Policy,
C. Santiso, CEPS Working Document No. 189, October 2002, CEPS,
Brussels
This paper addresses
the governance aspects of European Union’s foreign aid. The author
claims that the management structures of aid provision are too
complex. Therefore, governance, administrative and institutional
reforms are necessary. Most of all, there should be more focus and
certainty regarding the objectives of European foreign aid. In
addition, the role of development co-operation in foreign policy
should be reassessed.
For the document click here.
Measuring the
Performance of EC Development Cooperation: Lessons from Experiences
of International Development Agencies,
T. Lehtinen, ECDPM discussion paper 41, 2002, Maastricht: ECDPM
The European Commission
is discussing general management reforms, which should enhance
efficiency of the European public service. As part of these reforms,
the Commission should develop performance indicators for development
co-operation. In this context, this study identifies the scope and
nature of performance measurement systems used by other development
policies. Based on the experience of these other agencies, the paper
provides a number of suggestions that the Commission could explore.
These suggestions are split into different categories: 1)
input-based monitoring (where does the money go); 2) output-based
monitoring (what is directly achieved with the money); 3) outcome/
impact monitoring (contribution to development). Other suggestions
are related to agency-level performance and performance based
budgeting.
For the document click here.
Tackling Poverty: A
Proposal for European Union Aid Reform,
M. Van Reisen, 2002, BOND, London
This paper is a NGO
proposal for reform of European Community aid to developing
countries. It lists a number of shortcomings of current EU
development co-operation policy and gives recommendations for
reform. Specifically, the document proposes 1) an increase in the
quantity of aid, reaching the UN target of 0.7 percent of GNP; 2)
improving the quality of aid through increased spending on social
services, increased focus on poverty reduction and ownership of
development programmes, and increased transparency and coherence of
EU aid; 3) a change in the direction of development aid from
middle-income towards low-income countries.
For the document click here.
The
Effectiveness of EC Development Assistance,
International Development Committee (IDC), 2000, United Kingdom
Parliament, London
In this report the UK
Government Committee reviews the development policies of the
European Community. Approximately 25 percent of the budget of the
Department for International Development (DFID) is spent by the
European Community. The UK government has assessed whether this
money is spent as effectively as possible so as to further the aims
and objectives of DFID’s aid policy. The paper includes 24
conclusions and recommendations for EU development policy. The
parliament’s concerns include the following: the relatively high
share of development funds that is directed towards middle-income
countries and in particular to accession countries; the lack of one
single Directorate General responsible for all development
co-operation; the dominance of political priorities over poverty
alleviation in development co-operation; lack of policy coherence;
and the poor administration and delays in disbursements.
For the document click here.
The Quality of Aid:
Towards an agenda for more effective international development
co-operation,
Christian Aid, 2000, London
This report is based on
British and European Community aid to three countries: India,
Ethiopia and Mozambique. The report starts with a summary of the
debate on the question “does aid work?”. It finds that there are
no conclusive answers to this question. It disagrees with the
suggestion of the World Bank and the IMF, which claim that the
effectiveness of aid will contribute to growth only when the policy
environment is conducive and that this should be taken into account
in the allocation of aid. Christian Aid argues that countries with a
poor policy environment should not be excluded from aid, but rather
need different types of aid. The report furthermore identifies five
elements of aid quality: 1) a clear poverty focus; 2) good
co-ordination; 3) fostering local ownership and respect for
sovereignty; 4) making optimal use of available resources; and 5)
wide and appropriate consultations with all stakeholders. Assessing
these elements in British and EC aid, it concludes that British aid
has been more positive than European Community aid, especially in
terms of its poverty focus and the quality of technical assistance.
Criticism on British aid focuses on the reliance on European
consultants, the lack of attention to local capacity building and
the weak interface with civil society. Criticism on EC aid points to
slow disbursement rates, lack of adequate staff in delegations,
administrative procedures and a proliferation of aid instruments.
For the document click here.
A
Radical Approach to Development Assistance,
Kanbur, R., Sandler, T., Morrison, K.M., Special Report, Development
Outreach, Fall 1999, World Bank, Washington
In this paper, the
authors argue, among others, that donor co-ordination should be
improved. Highly disparate aid delivery systems exist within one
country, whose high degree of intrusiveness creates aid dependence
and undermine ownership by the country. This results in a situation
in which neither donors nor recipients benefit as much as they
should. The authors propose a more radical approach in which donors
really cede control to the recipient country government. Donors
should advance their own perspective on development strategy through
general dialogue with the country and with each other rather than
through specific programs and projects. The authors call this
mechanism a "common pool" approach to development
assistance, which builds on current trends and experiences like the
sector-wide approach, but pushes them much further.
For the document click here.
The European
Community External Cooperation Programmes,
Aidan Cox, Jenny Chapman, 1999, ODI/European Commission, Brussels
This publication has
been an attempt to evaluate European Community aid at a time that
the Commission was reforming its policies. The document gives an
extensive overview of the main features of European aid at EU level,
discussing different regions and types of aid. The authors underline
the fact that the aid system is still too complex with regard to its
objectives, instruments, procedures and institutional mechanisms.
There is a need for more coherence within the aid system and among
different policies. The authors also point at the lack of human
resources to manage European development co-operation.
For the document click here.
Relevant links
World
Bank - section on aid effectiveness
This section provides information on aid effectiveness through a
large background studies and links to relevant research papers. The
site also links to the research project on "Aid and Reform in
Africa”.
The
development gateway - section on aid effectiveness
An up-to-date website, which contains articles on different
themes related to aid effectiveness, including monitoring and
evaluation, debt forgiveness, aid harmonisation, enhancing donor
effectiveness, poverty reduction and best practices.
Experts'
Seminar on Aid Effectiveness, Selectivity and Poor Performers
The website of a
conference organised by OECD’s
Development Centre and the Development Assistance Committee (Paris,
17 January 2001) contains the programme and papers of the conference
and gives suggestions for further reading.
ELDIS
-
section on aid
Contains a broad range
of recent research papers on aid, including papers on aid
effectiveness.
Euforic
-
section on aid effectiveness
A list of research publications on aid effectiveness, from 1995.
As a recently launched site, we still have some way to go towards
providing a comprehensive information resource. You can help by
submitting your own contributions (academic papers, position papers,
analysis or comments etc.). To do this, go to Contact
us.
| 
