1. What can we learn from experiences in donor harmonization with investment in ARD?
Gerd Fleischer
GTZ, Eschborn (Germany)
ADB / IFPRI Policy Forum
Agricultural and Rural Development for Reducing Poverty and Hunger in Asia – In Pursuit of Inclusive and Sustainable Growth
Manila, August 9 – 10, 2007

2. Overview ODA trends Transaction costs in aid delivery
Responses from donors: Paris Declaration on Aid Effectiveness
Experiences with harmonized approaches in agriculture and rural development
Outlook
10 August 2007

3. ODA Delivery side: Protracted decline during the 1990s
Resumption of ODA from US $ 58 billion in 1997 to US $ 105 billion in 2005 (constant 2004 prices)
Much of the growth has been due to debt relief, and to a lesser extent to emergency assistance
Until most recently, pronounced shift from productive sectors to social sectors (health, education)
Core development ODA exceeded only in 2005 again its 1992 levels, but expected to increase significantly
Recipient side:
Increased donor funding is required to finance the agriculture-for-development agenda
Aid dependency is already high in a large number of agriculture-based economies
Average of 28 % of total agricultural spending in 24 Sub-Saharan African countries
In countries such as Mozambique, Niger, Uganda and Rwanda, ODA contributes > 80 % of agricultural spending
Agricultural spending: World Development Report 2008
10 August 2007

4. Aid delivery has grown into a complex system
Proliferation of aid channels…
Average number of donors per country grew from 12 in the 1960s to 33 in the period
The number of international organizations, funds and programs is now higher than the number of dev. Countries they were created to assist
Progressive „earmarking“ of funding, both in bi- and multilateral aid
Widespread use of uncoordinated technical assistance
Not to forget the role of international NGOs: In 2004, they employed 140,000 staff and generated revenues of US $ 13 billion
„meets“ ….
increasingly fragemented aid
Total number of interventions/activites increased from 20,000 in 1997 to almost 60,000 in 2004
Average size of donor funded activities decreased from US $ 2.5 million in 1997 to US $ 1.5 million in 2004 (2004 constant prices)
Fragmentation is the higher the lower is the institutional capacity of recipient countries
Proliferation most pronounde in health sector
NGOs: full time equivalent
Revenues: 36 % from philantrophy, 35 % from gov. Contributions, 29 % from fees.
10 August 2007

5. Transaction costs in aid delivery
Equivalent to a „tax“, reducing the amount of aid resources available to the recipient countries
Administrative costs on the donor side have been increasing
Recipient countries:
Direct costs:
Diversion of scarce resources of decision-makers
Example: Average number of donor mission per country is 307 per year
Indirect costs:
Aid is increasingly unpredictable, thus fostering weak fiduciary controls and lack of transparency in the resource allocation process
Distortive impact on incentive systems in government administration
Example: „Brain drain“ from line ministries to project implementation units
But:
So far, costs have not yet been systematically quantified.
10 August 2007

6. The Paris Declaration (2005) as a response to ODA being increasingly under scrutiny
Objective:
Increased aid effectiveness
Key principles:
Ownership: „Partner countries exercise effective leadership over their development policies and strategies, and co-ordinate development actions.“
Alignment: „Donors base their overall support on partner countries‘ national development strategies, institutions and procedures.“
Harmonization: „Donors‘ actions are more harmonized, transparent and collectively effective.“
Managing for results: „Managing results and improving decision-making for results.“
Mutual Accountability: „Donors and partners are accountable for development results.“
Common monitoring framework
Paris Declaration:
Signed by 30 donor countries, 30 multilateral donors and 60 recipient countries.
Siginifcant step forward, commitment to an international monitoring process
10 August 2007

7. Experiences in ARD
About 15 programs ongoing worldwide, some date back to 1996
ODI review of seven programs: Ghana, Tanzania, Mozambique, Uganda, Nicaragua, Cambodia, Vietnam (Evans 2007)
Harmonization still ongoing
Progress on alignment most advanced
Number of parallel project implementation units has not decreased significantly
Line ministries generally positive about the approach
Ghana case: Since 2006, second try on a sector-wide approach for agriculture, stimulated by a national joint assistance strategy and donor agreement on budget support targets
10 August 2007

8. Lessons learned and challenges
Initially, increased transaction costs for coordination.
Too much focus on national government administration led to re-centralization.
Often, donors have been undisciplined, induced by policy changes in their headquarters.
ARD generally more difficult than health and education
Role of public sector is more limited
Rural development is multi-sectoral, cutting across ministries
Donors hold different views on strategies for ARD
Weak government control of the process
Diverging expectations on the donor and the recipient side
10 August 2007

9. Outlook
Donor harmonization will get stronger attention as the international aid architecture has to deliver more results. ARD will not escape that pressure to remain on the agenda for ODA support.
Capacity development of the recipient side to steer donor support is needed
Donors will likely specialise in service delivery to remain visible to their home constituencies.
10 August 2007