1. BUILDING CAPACITY FOR MUTUAL ACCOUNTABILITY
Matthew Martin
Development Finance International
ECOSOC DCF Preparatory Meeting
Vienna, 20 April 2007
DFI, April 2007

2. STRUCTURE Introduction and Context Why Capacity is Important
Current Levels of Capacity in LICs
Current Efforts to Enhance Capacity
The Way Forward
DFI, April 2007

3. INTRODUCTION AND CONTEXT
HIPC Capacity-Building Programme works at demand of 36 HIPCs to unleash capacity to manage government financing (orig. debt relief)
Funded by six DAC donors (Austria, Canada, Ireland, Sweden, Switzerland, UK)
Capacity-building organised in country by sustainable regional organisations run by developing countries – and executed by 150 developing country experts (South-South)
Presentation based on country views and much wider paper on DCF prepared for UNDESA
For more details see and
DFI, April 2007

4. WHY CAPACITY IS IMPORTANT
Ownership: no chance of genuine “ownership” (preferably leadership) unless have designed and implemented own strategies
Sustainability (long-term): cannot depend eternally on TA and donor funding for consultants to monitor
Mutual Accountability: impossible to hold donors accountable unless capacity to monitor, analyse and negotiate improved behaviour
Ensuring Alignment: is lack of capacity to be used as an excuse (“only align if capacity to produce results”) ?
Avoiding complacency ? Paris Indicator 4 comes out of recent survey as 43% country-led though DCR expresses doubts on the results (+ no quality indicator). HIPC country evaluations indicate <20% both country-led and building capacity
DFI, April 2007

5. RECENT/CURRENT CAPACITY LEVEL
Broadest possible definition of capacity-building: political, institutional, individual – commitment/institution-building, training etc
HIPC CBP assesses capacity of 36 countries annually on 1-5 scale (5 highest)
Countries assess own capacity to maximise ownership, analyse next steps and partners which could help
Then quality-controlled by implementing agencies to ensure realistic
Divided into three major categories:
Back office – recording/monitoring
Middle office – analysis and strategy design
Front office – capacity to implement and negotiate
Issues cut across all offices - eg managing for results
DFI, April 2007

6. AID CYCLE
DFI, April 2007

7. RECENT/CURRENT CAPACITY LEVEL
Back office: major/accelerating improvement since 2001
Middle office: considerable improvement but lags behind
Front office: began higher but slower improvement
DFI, April 2007

8. CURRENT EFFORTS TO ENHANCE CAPACITY
Level and Progress Reflect Capacity-Building Efforts by International Community
Back office:
Major effort put into recording – DAD/AMP/DCR plus inclusion in Commonwealth Secretariat debt system
Outstanding issues
only just starting to monitor quality/effectiveness issues and adapt software ?
Insufficient transfer of software design/maintenance to countries
DFI, April 2007

9. CAPACITY-BUILDING EFFORTS (2)
Middle office
Design of aid policies
Mostly written/facilitated by consultants, negotiated with donors
Too closely linked to Paris criteria, not enough adapted to country problems eg conditionality, shocks, donor volatility/variability
Limited to overall principles and processes
Design of aid strategies
Virtually no countries have designed a detailed strategy for negotiating alignment by each donor, as well as forecasting impact of alignment on aid needs/effectiveness + development
Must be major focus of future capacity-building for alignment
Analysis of macro- and micro-level absorptive issues
Macro, Dutch Disease – dominated by IMF, excessive caution
Micro – not enough analysis of aid cycle and blockages
DFI, April 2007

10. CAPACITY-BUILDING EFFORTS (3)
Front office:
Public financial management (budgeting, accounting, auditing) – WB/PEFA
Procurement – OECD/WB
Too dominated by donor perceptions of best practice and of partner performance – much more mutual discussion needed to enhance ownership
Coordination and Mobilisation – UNDP/WB – more need to focus on Results and Resources and big picture rather than sectoral plans etc
Negotiation of New Financing – WHO IS DOING ?
Key need is building capacity to negotiate alignment
DFI, April 2007

11. CAPACITY-BUILDING EFFORTS (4)
Location of Capacity
Far too much for Ministries of Finance and Planning
Insufficient support to parliaments (finance, planning and sectoral committees), decentralised agencies (states, municipalities), independent bodies such as auditor-general/national audit office, civil society
Generally these stakeholders therefore assess based on non-results issues
(AfDB Study) – results are achieved where parliament, decentralised agencies, other bodies such as auditor-general, and civil society have capacity to monitor and analyse RESULTS and mechanisms to hold government accountable
DFI, April 2007

12. BUILDING CAPACITY FOR MUTUAL ACCOUNTABILITY: WHAT NEXT ?
Mutual accountability can spring only from country-run (government + civil society) design of national aid strategy
Thereafter countries monitor donors – not self-reporting – to compile National Compendia of Donor Practices, complementing Paris Surveys to set baselines
Compare with Global Compendium of Donor Best Practices, to agree annual targets with each donor
Negotiate greater alignment of each programme or project, refuse bad funding (“free riders”)
Diversify (for most LICs) or rationalise donors
Improve government own performance and be held accountable not just by donors but by parliament and civil society
Publicise donor progress to hold mutually accountable, use independent monitoring to resolve tricky issues
Monitor progress and refine strategy as needed
DFI, April 2007

13. WHAT ELSE IS NEEDED ?
DONOR POLITICAL OPENING: Clear demonstration that countries can go beyond Paris both in breadth and ambition, agreement to bilateral targets
PARTNER POLITICAL COMMITMENT: Honest discussion with donors, will to hold accountable and be held accountable by civil society, and to learn from best practices in other countries
GLOBAL INFORMATION:
Analyse global issues eg allocation criteria, scaling up, orphans
Global Compendium of Donor Best Practices (drafted)
Exchange information (at regional and international level) on relative performance of multilaterals, NGOs, vertical funds, “emerging” donors
Without dramatic reinforcement of evaluation, analysis and negotiation capacity, supported by donor openness and partner commitment, little chance of genuine mutual accountability, alignment or attainment of MDGs
DFI, April 2007