From the Theory of Aid Effectiveness to the Practice: The European Commission's Governance Incentive Tranche

Around the turn of the millennium a growing consensus emerged on the dos and don'ts of development assistance, based on lessons drawn from failed aid. Donors now increasingly see aid as a leverage to induce or support governance reforms in recipient countries. The EC, which considers itself to be a forerunner of the new aid approach, has recently launched a new instrument to incentivise such reforms: the ‘Governance Incentive Tranche’. However, the evidence presented in this article suggests that, in design and practice, the incentive tranche is surprisingly similar to some of the unsuccessful aid modalities of the past.     

Political‐Economy Analysis,Aid Effectiveness and the Art of Development Management

Recognising that aid effectiveness critically depends upon the quality of host‐country institutions and policies, international aid agencies have sought to inform their activities through more systematic political‐economy analysis (PEA). In this article, three analytical frameworks for PEA are compared, contrasted and critically appraised in the light of reflections by PEA practitioners and recent theoretical debate about development management. The article finds that the potential of PEA to improve development effectiveness depends on how far it addresses the micro as well as macro politics of aid and permits a finer‐grained engagement between analysis and action. This requires more reflexivity on the part of those who commission and produce PEA, and further movement from intervention to interaction modalities for aid delivery.     

Dichotomy of development aid’s ambition and neoliberal imperatives: A case‐study of private‐sector development in Bangladesh

Development in the twenty‐first century (“neo‐liberalism”) is a tool and its success and sustainability depend on how this tool is applied on a specific grounded reality. This article investigates how this modernization process continually co‐creates globalized Bangladesh through private sector development. While this field report highlights the challenges development aid donors can face in Bangladesh’s post‐colonial culture, it also unveils the dichotomous traction between globalization and inequality as well as the friction poverty reduction, through private sector development, can generate in impoverished countries. Finally, this report attempts to reconsider the ways in which the aid development ambitions of equality and liberty can find a workable balance with the neo‐liberal Imperative for private sector development. This article calls for improving quality control to generate greater impact of development aid resources in developing private sectors.     

Paddling on One Side of the Canoe? The Changing Nature of New Zealand's Development Assistance Programme

New Zealand's aid policy has undergone a revolution under the National Party government elected in 2008. Prior to this, NZAID, a semi‐autonomous unit, had evolved to manage aid in line with internationally agreed principles. Under the new government, NZAID was reincorporated into the Ministry of Foreign Affairs and Trade, its focus was shifted from poverty reduction to economic growth, and its programme was aligned with foreign policy. This article aims to provide an overview of the shifts in New Zealand's aid policy over four decades, to explore the relationship between the global aid regime and national practice, and to analyse the influence of politics, and of key individuals, in setting the direction of aid policy.     

Losing concentration? Lessons from a Swedish aid policy reform

Sweden is one of the donor countries that signed up for the Paris Agenda, which among other things advocated reducing aid dispersion. It also adopted its own geographical concentration policy in 2007. My empirical analysis shows that Sweden managed to achieve this goal only for two years following the reform and that this was followed by backsliding. Moreover, its current aid policy framework barely mentions the topic. I argue that a major reason was the failure to institutionalize the policy. This left it vulnerable to the regular politics of aid, which tend to generate both geographic and thematic spread. Reduced peer pressure, as the international community has moved away from the Paris Agenda, might also have contributed.     

Do Aid Donors Specialize and Coordinate within Recipient Countries? The case of Malawi

Acknowledging that aid proliferation and a lack of coordination impair aid effectiveness, donors have repeatedly promised to specialize and better coordinate their aid activities, notably in the Paris Declaration of 2005. We exploit data on the exact location of aid projects in Malawi to assess whether the country's bilateral and multilateral donors have acted accordingly at the district and sector level. We do not find compelling evidence for increased aid specialization after the Paris Declaration, and the regional division of labour among donors may even have deteriorated. Our within‐country evidence thus broadly corroborates what previous studies have found at the national level of recipient countries.     

Making international aid effective: An agenda for aligning aid to social business

In the context of heightened interest in social business and a renewed focus on the performance of international aid, this article explores the role and place of aid in addressing poverty in relation to the rapidly growing social business regime. Research on the subject is surprisingly limited. The article begins by operationalizing the key concepts, and developing a conceptual framework by exploring the possible nexus points between aid alignment and social business. It then addresses a number of key dimensions of aid; notably, a comparative account of possible aid investment in social business vis‐à‐vis conventional projects and private sector enterprises; an examination of the realities on the ground of the social business projects; and policy implications of the study together with some recommendations.     

External Financing of Social Protection: Opportunities and Risks

Social transfers have reached the policy agenda of low‐income countries in Africa, where affordability is a key concern and aid dependence is high. In terms of magnitude, aid could make a substantial difference in relaxing the affordability constraint. This article addresses issues that arise as external financing is contemplated. Cash on delivery (COD) aid is discussed as an alternative aid contract when the political ownership is strong. The potential for external financing where political ownership is weak is also discussed, and the limitations of aid under such circumstances are recognised.     

Organising for Donor Effectiveness: An Analytical Framework for Improving Aid Effectiveness

Donors have lagged behind aid recipients in adhering to the principles of aid effectiveness. Explaining the reasons for this demands greater awareness of organisational attributes within donor entities. To date, there have been only limited attempts to relate donor organisational factors to aid‐effectiveness goals. This article elaborates on a number of such relationships based on an empirical examination of donor dynamics in Norway, the UK and Canada. Donor effectiveness provides an important lens through which to build a robust post‐Busan global partnership.     

Exporting stimulus and “shared prosperity”: Reinventing foreign aid for a retroliberal era

The global aid world has changed, partly in response to the reconfigurations of geopolitical power and to the global financial crisis (GFC). Paradoxically, in the face of recession in most northern economies, collectively foreign aid contributions have not fallen. However there has been a qualitative shift in its narrative and nature. This new regime—which we term retroliberalism—projects the concept of “shared prosperity,” but constitutes a return to explicit self‐interest designed to bolster private sector trade and investment. Drawing evidence from New Zealand and the United Kingdom, we argue that aid programmes are increasingly functioning as “exported stimulus” packages.     

Paris in Bogotá: The Aid Effectiveness Agenda and Aid Relations in Colombia

This article uses an aid‐relationships perspective to explore the application of the Paris Declaration on Aid Effectiveness in Colombia. It argues that aid donors were subjected to an attempt to push them (back) into a technocratic corner, and that social actors' advocacy outcomes were put under threat. Both are worrying developments in a politically complex context marked by internal armed conflict and human‐rights abuses. Analysis of the Colombia case offers some useful insights into applying the Paris Declaration, and other global aid‐policy frameworks, to diverse settings.     

Can the New Deal solve the old problem of aid orphans and darlings? Aid effectiveness in fragile states

The New Deal for Engagement in Fragile States marks an important ideological shift in development co‐operation. Despite this progress, no practical response has been found to the problem of aid co‐ordination. This article traces the issue of aid allocation and highlights lessons from the ‘aid orphan’ and ‘aid darling’ debate. It examines the significant, yet under‐reported, policy process of the New Deal. It argues that deeper engagement with the concept of trust, and renewed focus on the political elements of the agreement, should be key priorities for the International Dialogue on Peacebuilding and Statebuilding.     

Applied ethics and allocation of foreign aid: disparity in pretensions and practice

We explore the applied ethics of development aid and humanitarian assistance, and juxtapose these with claimed objectives and factors that influence the choice of recipients. Despite some diversity among donors, ethical considerations appear not to be a prominent factor for allocation of aid. Although recipients’ need is not entirely ignored, donors’ self‐interest and herd behaviour, and recipients’ merits and voting in the United Nations, play crucial roles in allocation decisions. Likely to be shunned are complex emergencies and fragile states, the overlapping settings for action of development and humanitarian aid. Donors should take to heart and put into practice that allocation of aid is an ethical endeavour that should rest on proper needs assessment, established objectives and adopted agreements.     

Foreign Aid Transaction Costs: What Are They and When Are They Minimised?

‘Transaction costs’ are commonly referred to in the recent literature on aid effectiveness. Aid transaction costs, however, have been neither consistently defined nor measured. This article defines aid transaction costs as all the economic costs associated with aid management that add no value to aid delivery. This enables the ‘net’ transaction costs that should be minimised to be identified. An analytical framework is then developed for assessing these costs. This allows the effectiveness of different aid modalities to be compared, according to the characteristics of the aid transaction. The article shows that the choice of aid modality should depend on these characteristics and, therefore, that the minimisation of transaction costs should not be an end in itself.     

Gendered Leadership: The Effects of Female Development Agency Leaders on Foreign Aid Spending

This article examines the effects of gender on the leadership of bilateral development aid agencies, particularly their official development assistance (ODA) allocations toward gender‐related programming. Drawing on earlier research on gendered leadership, the article tests the hypothesis that female director generals (DGs) and ministers responsible for aid agencies will allocate more ODA than their male counterparts toward gender programming. This existing literature on gendered leadership is divided: some scholars argue that women and men have distinct leadership styles on account of their gender, while others argue that the only distinguishing factor is the institutional context in which they lead. Drawing on data collected on aid flows and agency leadership within the major Western aid donors of the Organisation for Economic Co‐operation and Development (OECD) Development Assistance Committee (DAC) over the period from 1995 through 2009, we use pooled time series analysis to examine the effects of gendered leadership on aid allocation. Our analysis reveals a tendency for female DGs and ministers to focus ODA on gender‐mainstreaming programs, while male DGs focus ODA on gender‐focused programs. We argue that these divergent priorities reflect the women's desire to reform gendered power structures within their respective aid agencies, and the men's desire to maintain existing gender power structures from which they benefit.     

Foreign aid and domestic taxation: multiple sources,one conclusion

There are influential studies that argue that foreign aid displaces domestic tax revenue when it is given in the form of grants. These claims are based on data that are deeply problematic: several different sources are amalgamated into one dataset, with no apparent checks on compatibility. In this article, a variety of econometric strategies are used to overcome these issues of data quality. The resulting weight of evidence points to a modest but positive effect on the part of foreign aid generally on domestic tax revenue. Fears over a negative effect for aid grants appear unwarranted, and are accounted for by the inappropriate use of data or endogeneity issues.     

Grants to Needy Countries? A Study of Aid Composition between 1975 and 2005

This article discusses whether the poorest and most indebted countries receive aid in the form of grants rather than loans, by studying bilateral aid flows to low‐ and middle‐income countries between 1975 and 2005. The empirical analysis finds no evidence that more indebted countries receive a higher grant component, but it does show that poorer countries receive a significantly higher grant component, although the size of the effect is quite limited.     

Brazil's International Development Co‐operation: Old and New Motivations

Brazil has entered the world of development assistance, but with its own twist. This article argues that Brazil is taking a cross‐government policy approach to the provision of development assistance, and which includes recruitment of business interests. There is a genuine concern with global poverty alleviation in Brazil, but this does not preclude policy‐makers from using aid and development‐related activities to advance national interests. The added quirk that sets Brazil apart from Northern counterparts is that the provision of development assistance offers significant benefits in terms of building up international bureaucratic experience inside the country and helping national firms internationalise their market activities.     

Living up to Policy Coherence for Development? The OECD's disciplines on tied aid financing

Tied aid credits are a way for donors to look to boost the international competitiveness of domestic enterprises while simultaneously contributing to development in recipient countries. Though regulated through the Arrangement on Officially Supported Export Credits, tied aid credits claim a place among the instruments of development policy and are eligible as Official Development Assistance (ODA). This raises the question of whether the international regulatory framework is equipped to safeguard the presumed development goals. This article examines the internal coherence of the tied aid disciplines of the Organisation for Economic Co‐operation and Development (OECD) with the development principles coined by the Development Assistance Committee (DAC). Thereby, the extent to which the OECD lives up to its own promise of Policy Coherence for Development (PCD) is scrutinized.