Criteria for Assessing the Case for Overseas Aid: A Note

This note derives minimum appraisal criteria for foreign aid consistent with those used by donor governments for domestic spending, and discusses implications for the level, allocation and financing of aid programmes. One finding is that aid is only welfare‐enhancing when the recipient country's social time preference rate is higher than the donor's, as will normally be the case. This implies that endowment financing is inferior to funding aid from current income, though borrowing against future aid as proposed by the International Financing Facility can be worthwhile provided returns exceed the borrowing cost.     

Second‐Generation Poverty Reduction Strategies: New Opportunities and Emerging Issues

The poverty reduction strategy paper (PRSP) approach has taken centre stage in development asssistance over the past five years. International endorsement of the approach has led to important gains in government focus on poverty reduction, civil society participation and donor behaviour. Yet PRSPs also potentially offer a much greater contribution to aid effectiveness, good governance and poverty reduction in developing countries. With a second generation of PRSPs now set to appear, this article examines the technical and political challenges that need addressing to realise their potential over time. Emerging issues include how to respond to political transitions, alternative design approaches, how to assess financing needs, and ways of enhancing the predictability of aid.     

Leader,Protester, Enabler,Spoiler: Aid Strategies and Donor Politics in Institutional Assistance

Aid co‐ordination has come to be seen as a miracle cure for the ills of donor proliferation. However, in weak states where aid conditionality may be a catalyst for institutional change, the ideal of aid co‐ordination is conceptually suspect, and in some instances politically counterproductive. Co‐ordination is one of the two solutions to the collective‐action problem that the public good of effective institutional conditionality generates; donor leadership is the other. The desirability of each solution depends on every donor's commitment and presence, which together generate a four‐fold typology: leader, protester, enabler, and spoiler. As long as there is at least one enabler or spoiler donor present, aid co‐ordination will be less effective than donor leadership.     

Why Do Aid Agencies Exist?

This article seeks to explain the organisational set‐up of foreign aid delivery from a Coasian perspective: Why are there many and different aid organisations and not just one? Why is foreign aid not transferred directly from donor to beneficiary? With zero transaction costs and fully shared preferences between donors and beneficiaries, there would be no need for aid agencies. Their role is not so much to transfer funds or goods and services to developing countries, but (a) to reduce ex‐ante transaction costs and (b) to mediate between the diverging preferences of donors and recipients, and package aid flows in a contract that reduces ex‐post uncertainties for donors. Outcomes differ according to types of agencies and aid delivery instruments.     

Aid Harmonisation and Alignment: Bridging the Gaps between Reality and the Paris Reform Agenda

The Paris agenda on aid effectivess emphasises support for recipient‐owned development strategies, increased use of national systems and more co‐ordinated and predictable donor actions. Monitorable targets for such behaviour have been agreed, but the connections with expected development benefits are as yet unproven. Alternative views of the rationale for aid agencies, transaction costs and conditionality, in which there is rarely complete preference alignment and trust between donors and recipients, introduce further complications. Four additional policy measures are identified which cannot be managed easily within the Paris agenda: better international balancing of aid allocations; new instruments with longer commitment horizons; liquidity arrangements to enable ‘scaling up’ across several countries; and independent aid rating institutions linked to market‐like sanctions.     

Will ‘Emerging Donors’ Change the Face of International Co‐operation?

Responding to the recent upsurge of interest in ‘emerging donors’, this article argues that the DAC share of aid is likely to decline only slowly from what is a historically high level, and at least some non‐DAC donors are likely to see DAC approaches and norms as relevant. Nevertheless, low‐income countries seem likely to have a wider range of financing options. Three key risks are that: they prejudice their debt situation by borrowing on inappropriate terms; they use low‐conditionality aid to postpone necessary adjustment; and they waste resources on unproductive investments. DAC members should develop constructive dialogue with other bilateral donors based on recognition that sustainable development and poverty reduction should be the core purpose of aid.     

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.     

Performance‐Based Aid: Why It Will Probably Not Meet Its Promises

Performance‐based aid (PBA) is increasingly advocated as a way to improve the effectiveness of development aid by resolving incentive issues inherent in aid relationships, and some donors use it together with performance‐based financing arrangements within partner countries. Expectations from PBA are high, but, while its rationale may look appealing, it is based on a restrictive model and is flawed when taking account of the real‐world context. A number of problems associated with PBA have already been observed, and its appropriateness to provide incentives all along the chain from recipient governments to those who are supposed to produce results is questionable. Thus believing that PBA can have a mechanistic trickle‐down incentive effect seems illusory.     

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.     

Management of the international development aid system: The Case of Tanzania

This article tries to clarify Government behaviours as to how to manage aid in Tanzania. Contrary to the Organisation for Economic Co‐operation and Development (OECD) Development Assistance Committee (DAC) donor intentions, the development aid structure, carefully constructed under the poverty reduction regime in Tanzania, has led to Tanzanian‐owned initiatives toward a national development plan (NDP). Furthermore, this article shows that, in the process of creating an international development aid system, the Tanzanian Government has learned to manage aid in a recipient‐driven manner not only from DAC donors, but also from China.     

An analysis of donor engagement with education policy development in Lao PDR from 1991 to 2000

This paper describes the relationship between donor agencies and government during the development of Lao basic education policy in the post‐Cold War period, 1991‐2000. We argue that Laos had only recently been ‘re‐ born’ from colonial regimes, and was thus unable to resist or mediate donor policy agendas and donors who acted on behalf of economically developed nations. The nature of the power relationship between donor and government is explored through an analysis of policy developed at that time as well as the perceptions of aid conditionalities, as recalled by government officials and those working in the aid sector at that time. These perceptions were gathered through interviews conducted by one of the authors.     

The MDG Conundrum: Meeting the Targets Without Missing the Point

The MDGs are being misappropriated to gain support for a specific development strategy, agenda or argument, mostly being used as a call for more aid or as a Trojan horse for a particular policy framework. As relative benchmarks, they are extremely difficult to meet in countries with low human development. Their misinterpretation as one‐size‐fits‐all targets is leading to excessive Afro‐pessimism, begging the question whether Africa is missing the targets or whether the world is missing the point. The global MDG canon is dominated by a money‐metric and donor‐centric view of development, and is not ready to accept that growing disparities within countries are the main reason why the 2015 targets will be missed.     

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.     

Policy Experiments,Democratic Ownership and Development Assistance

In an effort to enhance the impact of development aid, recipients are called on to provide democratically sustained ‘ownership’ for development policies, and donors to align their interventions with these ownership‐dictated strategies of their partners. This article illustrates the weaknesses of such an approach. From a political‐economy perspective, severe tensions exist between concepts of democratic ownership, on the one hand, and the experimental and iterative organisation of a society's encompassing interests in democratic settings, on the other. These tensions are even more pronounced in emerging democracies, making democratic ownership as a prerequisite for aid effectiveness an illusion, and provoking the re‐emergence of traditional donor‐recipient problems.     

Bringing Aid Management Closer to Reality: The Experience of Danish Bilateral Development Cooperation

In 2003, the Danish Ministry of Foreign Affairs undertook a decentralisation of the management of bilateral aid to the embassies in major partner countries. However, while decentralisation appears to live up to the principles of the Paris Declaration on Aid Effectiveness, the specific delegation of responsibilities as well as the political context of aid management may jeopardise the intended contribution to effective development co‐operation. This article explores some factors potentially limiting the usefulness of decentralised aid management in the Danish case, and discusses certain intra‐organisational dynamics and extra‐organisational pressures influencing ‘donor effectiveness’.     

Donor co‐ordination or donor confusion? How disputed facts and problem framing affect the prospects for aid harmonization

A declared commitment in international development assistance is to promote donor co‐ordination. Yet, how this objective plays out in practice, or how feasible and realistic it is, have rarely been evaluated. Using the fisheries sector as a critical case, this article explores whether two major international actors, the United Nations Food and Agriculture Organization (FAO) and the World Bank, meet the demands of policy harmonization as spelled out in the Paris Declaration on aid effectiveness. Through a systematic qualitative analysis, the article investigates whether the policies of these actors are complementary or contradictory. It also assesses how the potential challenges to harmonization can be understood and what the broader implications for aid and development policies in general might be.     

From Monterrey to Doha: Taxation and Financing for Development

Ill‐conceived tax policies cost developing countries vast sums of public revenue, but this issue has received relatively little attention within the Financing for Development (FfD) process of the United Nations. The outcome documents of the FfD conferences in Monterrey (2002) and Doha (2008) largely neglect globalisation‐related tax issues such as under‐taxation of multinationals and capital flight to tax havens. This article analyses how this topic has been marginalised by powerful interests, ideas and institutional factors, but it also shows how a growing coalition of governments, international organisations and NGOs has recently succeeded in raising the issue much higher up the international agenda.     

The Aid Paradigm for Poverty Reduction: Does It Make Sense?

Thinking on economic policy for development has undergone many shifts in response to the perceived weak results of earlier adjustment reforms. A new donor consensus has emerged based around the central themes of economic growth, good governance and social development. This article examines the logic behind this new aid paradigm, revealing a nuanced story with country circumstances playing a critical role and particular interventions varying in impact. For example, growth does not always lead to gains for the poor that match the national average; public expenditure needs to be targeted to achieve social development, but effective targeting is difficult; governance reform may be critical but there is no simple governance blueprint, and the corruption‐growth association need not always be negative.     

DOES NATION BUILDING SPUR ECONOMIC GROWTH?

Nation building, the allocation of economic aid conditional on military assistance in conflict and post‐conflict environments, has cost the world trillions of dollars over the last half century. Yet few attempts have been made to quantify the potential economic growth effects for the recipient country from the provision of this aid. Using a 45‐year panel dataset, we construct a measure of nation building using a three‐way interaction term between military assistance, economic aid, and conflict regime. Considering that slow growing and problem‐prone countries may be less likely to receive aid, we instrument for economic aid by estimating donor‐to‐donee aid flows in a first‐stage procedure. Using this approach, we find that spending on nation building has positive growth effects during conflict periods, but that these effects disappear after conflict. (JEL F3, F4, O5)     

Brazil and the Shifting Consensus on Development Co‐operation: Salutary Diversions from the ‘Aid‐effectiveness’ Trail?

Emerging economies emphasise horizontality and mutual opportunity in their relationship with developing countries, promising an alternative to the failings of traditional North‐South co‐operation. This article draws on research on Brazil's technical co‐operation and its health dimension to compare the Brazilian model with established aid‐effectiveness' principles and to discuss the appropriateness of the latter as standards against which to appraise emerging donors' co‐operation. The analysis shows that, despite progress towards greater dialogue between traditional and emerging donors, the ‘aid‐effectiveness’ framework still falls short of capturing the idiosyncrasies of South‐South co‐operation and therefore offers an incomplete international standard on how best to conduct development co‐operation.