Competing Visions of Development Cooperation

1. Competing Visions of Development Cooperation Louka T. Katseli Director, OECD Development Centre (www.oecd.org/dev) University of Bern 17 October 2005

2. Overview • The bumpy road to the 2005 UN World Summit • Shifting paradigms of development co-operation • The present “consensus” model • Competing practices • A smoother road ahead?

3. The bumpy road to the 2005 UN World Summit • Development is back on the agenda • Major commitments on aid volumes and delivery: • total ODA up by $50b in real terms by 2010 (over 70% of this from EU donors) • Paris Declaration on Aid Effectiveness (March 2005) • A fragile consensus on policy coherence for development (Monterrey, 2002)

4. The bumpy road to the 2005 UN World Summit • But diversity in both visions and practice reflects competing approaches to global governance • Incoherent practices mean development impacts are harder to achieve • The development co-operation system needs to cope with and reconcile differences

5. Shifting Paradigms of Development Co-operation • The Golden Age: Investment & Infrastructure(1950 – 1973)

6. Shifting Paradigms of Development Co-operation • From basic needs to the Washington Consensus(1973 – 1992)

7. The Present “Consensus” Model: • Poverty Reduction and the MDGs (1992 – … 2005?)

8. The Paris Aid Effectiveness Agenda (2005) • Enhancing aid effectiveness by: • Strengthening country ownership • Aligning donor country strategies with recipient systems through sector-based approaches and increased budget support • Harmonising donor practices through common arrangements at country level • Managing for results: aligning with partner country performance assessment and results-oriented reporting • Monitoring progress through 12 performance-based indicators • Mutual accountability through transparent financial management • (Source: DCD/DAC/EFF(2005)20)

9. The “consensus” model in practice • Priority setting • Implementation & allocation procedures • Monitoring and evaluation options • The development finance architecture

10. 1. Priority Setting in Practice • Actors • A multiple donor-driven process (bi- and multilaterals) • BWI dominance in policy selection • Weakened and uncoordinated UN agencies • Private institutions and multinational companies • Effects • Lack of voice and ownership • Limited participation of local stakeholders • Aid-dependency syndrome • Diffused political responsibility • Weakened credibility of domestic institutions • Aid darlings and aid orphans • Policy process • Normative one-size-fits-all approaches • Insufficient harmonisation of bilateral donors • Mismatch with local conditions and needs • Diverse minimum eligibility criteria • Selectivity • Lack of policy coherence across relevant policy domains

11. 2. Implementation in Practice • Effects • Volatile and unpredictable financing • High transaction and coordination costs on the ground • Inefficient use of resources • Actors • A multitude of operating actors • Policy process • Improved but limited donor harmonisation • Short-term disbursements • Differentiated conditionality • Plethora of donor-driven projects, policies and practices • Multitude of funding mechanisms and instruments • Parallel processes

12. 3. Monitoring and Evaluation in Practice • Effects • Limited monitoring capacity • Low accountability (on donor and recipient sides) • Lack of transparent operations • No arbitration mechanisms • No internal learning by doing • Limited international sharing of best practices • Actors • Donor-side experts • Evaluation units within donor institutions • DAC monitoring • Policy process • Monitoring of inputs • Limited use of objectives outcome indicators • Limited peer reviews

13. 4. Development Finance Architecture • Actors • Competition among US / EU / Japan • New actors • UN under reform • IFIs in transition • Leading recipient countries • Failed states • DAC’s balancing act • Effects • No focal governance points • New patterns of dependency • Erosion of legitimacy • Policy process • Disconnected global, regional, national and local processes & programmes • Scale-up of aid (Gleneagles communiqué) • Dispersed innovative sources of financing (e.g. IFF, airline tax proposal) • Differentiated partnerships

14. 2005 UN World Summit Outcome Summit “Outcome Document” (para. 22) “…We resolve: (a) To adopt, by 2006, and implement comprehensive national development strategies to achieve the internationally agreed development goals and objectives, including the Millennium Development Goals…”

15. A smoother road ahead? • Face reality: diverse preferences of donors and capacities of recipients • Enable those who can to lead: capable recipient governments and local accountable institutions • Provide incentives for participative and reform processes

16. A smoother road ahead? • Harmonise through alignment around achievable, short-term, sectoral and regional programmes • Finance programmes through appropriate pooling of diverse resources (e.g. ODA, public and private funds) via budget

17. A smoother road ahead? • Promote contractual relationships where possible • Develop mutual transparency and accountability through independent monitoring and evaluation mechanisms • Reward positive outcomes through performance-based conditionality

18. A smoother road ahead? • Develop differentiated engagement strategies for failed states • Mobilise stakeholders for a more coherent and accountable development finance architecture

19. In dealing with the multiple and complex problems of development, we have learnt that we must be deaf, like Ulysses, to the seductive chant of the unique paradigm. Albert Hirschman (1995) Merci! Thank you! Grazie! Dankeschön!