Could development cooperation do better?

Many of the observations made above are widely recognized by donor staffs. The problem is not that they are personally naïve but that it is not clear to anybody exactly what else might be done to be supportive of country-owned policies under these circumstances. The topic is under active consideration much of the time in several bilateral and multilateral agencies. Some proposals currently being discussed are certainly unwise if anything like the above is generally true. Others make good sense but are insufficient. It would not be the right solution to abandon wholesale what the main group of donors in the developed world currently consider to be the best approach. Rather, the argument I want to advance is about the importance of going beyond the EDPRS framework as currently conceived and addressing some of the missing links in the chains of causation needed to harness politics to the goals of development and poverty reduction in EDPRS countries. Two obvious focuses for discussion here are the aid harmonization and alignment agenda of the donors, and the arguments around general budget support as a preferred aid modality in an EDPRS context. Both are areas where there is no doubt donors could do better, but where the conventional concepts are insufficient. The harmonization and alignment commitments made by high-level representatives of the donors since 2000 are important landmarks. This is so in spite of and partly because of the points made above about constraints at the country level. There are severe limitations to the ability of donors to engineer progressive change and create country ownership of policies. However, there is not much doubt about the ability of the aid business to do harm. Both the multiplicity of competing donor agencies and the donor tendency to take over the policy-making function from country authorities (especially when this is done in aggressive or adversarial ways) have done, and continue to do, damage to whatever exists by way of country policy-making systems. For that reason, it is right that the donor declarations should be regarded as priorities for implementation by all the signatory countries. The qualification that needs to be added is that, even if fully implemented, these measures would not be a sufficient solution to the problem of aid misalignment, important parts of which are about the recipient side of the relationship. I would argue that the same applies to the promotion of general budget support as a preferred method of achieving the desired alignment with national policies and systems. In some poor countries, projects with their own reporting and accounting arrangements are the only thing that is feasible, because the minimum conditions for using government channels do not exist. However, from the point of view of institutional development, this remains very much a second- or third-best option, one that is very likely to reinforce the characteristics of the state that make it the only option in the first place. General budget support and pooled sector funds are both preferable (in that order) whenever they are possible. This follows the general principle that systems cannot be expected to improve unless they are being used. On the other hand, the new aid modalities are not a panacea. The key thing in the cases of both budget and sector support is to go in with eyes open, bearing firmly in mind the learning about conditionality that led up to the EDPRS initiative. That is, programme aid plus conditionality does not work for complex reforms, unless there is a significant amount of real commitment within the country. This means that conditions attached to budget support programmes should normally be limited to policy actions to which the government is in some real sense committed. Disbursement should be based on past progress and not on promises to do things in the future. In practice this distinction is often hard to make but the principle that buying reforms does not work is well established and a good general guide. The most important conditions for an EDPRS to be supported are those that surround the decision to embark on budget support in the first place, as it becomes difficult to withdraw later on. Those are most intelligently based on any observation of the country’s trajectory of institutional development over a suitable recent period, and not just on observation of a basic minimum of fiduciary good practices. If there are no significant domestic pressures leading to improvements in the budget process, it is doubtful whether any of the benefits from having donors make use of government systems will materialize. Once again, however, the main worry about programmatic forms of aid (sector and budget support) is that they come to be regarded as self-sufficient means of addressing the weaknesses that EDPRSs have helped to show up. If the EDPRS process has not generated real buy-in to poverty reduction by a country’s politicians, a budget support programme will not solve the problem. The conditions for EDPRS to work are essentially the same as the conditions for development policies associated reforms to deliver what they promise. The general conditionality or performance assessment has a modest role to play, mainly as a marker for policy dialogue. But if conditionalities are limited to policy actions that the government is showing some inclination to undertake anyway, something else is needed to get other and more difficult issues onto the agenda. What else might be worth a try? Three areas seem worth exploring: (1) getting a better understanding of country contexts into the operational work of donor agencies; (2) opening up those understandings to public debate at country and international levels; and (3) taking steps to create an international climate of opinion that is more welcoming to political projects that build developmental states. For donor staffs, getting to know and understand well the country context is an important first step. This seems obvious, but has not always been done. Short postings and management of country programmes from headquarters have contributed to a situation where aid approaches often get decided on the basis of generic principles and even passing fashions, not detailed knowledge of the country. Thinking has tended to be technocratic and less well informed than one would expect about the country’s history and the political economy of previous reform efforts. Several bilateral and the World Bank have moved towards recognizing these criticisms and have departments working on addressing them. Understanding is only a first step. It can allow donors individually and collectively to respond more intelligently to the type of problems the EDPRS experience has thrown up. Good ideas about how to do things better may and may not follow. Many of the problems identified in a country political analysis will not be capable of being solved by donor action, however wise and well motivated. That is why there has to be a second step, that of opening up the debate about the politics and political economy of reform, as well as about specific policy areas where there is no consensus, Donors should be prepared to put behind them the old principle that national sovereignty forbids active involvement in policy controversies within countries, because this would be political. As opposition politicians often point out, donors are part of the political system of the country whether they care to acknowledge it or not. That being the case, they should act responsibly by positively engaging in and contributing to the debates that ultimately shape the commitments of country stakeholders. This engagement needs to be politically and socially realistic. It must take into account the level of socio-economic development of the country. But it should also bear in mind that we live in an increasingly integrated world, with, among other features, large Diasporas from poor countries working in professional capacities in the developed world and benefiting from increasingly cheap and rapid international communications. The above are both things that might be done at the country level. But there is no reason for this discussion to be limited to the country level, and indeed there are many reasons for seeing it much more as a global or at least a regional (continental) challenge. The wave of formal democratization that broke over Africa and the former communist bloc in the 1990s, and over South America a bit earlier, shows that the international climate of opinion does have effects within countries. It is surely time for a further change in the international environment, one that provides more positive incentives and fewer negative ones to national leaders faced with choices between building predatory states and building developmental ones. Several ideas currently under discussion are relevant to this suggestion.Some of them are based on development cooperation agencies exercising greater selectivity in aid allocation between countries and doing so on a basis that openly rewards improved or improving governance, and punishes demonstrably bad behaviour by political leaders. This can be done using governance indicators and thresholds of performance, as in the USA’s Millennium Challenge Account. Alternatively, it might be done using only results measures (on the basis that we don’t know well enough what kinds of governance qualities are crucial for producing development results. Other proposals include constructing long-term compacts’ between the international community and national leaders who have political projects centered on state building, and concentrating on delivering powerful negative signals. These proposals have different strengths and weaknesses. They share two difficulties, as their proponents recognize. One is that many of the countries where state-building projects are most in need of encouragement are already heavily aided and/or have natural-resource revenues that give them now, or will soon, a large measure of immunity to aid-related international pressures. The other is that the effect on country incentives would only be significant if the selectivity was coordinated, and that seems an unlikely prospect on account of well-known features of donor motivation. For these reasons, it may be more useful to change the international climate in ways that do not involve aid. The options considered should certainly include the entire actions developed world governments could take to make the international banking system and the arms trade less hospitable to developing world leaders who steal natural resource rents and use them to create private armies. Various current initiatives on these lines are usefully explained and promoted in the report of the recent Blair Commission. Another kind of mechanism that has proven effective in changing incentives for national elites in several parts of the world is the aspiration to join a multi-country club, such as the EAC or COMESA, with the exacting entry standards or peer-review processes. A study of international efforts to avert instability and respond to crises by several countries has investigated this line of approach, including its applicability to developing regions. However, it reaches cautious conclusions. The African Peer Review Mechanism established under NEPAD by the African Union is one of the most relevant examples, with some potential to alter the nature of the neighbourhood in which African political leadership evolves. Unfortunately, it is also one of the less promising regional clubs, given the lack of anything equivalent to the benefits from institutions like EU accession in the set-up of the scheme. The international climate can only take countries so far, as is well illustrated by the experience with democratization. But what it can do is set a framework of standards and expectations to which domestic actors can appeal and to which they may respond in their own way, participating in movements for change that otherwise would not have existed. It may be that, for this reason, the general climate of opinion in the world is more important than creating special mechanisms that act upon elite incentives directly. In any case, several of these things could be tried together. A few small steps to create a more welcoming environment for state-building political projects could make a large difference to the prospects of realizing a positive outturn from the EDPRS experiment. Conclusion To sum up, there are sound reasons for wanting more country ownership of poverty-reduction policies. The EDPRS experiment has been the only show in town in trying to address this need for the last few years. It cannot yet be said that the experiment has failed, if only because no better idea has yet been articulated by anyone. On the other hand, it is clear that EDPRSs have not delivered what was hoped for, and the reasons include the rather simple theory of political change that was one of the conceptual underpinnings of the experiment. The theory that participation alone can generate accountability and an orientation to results is inconsistent with many findings from political science and geographic research. It also seems not to be confirmed by the EDPRS experiment. Despite what has been learned from EDPRS processes, quite a lot of the current donor agenda remains valid and sensible. But it is not sufficient. Both EDPRSs and the efforts that have been made to align aid with them have underlined the pivotal importance of domestic politics and its trajectory. This article has drawn attention to three types of possible international action that are missing links in the politics of development after nearly ten years of EDPRSs. They are: more serious understanding of country contexts by donor staffs; a willingness to go public about issues that donors currently discuss behind closed doors; and a more serious effort to construct regional neighborhoods; and a global climate of opinion that would do what EDPRSs have been unable to do to really incentivize the construction of developmental states in poor countries. Ends