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Aid EffectivenessWhere is it going, and what could you do?

19 May, 2010

Owen Barder

owen@devinit.org

This presentation: www.owen.org/musings

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Lack of predictability costs

15-20% of the value of aid

Source: Kharas, H. (2008). Measuring the Cost of Aid Volatility.

Wolfensohn Center for Development Working Paper No. 3.

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0

20,000

40,000

60,000

80,000

100,000

120,000

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Aid projects are proliferating ...

bilateral

multilateral

total

0

10

20

30

40

50

60

70

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

... and project sizes are falling

bilateral

multilateral

Source: AidData (www.aiddata.org)

March 2010

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12.5% of bilateral aid from DAC

donors is still tied

Sources: OECD DAC Database Table 23

(excludes administration and technical assistance)

OECD DAC The Tying Of Aidhttp://www.oecd.org/dataoecd/16/56/29412505.pdf

Tying reduces aids valueby 20-30%

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An example

of why

Paris wont work

Proliferation

and the division of labour

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more than $10m

(43%), 35

$1m-$10m

(41%), 266

100K-1m (15%),

754

less than $100K

(2%), 1121

Bilateral aid to Ethiopia

from DAC Donors 2008

Source: DAC CRS DatabaseMay 20102176 Projects reported

These projects add

up to 1.8% ofbilateral aid

More than 51% of

projects are for

less than

$100 000.

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Total welfare of society isincreased when individuals and

firms produces according to theircomparative advantage

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Comparative advantage isthe only idea in the social

sciences that is both true and

non-trivial

Paul Samuelson

1915-2009

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The opportunity cost of growing chatisthe value of the coffee that would have

been grown instead

Chat, corn and coffee

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In cases where EU donors own

view of their comparative

advantage does not match theiractual sector engagement we

should make decisions where

possible coherent and collective

EU decisions on the basis of

complementarity vis a vis other

EU donors engagement.

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Hands up if you

want to go home

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How not to

achieve adivision of

labour

Two reasons:1. Information.

2. Incentives.

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Just an example ...

Division of labour, predictability,

alignment, untied aid, ownership,

rigorous evaluation, transactions costs,

aid allocations, division of labour,

technical assistance, exit ....

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Paris indicators are results not drivers - of change

Change the equilibrium, dont try to move away from it

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Expired Tired Wired

DAC Donors DAC Outreach China, Gates, RED, Pepsi

The DAC WP-EFF The DCF

The Bretton Woods system Intelligent Design Evolution

Go it alone Harmonise activities Agree rules of the game

Bilateral aid Joint funding, SWaPs Multilateral aid

No evaluation Process evaluation Impact evaluation

Structural adjustment PRSPs Social accountability

Project aid Budget support Cash on Delivery

Money to NGOs Money to governments Vouchers

Imported food aid Locally bought food aid Cash transfers

DAC database AidData.org Real time, raw data

Bureaucrats know best Governments know best Citizens know best

Unaccountable agencies Peer reviews Crowd-sourcing

Secrecy Communications Transparency

DAC guidelines Rome, Paris, Accra ???

The new aid effectiveness agenda

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You could ...

Agree systems & norms, rather than coordinate & harmonise

Standard output indicators

Standard grantee applications, monitoring, reporting

Introduce entry fees per sector (eg $1m per donor per year)

Increase transparency and accountability, to provoke change

Publish real-time, detailed aid data Publish unit costs, overheads

Enforce rigorous, independent, multi-donor impact evaluations

Invest in statistical capacity

New ways of working Pilot Cash on Delivery (replace PBS?)

Support social accountability

Set more modest objectives e.g. Service delivery