the evolving landscape of development finance results and reflections from the first year of the...
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The Evolving Landscape of Development Finance Results and reflections from the first year of the OECD Global Forum on Development
Louka T. Katseli, Development Centre
Richard Carey, Development Cooperation Directorate
2
The (non-) system of development finance1
Consequences for recipientsConsequences for recipients22
Challenges for donorsChallenges for donors33
Overview
Dealing with complexityDealing with complexity44
3
The international system of development finance is
expanding
Global Programmes
World Bank
UNDP
GFATM
GAVI
Global Environment
Facility
Fast Track Initiative/
Education for All
…
Others, e.g. Islamic Dev.
Bank
NGOs
InternationalNGOs
Regionaldev. banks &
agencies
UN SpecialisedAgencies
National NGOsin donor countries
National NGOsin developing
countries
MultilateralDonors
IMF
Public Private
Other private
non profit
Private for profit
22 DAC donors
Incl. bilateral development
banks and agencies
Other OECDdonors
(non-DAC)
Emerging donors
BilateralDonors
Foundations
Households (e.g. remittances and other private
transfers)
Firms
Commercial Banks
Private Investors
Observer status in DAC
EC
4
Financial resources are increasing, especially to
emerging economies
0
50,000
100,000
150,000
200,000
250,000
Private creditors Equityinvestment
ODA Disbursements
Remittances
-50,000
0
50,000
100,000
150,000
200,000
250,000
Privatecreditors
Equityinvestment
ODADisbursements
Remittances
Emerging EconomiesDeveloping countries (excl emerging)
Source: UNCTAD, World Bank GEP 2006, IIF online statistics, OECD DAC 2006
1980 2004
5
But is this really a system?
Selected Multilaterals Working on the Millennium Development Goals
Source: National Audit Office (UK), DIFD- Engaging with Multilaterals, London, December 2005.
6
Public and private mechanisms are
proliferating
Source: Kaul and Conceicao (2006)
7
Since 2000
8
Leaving us with a (non)system
that is hard to manage
• Proliferation of donors
• New non-DAC and private donors
• Fragmentation of delivery channels
9
The (non-) system of development financeThe (non-) system of development finance11
Consequences for recipients2
Challenges for donorsChallenges for donors33
Dealing with complexityDealing with complexity44
10
23 donors per country …
23.4
13.55
9.85
5.85
3.492.36
3.311.9 1.41
0
5
10
15
20
25
All donors 0.5% level 1% level
All
Bilateral
Multilateral
Nu
mb
er
of d
on
ors
pe
r co
un
try
Source: DAC (2007); Cohen & Katseli (2007)
11
… but only a handful account for the bulk of
aid
Education Health Water Supply Government
Ghana Tanzania Ghana Tanzania Ghana Tanzania Ghana Tanzania
Total number
of donors 16 19 9 10 14 19 12 19
First five donors
IDA; AfDF; US; Germany;
Japan
IDA; Canada; Finland; France; Ireland
IDA; Denmark; Canada; AfDF; UK
AfDF; Germany;
IDA; Japan; Denmark
Canada; Germany; UK;
EC; US
UK; Netherlands;
Norway; Finland; Sweden
Spain; IDA; US; Denmark;
Japan
Denmark; IDA;
Netherlands; Ireland; Japan
Share by 5 first
donors 97,07% 95,05% 99,79% 98,76% 92,68% 77,65% 89,58% 90,03%
Source: DAC (2007); Cohen & Katseli (2007)
12
Straining weak local capacities:
too many projects
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1995 1996 1997 1998 1999 2000 2001 2002 20030 500 1,000 1,500 2,000
Mozambique
India
China
Russia
Ethiopia
Indonesia
Vietnam
Tanzania
Serbia & Montenegro
South Africa
Number of reported project commitments top ten recipients
(2001–03)
Number of reported project commitments all donors (1995–2003)
Source: Roodman (2006)
13
13.6 %
DonorsGovernmentHouseholds
Ministry of Health
59,2 %
Health sector
27,2 %
While reporting seems simple…
Health financing in Ghana
Source: Drechsler & Zimmermann, 2006
14
Internally genera-ted funds (13.6 %)
DonorsGovernmentHouseholds
Ministry of Health
Ministry of Finance
(59.2%)
Health Fund (14.9 %)
& MoH Programme Support (12.3 %)
Commercial Loans (15 %)
HPIC (0.2%)
Budget Support
44 %
Health Sector
ProjectsOther private spending
Global prog’sFoundationsPharma industry NGOs
… the reality is complex
Source: Drechsler & Zimmermann, 2006
15
Donor fragmentation is costly
Donor Fragmentation and the Erosion of Bureaucratic Quality
Source: Knack and Rahman (2007)
16
The (non-) system of development financeThe (non-) system of development finance11
Consequences for recipientsConsequences for recipients22
Challenges for donors3
Dealing with complexityDealing with complexity44
17
Global Forum on Development – Year I: Understanding the present
development finance system
Global Programmes
World Bank
UNDP
GFATM
GAVI
Global Environment
Facility
Fast Track Initiative/
Education for All
…
Others, e.g. Islamic Dev.
Bank
NGOs
InternationalNGOs
Regionaldev. banks &
agencies
UN SpecialisedAgencies
National NGOsin donor countries
National NGOsin developing
countries
MultilateralDonors
IMF
Public Private
Other private
non profit
Private for profit
22 DAC donors
Incl. bilateral development
banks and agencies
Other OECDdonors
(non-DAC)
Emerging donors
BilateralDonors
Foundations
Households (e.g. remittances and other private
transfers)
Firms
Commercial Banks
Private Investors
Observer status in DAC
EC
18
Foundations as partners
• Conference in Lisbon, 22-23 March 07• Improve mutual information sharing• Deepen dialogue for a common agenda
on– structural inequality?– governance & democratic accountability?– infectious diseases?
Session I
19
Global Programmes
• Policy Workshop in Paris, 4-5 December 06
• Horizontal vs. vertical approaches
• Weak systemic capacities are unable to integrate vertical programmes
• A distortion of priorities: how well are they integrated into country strategies?
• Proliferation of programmes raises transaction costs and overburdens recipient-country administrations
Session I
20
Emerging Economies and Development Co-operation
• A big opportunity to achieve shared goals– donor diversity gives recipient countries choice
• But also concerns about diverging approaches to– Millennium Development Goals– Governance and accountability– Aid effectiveness and the Paris Declaration
• Risks to debt sustainability? (is a Debt Transparency Initiative needed?)
• Need for improved information flows and coordination at country level
Session II
21
Challenges for bilateral donors in 07/08
• Two important years
– 2007: replenishment discussions for IDA, the ADF and the Global Fund
– 2008: reviews of the Monterrey Consensus and the Paris Declaration
• Following commitments, pressure to monitor performance and show results is rising
• Donors are thus faced with difficult portfolio decisions
Session III
22
Soul-searching multilaterals
• Informal Workshop in Berlin, Jan. 2007
• A weakening multilateral system?
– UN system is weakened by ‘cherry picking’,
– the IMF by a vanishing client base,
– the IDA by move toward grant finance
– All by too many priorities and inadequate governance structures
• Rethinking roles and responsibilities
Session III
23
No clear specialisation of multilaterals relative to
bilaterals for half of total ODA
0 0.2 0.4 0.6 0.8 1 1.2 1.4
Social Infrastructure and Services (SSI)
SSI: Education
Economic Infrastructure
Trade Policy and Regulation (Part of ProductionSectors)
Multilaterals BilateralsSource: Cohen & Katseli, 2007
24
Regional Development Banks: Struggling to reconcile competing
priorities
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
IDB AfDB AsDB EBRD ADC EIB CABEI CDB
Non-borrowers BorrowersSource: Ocampo, 2007.
Vot
ing
pow
er
25
The (non-) system of development financeThe (non-) system of development finance11
Consequences for recipientsConsequences for recipients22
Challenges for donorsChallenges for donors33
Dealing with complexity4
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Is complexity here to stay?
“Fools ignore complexity. Pragmatists suffer it. Some can avoid it. Geniuses remove it.”
Alan Perlis
• The « Architect » is dead
• Competition has its limits
• But so does co-ordination
27
Improving coherence (1):Multilateral reform
• UN Reform: Delivering as One
• Broaden evaluation criteria to include core aspects of system-wide coherence and systemic capacity development in partner countries
28
Improving coherence (2):Co-ordination / division of
labour• German Development Institute
– Towards an improved division of labour in EU development co-operation
• European Commission– Code of Conduct for an improved division of
labour between EU Donors
• OECD Development Centre – Delegated co-operation based on National and
Sectoral Coordination Councils.
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Improving coherence (3): Towards coherent behaviour
by Donor Countries as Portfolio Investors in the Aid Industry (buying development
outcomes)• Performance Assessment Systems (MOPAN,
MEFF, MERA, PMF, MMS, etc.)
• Global Programmes: Selectivity and Governance
• Forward information: survey and dialogue
• Thinking holistically, with expanded time frames
30
Thank you