Why doesn’t untying aid work?

Edward J Clay(with Matthew Geddes and Luisa Natali)

IDS-Sussex Development Lecture10th February 2010

Full OECD Study: “Untying Aid: is it working?” available at:

http://www.oecd.org/dataoecd/51/35/44375975.pdf

Contacts: e.clay@odi.org.uk, m.geddes@odi.org.uk

Outline of talk

• Wider awareness of the tying of aid• The OECD studies – it’s the politics silly!• What do we mean? Definitions• A historical perspective – ‘path dependency’ and

‘context specifics’• OECD studies: formal and informal tying practices• Why is untying not working?• What is to be done?

THE THREE OECD REPORTS

OECD Definitions of Tying Status

Developing country perspectives:

Untying is seen by governments, civil society and academics as:

• An issue of ownership; • Aid alignment with their priorities; and • Providing opportunities to local companies and

organisations to compete successfully for aid funded contracts.

THEY ARE LESS WORRIED ABOUT COMPETITION BETWEEN DONOR COUNTRY EXPORTERS

AID: development and humanitarian grants and concessional flows

Formal Untying: a success story?

Who is still tying? And who is not reporting?

TYING: DOES IT MATTER?

• Tied Food Aid efficiency costs were at least 30% or $800 million in 2002

• OECD study found local competitive sourcing using NCB or ICB to be cost-effective in most cases

• Caution - widespread view that ICT leads to oligopoly

• ISSUE OF LEVEL PLAYING FIELD

WHERE DO WE GO FROM HERE?

• RECOMMENDATIONS ON MAKING UNTYING WORK BETTER

• RECOGNISE A MORE COMPLEX WORLD - DAC ODA IS ONLY 2/3RDS OF “AID FLOWS”- PHILANTHROPIC AID UNREGULATED AND NON-TRANSPARENT- MANY WINDOWS OF MULTILATERAL FINANCE- EMERGING ECONOMIES- NEW AGENDA OF CLIMATE CHANGE MITIGATION AND ADAPTATION

• A CLEARER DISTINCTION BETWEEN DEVELOPMENT AND HUMANITARIAN AID AND DEVELOPMENT INVESTMENT WITH GREATER TRANSPARENCY, COMPETITION RULES AND MAXIMISING FUNDING FOR NEW CHALLENGES

AND WE WOULD WELCOME YOUR VIEWS!

THANK YOU!