Friday, 11 February 2005

CSOs-Donors Dialogue on the New Aid Effectiveness Agenda

Introduction

There is a growing sense and realisation among donors, governments and civil society alike on the need to work together in aid and development policy for effective outcomes and impacts. Against such a background a lot of meetings have been scheduled both at national and international levels to look at issues of donor practices and harmonisation, current and future roles of government and would-be roles for civil society in aid delivery and management systems. Numerous reports from aid recipient countries are showing that aid as much as it is desperately needed for development, is increasingly coming with high transaction costs in terms of the time required to attend to mission teams from donor agencies and countries, endless meetings held between government officials and donors, and the ever-increasing number of reports that have to be compiled for a spectrum of donors. For instance, recently Tanzania was required to prepare over 120 reports for various donors that operate in that country! The question then is: how can we improve aid delivery and management systems in the recipient countries without these cumbersome procedures?

I was recently in Paris, France from 31^st January to 4^th February 2005 at the invitation of the High Council for the International Cooperation (HCCI) to attend a joint meeting between donors on one hand (UNDP, World Bank, Bilateral creditors, etc) and the non-state actors commonly called civil society organisations (CSOs) on the other (from Europe, Latin America and Africa) to try and find a common ground to some of these perplexing problems. It was a High-Level Forum (HLF) and preparatory meeting with a focus on Harmonisation and Alignment for Aid Effectiveness. For unexplained reasons, the presence of the International Monetary Fund (IMF) was conspicuously missing. However, the meeting had been jointly organised by the HCCI, Cooperation Sud--an amalgam of French CSOs and the Ministry of Economy and Finance of France. The gathering was opened by Jacques Pelletier, President of the HCCI who spoke at length on the need to find practical ways of making aid delivery to poor countries more flexible and less cumbersome. Jubilee-Zambia was invited to this meeting as one of the representatives of civil society organisations from the South and I was asked to speak specifically about Civil Society Participation in Aid and Development Policy: The Zambian Perspective.

The meeting had several sub-themes including Alignment on What? Ownership and National Strategies, Mutual Accountability and Transparency, Participative Approach in Development Cooperation as well as Civil Society’s Organisation: How NGOs’ Networks/Platforms Favour Participation in Development Policies. In all these meetings participants were all agreed that both donors and recipient governments needed to do more in terms of opening up the aid frontiers to the inclusion of other stakeholders. As civil society present in the meetings, we were resolved in our demands across the table that any development policy or programme would be futile if it did not embrace within its principles, the multi-staker dialogue approach. Civil society organisations protested at the tendency by many governments and donors to invite them to comment on official documents and processes that had already been agreed upon thus limiting their role to that of a “proof reader” and spectator since they cannot change anything. There is therefore need to redefine the role of civil society within the new donor-CSO dispensation to move beyond mere spectators to proactive participants in agenda setting and execution.

But What is Foreign Aid and Is It Important?

To different people aid has different meanings. Aid in official circles stands for the Official Development Assistance (ODA). Financial aid includes grants and concessional loans. Zambia has been receiving financial aid since the 1970s with a significant increase being recorded soon after change of governments in 1991. For instance, Professor Oliver Saasa and Carlson observed in 1996 that Zambia’s financial assistance has largely been in form of Balance of Payment (BOP) support consisting of import and debt relief and this accounted for more than half of total aid to Zambia in the early 1990s. Admittedly, there was tremendous goodwill from the international financial community in the 1990s toward Zambia probably as a way of rewarding the new government for having embraced neo-liberal economic policies that were being promoted by the IMF and the World Bank.

In a complete about turn move, Zambia literally did away with commandist policies that Dr. Kaunda had pursued during the 27 years of his tenure of office. Under the new policies, it was argued that the ‘Government had no business in business’ and therefore the role of the state was redefined and rolled back. This kind of economic reasoning dealt a heavy blow to the Keynesian economics, which among other things, argued for an expansionary role of the state in the economy. According to John Maynard Keynes, a celebrated British economist whose writings had a profound influence in the field of economics in the 1930s and through the 1950s, the state had an important role to play to stimulate aggregate demand through increased spending especially during times of economic recessions or low peaks. However, the new dispensation of economics as championed by the international financial institutions (IFIs) argues that the state need not stay active in the economy as there are other players who could do it much more efficiently and effectively provided they are enabled to do so.

But the question is, why aid in the first place? Due to the poor state of economies in most countries particularly in Africa and Latin America these countries have increasingly come to be under a foreign-led aid regime. The main sources of aid in its various shades and form have been the bilateral governments and the multilateral financial institutions such as the International Monetary Fund (IMF) and the World Bank.  Recently the two Bretton Woods institutions have been giving their aid in form of highly concessional loans to poor countries. For instance, the IMF under the Poverty Reduction and Growth Facility (PRGF) give loans at 0.5% interest which is much lower than the market rates and with a repayment period of 10 years. Aid to Zambia has mainly been in form of financial assistance, technical assistance and commodity aid. It is important to underscore one point that different donors are motivated by different set of factors to give aid. Some of those factors may be political, military, social or economic in nature. For instance, former President of the United States of America, John F. Kennedy is quoted as having said in 1962 that “foreign aid is a method whereby the United States maintains a position of influence and control over the entire world and supports a great many nations that would otherwise collapse or go over to the communist bloc”.

The Politics of Development Aid

 In September 2002, the Canadian International Development Agency (CIDA) published an overarching strategic statement on aid policy, Canada Making a Difference in the World, a Policy Statement on Strengthening Aid Effectiveness. Among other aspects, this new policy directed CIDA to commit its aid resources to development programming planned and owned by recipient country partners, to improving its focus on poverty reduction and to reaching the Millennium Development Goals (MDGs). CIDA and a host of other donors are now looking more critically at its aid practices and strengthening its focus on reducing poverty. In recent years a lot of donors are relying on the Poverty Reduction Strategic Papers (PRSPs) as roadmaps for achieving the MDGs. CIDA has joined a number of other major donors in its aid policy to increase its use of programme based approaches (PBAs) as a key instrument in contributing to implementing PRSPs and advancing the MDGs in the poorest countries.

For donors, PBAs aim to address critical weaknesses of traditional donor projects that had been widely criticised as narrow, donor managed initiatives with little sustained impact beyond the project’s “island experience”. For CIDA as Brian Tomlinson and Pam Foster observed in their 2002 paper on At the Table or in the Kitchen? CIDA’s New Aid Strategies, Developing Country Ownership and Donors Conditionality, PBAs were defined as “a way of engaging in development cooperation based on the principle of coordinated support for a locally owned programme of development. The approach includes four key elements: leadership by the host country or organisations, a single programme and budget support framework, donor coordination and harmonisation of procedures over time with regard to programme design and implementation, financial management, monitoring and evaluation”. The Paris meeting seemed to have drawn heavily from this approach. However, conventional wisdom and practice strongly suggest that many donors have continued to wield tremendous power and leverage over domestic economies using the money they provide as a basis to bulldoze aid processes. This situation has invariably reduced country ownership of development programmes. For instance, is Zambia free to spend the money it receives from donors in the areas it deems a priority to national development or it has to take it into areas donors think in their own right are priority issues? So then, how do we resolve these competing and conflicting interests?

There is No Free Lunch!

Donor financing is not free from policy conditionality. It is tied to a number of policy issues that in some cases have outweighed the benefits in aid recipient countries. Zambia is not new to the policy area of conditionality. The IMF and the World Bank have recently been in the limelight in Zambia particularly because of their strong focus on policy conditionality associated with the Highly Indebted Poor Country’s (HIPC) Initiative. Policy conditionality issues are varied as some are social, others are macroeconomic and indeed others are structural in nature. However, for most Zambians they resent structural conditionalities such as user fees in schools and hospitals, privatisation of national assets without evaluating the impact of such a programme on the poor majority. In light of these concerns there is an urgent need for the IMF and the World Bank to institute either ex ante or ex post the Poverty Social Impact Analysis (PSIA) and Environmental Impact Asssessments (EIAs) of their programmes in the implementing countries. These processes, as a matter of necessity must include all stakeholders in order to get a holistic picture of the impact of donor/creditor policies on the people.

Still on the issue of tied aid it must be noted that in some instances tied aid makes a country’s ODA conditional on acquiring specific goods, services and technologies from that country providing the said aid. For example, from 1981 to 1983, 94% of all funds supplied by Switzerland were spent in Switzerland itself and according to Gelinas a scholar in Latin America, 80% of USAID aid funding to poor countries returns directly or indirectly to the United States. Civil society is generally concerned about the fundamental problems with aid delivery—how it is allocated between and among countries. The current aid regime does not go far enough on ensuring greater national ownership over development policies and procedures, building country capacity, enhancing aid predictability and untying aid.  In light of the problems stated above, civil society put forward some demands and concerns to the donors and government officials during the meeting and these were that:

o        There should be a commitment by all donors to increase the current amount of aid that goes to the poor countries and ensure that a significant portion of it is allocated to the improvement of basic social services like education, healthcare, water supplies and sanitation. Aid will make the greatest impact if it is directed and spent on the poorest people!

o        There is need to strengthen country ownership over development policies and procedures and that this is essential to enhancing aid effectiveness. Indeed, national ownership must be a pre- condition for all donor harmonisation and alignment activities

o        Currently the Poverty Reduction Strategy Paper (PRSP), which is one of the principle instruments for facilitating greater ownership, is not delivering results, as the World Bank and the IMF evaluations have demonstrated. Part of the problem is that donors have not sufficiently adapted their programmes to support PRSP priorities

o        In light of this, the CSOs are urging donors to transform their funding systems and modalities to support country PRSP processes and systems, rather than the other way round, which has too often been the case up until now

o        There was also a call for an end to all harmful economic policy conditionality. If the governments and the people are to have control over their future, and if aid is to be an effective tool for poverty eradication, donor imposed economic policy conditionalities such as trade liberalisation, market deregulation, fiscal austerity and privatisation must be abandoned

o        Donors should fully untie aid, including food aid and technical assistance to the developing countries. For instance, most bilateral donors in Zambia and elsewhere have tied their aid programmes to a country having an agreement with the IMF (thus the signalling role of the IMF in aid recipient countries is quite enormous!) World Bank loans are usually tied to issues of governance as well as policy goals linked to poverty reduction and sectoral performance. But even more disturbing is the chilling reality of Switzerland where as earlier noted, 94 percent of all funds supplied by that country were spent in Switzerland itself and regrettably some of the donors continue to tie their aid in similar fashions!

Conclusion

These and many others were some of the critical issues raised by the CSOs at the Paris meeting. There was also a question of holding donors accountable for their actions within the framework of mutual accountability and transparency in poor countries. For instance, if a recipient country fails to stick to donor prescriptions, the implications and penalties for such a country are obvious: there is an aid embargo or freeze. But on the other hand, if a donor does not fulfil his/her obligations and commitments, there are no corresponding sanctions imposed on such a defaulting donor! This is an unfair situation and is at variance with the tenets of good governance on the part of donors.

When everything else has been said and done, what is needed here in Zambia is development aid that can restore a lost future to that street kid in Kitwe, create a job for that jobless father of six in Ndola’s Chipulukusu township, allow that sick mother in Lusaka’s Chainda township access to the clinic/hospital and repair the road network as well as improve other infrastructure in the country. Failure to achieve this, then it is fair to say that Zambia does not after all need aid!

The author can be reached at the JCTR, P.O. Box 37774, Lusaka, Zambia Tel. 260-1-290410, Fax 260-1-290759

Email: debtjctr@zamnet.zm
Web: www.jctr.org.zm

By Jack Jones Zulu (Jubilee-Zambia Policy Analyst)