2. Identifying the Key Issues and Actors at

  • Country Level
  • 2.1 Aid Coordination and Management Issues

    2.1.1 Internal and External Issues

    Traditionally, a distinction has been made between internal and external issues of aid coordination and management. This may not be appropriate in view of the above definition of aid coordination and management as a question of the integration of internal and external resources. Furthermore, both aid coordination and aid management are the prerogative of national institutions, in particular government.

    A good example of the traditional approach was found in the 1991 evaluation report on Capacity Building for Aid Coordination in the Least Developed Countries, which summarizes six internal coordination issues and five coordination issues among the donors (op.cit., pp 6-9). The six coordination issues internal to the LDCs go beyond aid coordination issues. They deal, correctly, with issues of overall public sector management:

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  • There are differences within LDC governments over the objectives and uses of aid and inadequate frameworks for defining development policies, strategies, and programmes to guide coordination activity.
  • * There is a lack of systematic approaches for sector programme planning. The governments' programme and budgetary systems for the integration of domestic and external resources are ineffective.

    * There is an absence of aid receiving strategies and procedures: focal points for aid coordination within governments are often not well defined or followed.

    * Management skills for programme design and implementation are weak.

    * LDCs are not making adequate provision of resources to secure and retain government staff for aid coordination and development management tasks and provide them with productive work environments.

    * Many LDC governments do not encourage or facilitate open dialogues on development issues nor promote public accountability.

    The report then creates a separate room for coordination issues among the donors, which deal with the performance of individual donors and the quality of aid:

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  • The donors are motivated by multiple interests in providing aid, - some of which (e.g. the political and commercial) are not concerned with development objectives. Donors like to preserve their identity with, and control over, development activities.
  • * There are differences among the donors' priorities for development and noticeable variance in donor familiarity with development issues.

    * There are serious differences in the donors' practices.

    * There are pressures to commit funds and to show quick results within tight time schedules.

    * There is a lack of guidance and incentives within donor bureaucracies for staff energies and time invested in coordination activity.

    2.1.2 Issues Related to External Support for National Development

    It is more appropriate to distinguish among aid coordination and management issues that are related to different functions of national development. UNDP's 1991 "Concept Paper on a Coordinated UNDP Strategy for Capacity Building, Aid Coordination and Programme Approach" (op.cit., pp 4-9) suggested that a country needs the following capacities to advance its social and economic development:

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  • Capacities to define and manage the 'long-term vision'
  • * Capacities to define development policies / substantive orientations

    * Capacities to manage policies and development resources

    * Capacities to implement development policies

    On the basis of the Study Team's case-studies in Sri Lanka and Zimbabwe, it is proposed to distinguish between four levels of aid coordination and management:

  • 1)
  • Visions and priorities on national societal development: This level covers the structure of society and long-term development dialogues concerning, for example, poverty alleviation, sustainable human development, national governance and popular participation. The aid coordination issues concern the profile of aid commitments and the contents of related development dialogues.
  • 2) Macro-economic policies: These comprise basic economic and financial policies, including monetary and fiscal stabilities. The aid coordination issues are particularly related to the overall size of aid commitments in the form of grants, credits and loans, as well as the achievement of agreed aid targets.

    3) Programme formulation: At this level, aid coordination and management deal with the formulation of the donors' country, sector or area programmes, and individual projects. The underlying aid coordination issue concerns the substantive integration of aid into national priorities and programmes.

    4) Programme delivery and implementation: Aid coordination and management aims at harmonization of aid and budget cycles, minimization of the administrative burden on donors and recipients, and institutional and financial sustainability. It concerns procedural integration of aid into national institutions.

    The concrete aid coordination and management tasks differ between these four levels that are platforms for donor / recipient interaction in the management of external support to national and local development. The appropriate mechanisms for this interaction and the actors involved on both sides will differ between the four levels.

    2.2 Present Aid Coordination and Management Mechanisms

    Table 2.1 presents the key institutional mechanisms that are available for country-specific aid coordination and management in relation to the four levels outlined above. The Table excludes the - relatively limited - attempts in international fora, such as OECD's Development Assistance Committee and various UN committees, to harmonize the procedures of donors before these enter into country-specific development cooperation with developing countries.

    Table 2.1: Existing Aid Coordination and Management Mechanisms at Country Level

    Four aid coordination and management issues

    Existing aid coordination mechanisms

    Existing aid management mechanisms

    1. Visions and priorities on national societal development

    Few mechanisms. Some UN coordination. Mainly internal government discussions

    Some project-specific, bilateral dialogues, and some capacity building assistance

    2. Macro-economic and financial policies

    The Consultative Group process and the meetings in Paris

    Mainly programme- and project-specific dialogues

    3. Formulation of national and local development programmes

    Mainly bilateral negotiations. Some information exchange and thematic donor groups

    Bilateral negotiations between government and individual donors. Some project co-financing

    4. Programme delivery and implementation

    Some ad hoc, joint programme and project reviews

    Bilateral negotiations, and co-financed projects and programmes

    2.2.1 National Visions and Priorities

    There are today few permanent mechanisms available for a dialogue on visions and priorities on national development. The governments of most developing countries lack such mechanisms both vis-<-vis their own civil societies and in relation to external support agencies and donor governments. Too often, the establishment of national priorities takes place implicitly in ad hoc government decisions, through clandestine political processes, and in the uncontrolled operation of market forces.

    Within the UN, there have been numerous attempts to force all UN bodies to relate to the declarations and programmes of action of global UN conferences as well as the resolutions of the UN General Assembly and its subsidiary bodies. In general, however, these have been formulated too broadly to ensure coordinated approaches.

    Thus, it is mainly through very general policy dialogues between donor and recipient and through (some) project assistance aimed at a dialogue with national and local partners, that external support agencies explicitly address national visions and priorities. As a rule, however, these efforts are bilateral: The government is forced to engage in such dialogues with each of 15-30 external support agencies, which is likely to increase rather than reduce the problems of national governance.

    Through the country-specific National Technical Cooperation Assessment and Programming (NaTCAP) exercise, UNDP has attempted to build capacity in government to make optimum use of all technical cooperation. The exercise has, however, often been more input- than programming-oriented.

    2.2.2 Macro-economic and Financial Policies

    The weakness of existing mechanisms at the 1st level is compounded by the relative strength of the mechanisms at the 2nd level, especially the World Bank-led consultative group-mechanism. This led in the 1980s to peculiar discrepancies between:

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  • Strong and coordinated 'intervention' by the international community in the national sovereignty of debt-ridden developing countries in the economic field through stabilization packages and structural adjustment programmes; and
  • * Acceptance by the international community that the governments of developing countries in the political field pursue their own policies of governance, which may or may not have been in accordance with their international commitments on individual and collective human rights, participation, etc.

    The emphasis on sustainable human development and good governance in the first half of the 1990s reflects a necessary attempt to close this discrepancy. There is hope that the rigid economic standard prescriptions are being softened through the increased attention to sustainability and human development, and that the 'laissez-faire'-attitude in the political field is being replaced by adherence to international norms on issues of governance.

    The problem remains, however, that there are no permanent aid coordination institutions to carry such an integrated dialogue on economic and political issues. The Consultative Group process could become such a platform, but there is in the Bretton Woods institutions and in large Western countries a concern that a broadening of the agenda might jeopardize the commitment which is the aim of the Consultative Group process: commitment by the government to implement agreed economic and financial policies; and commitment by the donors to meet the external financing targets.

    A comparison of the Consultative Group and the Round Table processes in terms of the issues that can be covered would indicate that the Round Table process can address a broader agenda than the Consultative Groups, although the World Bank is moving more forcefully into issues of poverty alleviation and environmental protection. One of the problems of the Round Table process has been the lack of policy, programme and financial commitments by the participants attending the Geneva meetings. This may be due to the large attendance (comprising also small donors and UN agencies), the diplomatic approach, and the impossibility to address all such issues in one meeting in a qualified way.

    Analyzing the prospects of the Round Table process lies outside the scope of the present Study, partly because the countries visited (Sri Lanka and Zimbabwe) are Consultative Group countries. One reason why two different processes are still being used may be that the World Bank would not be able to cope with the small, low-income countries that are covered by the Round Table process. This 'geographical' division of responsibility between the two systems is hardly sustainable, however.

    A merger of the two processes may be needed, with the following characteristics:

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  • More emphasis on country level aid coordination, to precede and follow-up on the international meeting in Paris or elsewhere;
  • * Leadership and ownership of the process by the recipient government;

    * Inclusion of policy dialogues concerning long-term economic and social development issues;

    * A starting-point in national visions, priorities, plans and programmes as the framework for aid coordination;

    * A commitment by all donor agencies (bilateral as well as multilateral) to contribute and adhere to the results of the aid coordination process; and

    * Involvement of both the World Bank and UNDP in support of the government's preparation and management of the process.

    2.2.3 Formulation of Development Programmes

    Table 2.1 shows that a diversity of aid coordination and management mechanisms is applied at the programme and project level. Their common characteristic is that they cover only a selection of aid agencies, rather than the donor community as such. This is a reflection of the weakness in many governments of LDCs to formulate strong and comprehensive national development programmes.

    The country programmes of aid agencies are usually formulated independently and separately. They include bilateral negotiations between donor and recipient. The present aid coordination mechanisms are usually of two types: Firstly, the 'External Resources Division' or 'Foreign Aid Section' of the Ministry of Finance seeks to minimize duplication and overlapping donor programmes. In this context it is a problem that such Divisions / Sections tend to be organized in donor-specific desk offices, which institutionalizes a vertical approach from the individual donor to 'its' programmes and projects. Secondly, selected groups of donors hold informal consultations, regular meetings, thematic groups, luncheons etc. at country level, to inform each other of changes in country programmes and strategies, upcoming programming missions, etc. Such groups may be the UN agencies, the EU member states, the like-minded countries, the Nordic countries, and the 'large' donors (both bilateral and multilateral).

    The availability of aid coordination mechanisms for donor-supported sector or area programmes depends primarily on the presence of lead donors: the World Bank (and occasionally the regional development banks) in the case of sector adjustment programmes or large, multi-donor co-financed programmes; and other large donors in given sectors or areas, with or without co-financing. It is often argued that this 3rd level is decisive for the success of aid coordination and management.

    2.2.4 Programme Delivery and Implementation

    The lack of effective aid coordination and management has probably its greatest negative effect on the capacity of government and other institutions of developing countries at the level of programme delivery and implementation. Very little has been done to reduce the establishment of donor-specific procedures during all stages of the project cycle.

    The main exceptions to this are the cases of co-financed projects, especially joint (as opposed to parallel) co-financing, which sees one lead donor negotiating with the implementing agencies on behalf of all donors. Here, the burden of coordination is, at least in principle, transferred from the weak implementing institutions to the strongest donor. This arrangement should, as a minimum, imply that project review and evaluation missions are conducted at the same time with all donors attending, instead of as a series of donor-specific missions taking all of the working time of the best and most influential officials in the institutions of developing countries.

    Despite these significant advantages, joint co-financing is not a panacea solution to the problems of aid coordination and aid management. Its actual or potential weaknesses include: A risk of ganging-up by donors; too much attention being paid to donor coordination; too little attention to development impact and capacity building in implementing institutions; and relatively little integration into national priorities and procedures.

    The alternative approach is to reduce the need for aid coordination by clarifying the division of labour among donors and by strengthening aid management by the implementing national institutions. This requires aid coordination mechanisms at the 3rd level (programme formulation) and capacity building in both planning and implementing institutions.

    2.3 The Key National and International Actors at Country Level

    Based on the identification of the key issues and existing mechanisms of aid coordination and management, the next step is to identify the key parties or actors involved in the processes at country level. Table 2.3 summarizes the participation at the four levels of aid coordination and management on both sides: government institutions, and bilateral and multilateral donor agencies.

    Table 2.3: Government and Donor Actors in Aid Coordination

    Four issues and levels

    Key government actors

    Key actors among donors

    1. Visions and priorities on national development

    Min. of Planning; Cabinet; President's Office

    No lead actor; partly UNDP, UNICEF, etc.

    2. Macro-economic and financial policies

    Ministry of Finance; the Reserve Bank

    World Bank; IMF; bilateral donor headquarters

    3. Formulation of development programmes

    Min. of Finance and Planning; line ministries

    Individual donors on a bilateral basis

    4. Programme delivery and implementation

    Ministry of Finance and implementing institutions

    Individual donors on a bilateral basis

    The table excludes national and foreign non-government organizations. International NGOs channel increasing shares of development and emergency aid. Governments of developing countries are, understandably, concerned about the desire in recent years by both bilateral and multilateral donors to provide funds to NGOs, thus circumventing the central role of government in aid coordination and management. However, it lies outside the scope of the present Study to assess in detail the role of NGOs as independent actors in aid relations.

    Even without NGOs, Table 2.3 provides a bleak picture: There is no clear division of responsibility among actors on either the government or the donor side.

    On the recipient government side, the Table indicates a logical division of responsibility between Planning Commissions (Ministries of Planning) at the 1st level and Ministries of Finance at the 2nd level. However, this has often led to power clashes between the two and to different aid coordination objectives with respect to long-term national development and short-term economic adjustment, respectively.

    At the crucial 3rd level of programme formulation, the reality in most developing countries is that there are multiple government institutions involved:

  • *
  • The Ministry of Finance agrees with individual donors on their country programme and portfolio;
  • * The Ministry of Planning is involved in priority-setting among programmes and possibly in the review with donors of their portfolio and individual programmes; and

    * A host of implementing institutions are involved in discussions with individual donors during all the formulating stages of the programme and project cycle.

    Building capacity in governments to minimize this confusion would be a major contribution to improved aid coordination and management.

    At the 4th level of programme implementation, the implementing institutions are essential for aid coordination and management. The involvement of implementing institutions depends on the institutional complexity of programme design and project organization. Multi-sectoral, integrated programmes, supported by one or more donors, are more difficult to manage than well-focused programmes.

    On the donor side, the diversity among agencies is equally profound. The only exception is the Consultative Group process at the 2nd level concerned with macro-economic and financial policies, where the World Bank has a clear lead role. The same applies to some degree to UNDP's role in the Round Table process, although it seems that UNDP has played a facilitating rather than a leading role.

    Through their advocacy functions, some UN agencies perform substantive lead and coordination roles at the 1st and 3rd levels. In the past, UNICEF has been most successful in this field, through its advocacy of child survival and development. WHO and other UN specialized agencies have played similar normative roles in their respective fields, e.g. in the call for Health for All in the year 2000. In recent years, UNDP has moved forcefully in this direction through its annual Human Development Reports and its advocacy of sustainable human development.

    At the 3rd and 4th levels of aid coordination and aid management, it is only possible to identify key actors among donors in cases of sector programmes and co-financed projects that have a large bilateral or multilateral donor as lead donor. Otherwise, diffusion, multi-donor presence and even donor competition are the characteristics of today's aid coordination and management regime.