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Q&A: Unravelling the Knots of Tied Aid

Interview with OECD Secretary-General Angel Gurria

BERLIN, Sep 15 2008 (IPS) - The forum on aid effectiveness in Accra has delivered “profound” decisions to change the way aid is structured, OECD Secretary-General Angel Gurria told IPS in an interview.

Angel Gurria Credit: OECD

Angel Gurria Credit: OECD

Decisions were taken to channel aid in a way that does not undermine local systems, and towards greater untying of aid from policies and companies in donor countries, Gurria said in an interview to IPS Europe regional director Ramesh Jaura, in the first interview to IPS by a head of the influential OECD. Excerpts:

IPS: Are you happy with the outcome of the Third High Level Forum on Aid Effectiveness that concluded Sep. 4 in Accra?

Angel Gurria: The Accra Agenda for Action (AAA), the main outcome of the Third High Level Forum, will help global efforts to deliver aid more effectively The AAA signals profound behaviour change for both donors and developing countries. It will drive the new aid business model envisioned in the Paris Declaration on Aid Effectiveness, agreed in March 2005.

We are encouraged by the fact that the AAA is the product of wide and inclusive consultation among developing countries, multilaterals, OECD donor countries (the Organisation for Economic Cooperation and Development is a grouping of 30 wealthy nations), hundreds of civil society organisations from around the world, non-traditional donors, global funds and middle-income countries. Developing countries voiced their priorities from the beginning of the process and the significant actions embodied in the AAA reflect their major concerns.

IPS: What would you describe as the salient aspects of the Accra Agenda for Action? Does it deliver on concrete commitments to make aid work for the poor?

AG: The Accra Agenda for Action will speed up the follow-through on commitments made in the Paris Declaration. For instance, a key problem of the aid industry is that donors too often deliver aid through their own systems and channels, undermining the local capacities for public management and accountability. Now, under the AAA, if they are not using countries’ own systems they will have to explain why, and work with the country to develop plans for doing so.

The AAA calls for transparency, a pre-condition for good public management – good governance – in all countries.

It pledges to reduce the prescriptive conditions donors attach to aid – about how and when money is spent – and instead focus on conditions based on the developing country’s own objectives, as set out in their national development plans.

It commits donors to make more progress in ensuring that aid is not tied to purchases in the donor country.

It strengthens developing country ownership and accountability by committing them to engage their parliaments and citizens and to respect their international commitments on gender equality, human rights, disability and environmental sustainability.

It ensures that donors will work effectively in each developing country – not overcrowding some sectors while ignoring others.

It increases the predictability of aid, calling on donors to commit medium-term funding so that developing countries can effectively design their budgets and manage related development programmes. This is especially important in sectors such as health, which depend on reliable long-term funding to deliver drugs and to staff clinics.

IPS: European NGOs are deeply disappointed that there has been failure to progress on issues such as tied aid and conditionality. Do you share their disappointment?

AG: No. There has been considerable progress on these fronts, and the AAA calls for more. In 2001, DAC (Development Assistance Committee of the OECD) donors untied the majority of their aid to the least developed countries. Now, in response to the AAA, they have agreed to untie their aid to the heavily indebted poor countries. This means that aid to the 60 poorest countries is now mostly untied.

Eight DAC members have fully untied their bilateral aid – Australia, Belgium, Luxembourg, Norway, the Netherlands, Ireland, Sweden, and the United Kingdom. Four others have untied most of their aid – Denmark, France, Germany and Switzerland. The U.S. Millennium Challenge Corporation provides its aid untied, while the European Community opens its aid procurement to other donors on a reciprocal basis.

As a result, the share of aid recorded as untied has increased – from 43 percent in 2002 to 53 percent in 2006. The proportion reported as tied has fallen from 7 percent to 3 percent.

On another front, OECD data show that 60 percent of contracts go to companies not in the donor territory, with more than 40 percent of these going to companies from developing countries.

The AAA calls on those donors who do not yet follow the general DAC trend towards increased untying (Austria, Canada, Greece, Italy, Japan, Portugal, Spain and the U.S.) to set out plans to increase the share of their aid that is untied. I am confident that this will prompt further progress towards this important objective.

IPS: The executive director of the South Centre, Yash Tandon, has described the Paris Declaration on Aid Effectiveness agreed in 2005 as the rich nations’ “collective colonialism.” The main plank of his argument is that the donors do not favour any inherent change in the governance structure of the international aid system which continues to be donor-driven and reflects donors’ economic and policy agendas. Would you like to comment on that?

AG: The international community is finally aware of the need for developing countries to lead the implementation of the Paris Declaration. This is why, as I mentioned earlier, the negotiation process that led to the AAA was guided by developing countries, in partnership with donors and CSOs.

The AAA places emphasis on strengthening country ownership of development. This includes broadening the definition of ownership to include parliaments, local authorities, and civil society. The AAA calls for increased leadership from partner countries in making assistance demand rather than supply driven: it calls on developing countries to identify where capacity needs to be developed. It establishes that technical cooperation should be provided by local and regional resources, including through South-South cooperation.

The AAA’s call for donors to use national country systems as the first option for aid programmes will ensure that national priorities are not bypassed. At the same time, donors are committing to delivering results rather than pushing for visibility and attribution. This means changing organisational and staff incentives to promote behaviour that is in line with aid effectiveness principles.

IPS: Does the Agenda go far enough to pave the way for the success of the UN MDG Summit later this month and the Financing for Development conference end of the year in Doha, which will decide the volumes of finance to be made available for reducing poverty and tackling inequality?

AG: Donor buy-in of the Accra Agenda for Action shows that there is political will to do aid better. Following the July impasse in the Doha trade talks in Geneva, ministers came to Ghana knowing that they must not fail the world’s poorest yet again. Despite success in Accra, there are serious challenges ahead – great concerns remain about food and oil prices, and about climate change. We must capture the progress made in the Doha trade talks; we must close the small gaps that separate the parties and conclude this vital development round. This is about inclusive globalisation. It’s about creating jobs, increasing incomes, and ensuring energy efficiency and global food security.

As you know, many donors have made commitments to significantly increase their aid in the years immediately ahead. Now more than ever, we call upon them to make the budgetary provisions needed to provide predictable assistance in line with their promises. OECD will be tracking that aid and calling donors to account if the numbers don’t add up.

IPS: The last para of the Accra Agenda for Action says: “Today, more than ever, we resolve to work together to help countries across the world build the successful future all of us want to see – a future based on a shared commitment to overcome poverty, a future in which no countries will depend on aid.” Do you see any realistic possibility of that happening one day?

AG: In Accra we found common ground and sent a resounding message to the world: governments are serious about making development assistance work. What we achieved in Accra will contribute to giving the 1.4 billion people who still live in extreme poverty an opportunity to improve their lives. We are confident that it offers a breakthrough in the way assistance is delivered and in enabling countries to work their way out of aid.

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