Make Aid Effective, Put Recipients First

Donor countries need to accept some of the responsibility for making development assistance work over the long term.

Foreign aid is often criticized for its failure to have a significant impact in recipient countries. So how can it be made more effective?

Before attempting to answer that question, we need to ask what we mean by aid effectiveness. Just like environmental sustainability, aid effectiveness is a “Mom and apple pie” concept. These are terms that evoke a positive idea that one can hardly oppose. No sane person actually wants the environment to be irrevocably destroyed, just like no one wants aid to not have a positive impact. But not everyone means the same thing by them. Nor does everyone agree on the means to achieve them.

Aid effectiveness is actually a very malleable term. Economists usually equate growth with development. So to them, effective aid is aid that increases a country’s growth rate. The World Bank used that logic in its highly influential report, Assessing Aid: What Works, What Doesn’t, and Why, published in 1998. It placed the responsibility on developing countries to establish the “right” policy environment and “sound” fiscal, monetary, and trade policies, which would then lead to growth. The kind of aid being providing did not enter into the equation.

In recent years, donors have come to accept that some of the responsibility for effective aid rests with them and does not only depend on government policies in recipient countries. Some donor policies are clearly ineffective, such as tying aid to the provision of goods and services from the donor country, even if they cost more or are of inferior quality. This requires that donor money be spent in the donor country, rather than where it will be of maximum benefit to the recipient country’s development. Most European countries committed to eliminating tied aid in the 2000s. Canada will soon be joining them.

The current consensus on what improves the effectiveness of foreign aid can be found in the Paris Declaration on Aid Effectiveness, signed in 2005 by bilateral donors, multilateral institutions, and recipient countries, and the 2008 Accra Agenda for Action. Together, these documents commit development actors to many principles, including that recipient countries determine their own development strategies, that donors align their aid programs with recipient governments’ priorities, and that donors ensure coordination amongst themselves. They also specify that aid should be untied and donors should provide predictable flows of aid, without which planning is next to impossible.

For the past decade or so, whenever the Canadian government introduced new aid policies and priorities, it usually justified them by saying that they would increase effectiveness. If we truly want aid to have a positive impact on the ground, it is important to ask to what extent the changes actually do this.

The elimination of tied aid is unambiguously a very positive step. It allows recipients to get the best value for money. However, historically Canada has had one of the worst records on this. It won’t completely untie for another few years and by then it will be one of the last countries to do so.

For the past decade, the Canadian government has touted greater focus as an important measure to improve aid effectiveness, spending most resources in a limited number of countries and sectors. Under Jean Chrétien, Canada identified nine priority countries. Under Paul Martin, the government chose 25. Under Stephen Harper, 20 were selected, delisting many African countries that had been added only four years earlier.

There is no clear evidence, however, that geographic concentration of aid actually increases effectiveness. It is nonetheless clear that switching priority countries and continents every few years increases aid volatility and decreases predictability, rendering aid less effective. It also hurts Canada’s reputation abroad. Similarly, limiting aid to small number of sectors contradicts the principles of aid effectiveness, as it does not allow for recipient countries to select their own development priorities.

Another Canadian policy innovation designed to increase effectiveness is the “whole-of-government approach,” which means that the various components of Canadian foreign policy (aid, trade, diplomacy, security) – and the relevant government departments – join forces to achieve Canadian priorities abroad. Though this sounds appealing, it can and has had negative effects on Canadian aid. Rather than bend other policies to promote development, foreign aid is increasingly used to pursue goals other than development. The starkest example of this is the hundreds of millions of dollars CIDA is spending in Afghanistan every year. Much of this is put to use in Kandahar province, but it is very hard to achieve long-term development results in the middle of a conflict.

Finally, recent critiques of CIDA and aid announcements have often mentioned the need for visible, short-term results that can be attributed to Canadian assistance. This is appealing to politicians who want to boast about the results of government policies, but this approach rarely translates into effective aid. Sustainable development depends on long-term collaborative relationships and efforts, not quick-and-easy photo opportunities with the maple leaf in the background.

In sum, too many Canadian initiatives that are supposed to improve aid effectiveness are little more than public relations efforts to brand the ruling party’s aid program or use aid money for non-aid purposes. Many of these new policies actually make aid less effective, even as they invoke greater effectiveness. It would be far more productive to cease hijacking aid in political and bureaucratic games and to adopt instead an authentic and sustained effort to put poverty reduction first.

A slightly different form of this commentary was published on the website of the Canadian International Council, on April 22, 2010.