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Delivering Aid Differently – The New Reality of Aid

Wolfgang Fengler's picture

This month Homi Kharas and I published a book titled “Delivering Aid Differently – Lessons from the Field”. We launched the book yesterday at the University of Nairobi.  Here is a summary of the main messages:

We live in a new reality of aid. Rich countries delivered US$ 3.2 trillion of aid to poor countries between 1960 and 2008, and it is a US$ 200 billion dollar industry today. Despite disputes and convulsions, the core of the aid industry has changed little over the past few decades. Now the new pressures on the aid systems may be too strong to resist fundamental change.

 

The new reality of aid is apparent in developing and donor countries alike. Gone is the “Third World” as a homogenous block of poor countries in the south, as Robert Zoellick has put in his speech at the Woodrow Wilson Center for International Scholars this April.  Many of the previously poor countries, especially in Asia, have been growing richer. Some of them have become major donors themselves, most prominently China. Strong growth in many developing countries – including in Africa since 2000 – meant that aid has declined in relative importance in most countries. This paradox of increasing flows and more players, and at the same time reduced financial significance will shape the new aid architecture.

The donor landscape has changed fundamentally over the last decade, a trend that will likely to accelerate in the coming years. New players are responsible for an ever larger share of the aid volumes, especially when one considers actual cash flows to the governments and poor people in developing countries. The new donors are not just countries with growing foreign policy roles on the international scene, but increasingly international NGOs, foundations and private corporations. Private philanthropy from developed to developing countries may represent as much as US$ 60 billion annually. The following figures illustrate the shift from the relatively static “old reality of aid” to the more complex “new reality of aid”.

Old Reality of Aid


 

The New Reality of Aid

 

 

 

 

 

 

 

 

 

 

 

 

 

Many of the new players operate differently and in parallel to the established aid system. They have brought fresh energy, resources and approaches to the delivery of aid but coordinating their activities can be a logistical nightmare. As a result, it has become harder for recipient governments to figure out what the different development partners are doing, whether they are actually responding to the greatest needs and gaps. Lack of effective monitoring may also mean that successes can go unnoticed and that small projects that work are not replicated or scaled up. Fragmented, uncoordinated, and unreliable aid leads to waste and inefficiencies.

The dynamic in the relationship between donors and recipients has changed. The diversification of donors offers recipient countries more choice and more leverage. Many traditional donors struggle to fulfill differing demands with systems that were built for a different context. While the volumes of aid are growing, the average project size is shrinking, even for ODA-projects (see figure).


Projects have quadrupled – but their average size has declined

 

 

 

 

 

 

 

 

 

 

 

 

 

Small projects are not bad, per se. They are a source of experimentation and innovation. They can be exactly what are needed in isolated communities, where small amounts of money can make a significant difference in lives. But fragmentation of ODA runs the risk of heavy administrative costs. Each project must be prepared, negotiated between governments, supervised, and reported on. In 2007, for example, official donors sent out probably more than 30,000 missions to manage their aid projects.

In a next blog post I will write about the implications for  Delivering Aid Differently. I look forward to feedback and other ideas on how to Deliver Aid Differently and successfully.
 

Comments

In his blog - and apparently in his book - Wolfgang Fengler argues that the dissection of aid will exacerbate the monitoring and the management of development aid and progress. I believe that we always need evidence for our statements, otherwise they might be misleading. Me personally, I don't believe that the number players in the development aid industry has increased during the last decade. NGOs like the Bill and Melinda Gates Foundation, the Novartis Foundation - not to mention the Rockefeller Foundation - have been in the filed for mor than ten years. I would like to see evidence for the number of actors in the field during the last 20-30 years. On the other hand, Wolfgang is stating that US$ 3.2 trillion in aid haven't led to big changes in developing countries. Is this ODA or does this count include NGOs, venture philanthropy and individual contributions? However, if "big" money has not spured any progress, what should be bad about "small" money? Could it be that the proportion of small projects is steadily increasing just BECAUSE ODA doesn't work the way it should? I think we should be careful with big statementss. Big statements might prove to be wrong if the data show something else, and wrong statements will lead to wrong recommendations, strategies, and actions. Maybe the time has come to look at the key success factors of small projects and take the learnings to the regional, national or continental level. Our entire society in the West is build on a bottom-up approach, but in the South we claim to implement a top-down model. The Chinese are better at doing that.

What is making aid a mess is not the fragmentation of actors - in the private sector we would call this competition - but the joint approach, mainly the joint strategies. Indeed, as all donors expand the areas they are interested in, while there is often no real accountability for results, creating projects in overlapping areas is a normal result. In the private sector, donors and actors are forced to specialise in order to gain the expertise to survive competition. In de current aid world, all donors are supposed to sign up to every area of importance: this percentage to social services, another one to agriculture and to health. A donor not giving to the next fund gets a WB visit at the appropriate level of seniority. When you compare this to long term campaigns like the polio vaccination effort, you see donors and intermediaries working together, measuring results for decades. Only a few global actors are involved, with a myriad of local partners.

Submitted by Jean-Claude M on
Thank you for highlighting the new realities of aid. This will help donors, recipients and observers (researchers, public opinion in donor countries, etc) understand better the many and complex issues related to this controversial topic and controversial policies on it. But, your summary of the key new actors in aid seems to miss some of the main new ones: the diaspora, NGOs and rich people from developing countries. In fact, these three "new" actors may be even more important than all other actors combined when it comes to some countries like Ethiopia. According to a book by your colleague in The World Bank, the Ethiopian diaspora may have recently contributed to their homeland more foreign currency than ODA, FDI and exports combined. This is increasingly the case for many other developing countries. Rich people in towns, local NGOs, churches and other locally funded projects have been making a big difference in rural areas of many developing countries. For example, the community University of Mwaro in Burundi was builit and is operating since 8 years through a combination of funding by the diaspora originating from the young province, contributions from the administrative entities around it as well as tuition from students. No foreign aid has so far been received by this young but growing rural university. Other examples include primary schools, hospitals, small mills for cereals, irrigation systems, water and energy provision, small roads, etc. All these small projects are changing the face of rural areas in many developing countries. They should be recognized for the real contributions they are making to well being of their own people and for the commitment and sustainability they bring to their development projects. Othe new realities of aid include: - Changes in the overall technological environment: more, efficient and ubiquitous communications through internet thanks to more fibre optics, mobile phones and cheap and used computers; more images of what is being done through photos and videos; new and cleaner or adapted technologies for transport, energy, food production, water management, more hygiene and better health, etc. - More knowledgeable people from all corners of the developing world. There are more and better human resources that can design, implement, assess, advocate for all aspects of development in their countries, provinces and other areas of origin. - Some progress in policy design and implementation (diversification) through stronger and more independent institutions. For example, more ministers of mining have understood that they need to transform as much as possible their minerals (oil and diamonds are good examples in the case of Niger, Tchad, Botswana and Namibia). They increasingly manage to resist to corruption and other long lasting manipulations by neocolonial powers. This creates more wealth in the country through more jobs, incomes and their multiplier effects, technologixal upgrades, etc. - More and efficient integration through new regional institutions like the East African Community, COMESA, SADEC, ECOWAS, etc. Freer movement of goods, services and people in those areas will create more wealth and less need for technical cooperation (costly expatriates) from rich countries. This is already a successful case in Rwanda where knowlegeable Kenyans work by tens of thousands, helping the country do wonders in such a short period of time.

I would wholeheartedly welcome this shift in the cognitive frameworks with which we talk about international development. Now is the time to be corrective, restorative, and imaginative, with imperative and profound effect. In working with large corporate aid agencies over the years, I continually experienced the limitations of large-scale, donor-controlled, project-based funding, recognizing the profound need for community-driven development initiatives that were genuinely responsive to local needs. I’ve also had the unique privilege to experience the impact and potential of alternative mechanisms that directly support community leaders and that, for me, highlight the way forward for our sector. The web of local organizations and grassroots initiatives are still largely undocumented and unrecognized around the world, offers an opportunity for sustainable and large-scale responses to relief and development that even the most comprehensive and impactful macro-level, white-in-shining-armour efforts may never be able to accomplish. WiserEarth.org has already registered over 110,000 local organizations and movements working on a wide variety of issues in 243 countries. They estimate that they may well be over 1,000,000 such local groups operating across the globe. Yet the sad reality continues; community-based organizations are not the drivers of development, nor the setters of priorities, nor the controllers of resources. While local non-profits may lack the accountability mechanisms and sophisticated procedures that would make them more recognizable or esteemed in the development sector, they have important competencies and strengths that distinguish them from other civil society actors, such as their resourcefulness, flexibility and community responsiveness--a new reality it's time to embrace.

Submitted by NORA JOSEPH OKOTH on

The foreign aid in Africa will play a great role when Donors will start making foll up on the provided aid by making sure that those actors are providing report on the use of such aid in project implementation.Also donors has to near to the intended government to their real problem to be addressed and not to listen on actors views only and lastly donors are supposed to make visit on the finished projects.

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