Aid effectiveness debates

advertisement

The Political Economy of Aid and Governance

Agenda in Africa

Maputo Residential School on Governance and Development

CARLOS OYA

Development Studies, SOAS, University of London

Email: co2@soas.ac.uk

Maputo, 6 April 2011

1

Outline

• The ‘aid effectiveness’ debate

• The contradictions in the nexus aidgovernance

• Aid and state capacity de-building

• Conditionality, policy space and ideology

2

Some key issues in the aid-governance nexus

1.

2.

3.

4.

5.

Aid and state formation

Aid as factor affecting the nature of state institutions and practices (rentier, neopatrimonial, developmental, etc.)

Accountability

and

legitimacy

: society vs donors

Conditionnality and

policy space

Aid and state capacity ‘de-building’

3

ODA: an expanding global complex

• Despite shifting trends (eg. aid fatigue in 1990s), generally significant and systematic increase in number of official donors (around 200 now), NGOs

(37,000?) and recipient countries (180 for 100 major official donors)

• Recently, over 35,000 annual official aid transactions

(200 per country)

4

35,000

30,000

25,000

20,000

15,000

10,000

5,000

ODA trends to Least Developed Countries - constant 2006$ and % million

Aid fatigue

Early stages Cold War, SAPs expansion of aid industry

Debt relief,

PRSPs, War on

Terror

40%

35%

30%

25%

20%

5%

0%

15%

10%

-

Source: DAC

LDCs, Total (Least Developed) LDCs, % of developing countries 5 per. Mov. Avg. (LDCs, Total (Least Developed))

5

6

7

Aid effectiveness debates: aid works, it doesn’t, it depends…

– Different methodologies

(McGillivray et al. 2006)

– Different time periods / samples

– Different policy indicators

– Different outcomes

– Different explanations:

• Destination bias, geopolitics of aid

• Perverse macroeconomic effects

• Policy environment / ‘bad governance’

• Institutional outcomes / state capacity de-building

8

Aid effectiveness: perverse macroeconomic issues

• Perverse macroeconomic effects:

• ‘Dutch Disease’

• Crowding out domestic savings

• Debt – aid spiral

• Aid volatility

– Greater than export revenues

– Perverse pro-cyclical pattern

– Negative effects on investment and long term planning

– Unstable donor-recipient relations

9

Aid volatility in Africa

10

Capacity building?

‘Inadequate state capacity in Sub-Saharan Africa has been a self-fulfilling prophecy; the outcome of a bet rigged by those in a strong position to influence results.

The Washington institutions have consistently demanded initiatives that impair governments’ capacity for policy formulation and implementation’

(Sender 2002)

11

State capacity ‘de-building’: perverse mechanisms

• Distortions in government pay structures (per diems, top-ups, etc.) 

uneven burden and benefits for civil servants

• Distortions in budgeting system (off-budgets, investment/ recurrent balance)

loss of control over budget process

• Fragmented and complex aid delivery system  management

 inefficient time

Distraction from government programmes and necessary routines

loss of capacities to think and articulate long-term strategies

• ‘Brain drain’ towards donor agencies and project/implementation units especially in countries with scarce skilled labour

 growing human resource mobility

loss of institutional memory and technical capacities

• Reduction in domestic revenue raising capacity through multiplication of efforts to manage aid and debt

deepening aid dependence

12

Summary of the growing complexity and irrationality of aid delivery systems

General budget support -

Donor BS review groups

Programme aid –

SWAPs and their management units

‘Old mechanisms’ - Projects

Loss of policy space driven by aid flows

(thanks to policy ‘advice’)

Areas of loss:

• Macro and sector policies

• …and now more on institutional development (Anglo-American governance model)

• List of conditions

: IMF avg 6 in

1970s, 10 in 1980s and 26 in 1990s

Channels of shrinkage

1.

2.

Imposed conditions through

‘forced consensus’

 selfcensorship

Strong influence of ‘blocs’ of few donors (dominated by

WB/IMF, USA, UK and EC)

3.

Gradual ideological conversion (indoctrination) of technocrats (especially in

Ministries of Finance and

Planning)

14

Uganda

Mozamb.

Tanzania

Ethiopia

Senegal

Niger

Botswana

Table

Sources of aid for selected African countries (2004-6)

Top five donors Joint

%

% top

2

69 44

WB (26%), USA (19%),

EC (9%), UK (9%),

Netherlands (6%)

WB (16%), EC (12%), USA (10%),

AfDF (8%),

Sweden (6%)

51 28

65 42

WB (30%), UK (13%), EC (10%),

Netherlands (7%),

USA (6%)

WB (27%), USA (24%), UK (7%),

EC (6%), AfDF

(4%)

WB (25%), France (22%), EC (8%),

AfDF (8%),

Japan (8%)

EC (23%), WB (19%),

France (12%), AfDF (8%), USA

(6%)

USA (63%),

Germany (10%), UNHCR (6%), EC (5%),

France (5%)

68

71

68

89

51

47

42

73

15

Source: own elaboration from DAC data

The persistence and deepening of

‘structural conditionality’

(IMF)

Source: IMF website, country Senegal, letter of intent

And list continues

16

New aid agenda closely linked to ‘good governance’ agenda: the post-Washington consensus

• In light of SAP’s failure, focus on institutions

 institutions right’

‘getting

• Aid effectiveness debate in 1990s  role of institutions and public sector reform

• Why ‘good governance’?

– Fiduciary aspect (need for accountability and transparency)

– Alleged positive correlation between ‘good governance’ and development

17

14%

12%

10%

8%

6%

4%

2%

0%

Sector bias of aid: implications of focus on macro, social policies and governance

Aid to agriculture as a proportion of total gross disbursements (Sub-Saharan Africa)

Sector composition of OECD/DAC aid

Distribution of aid by use - 2008

TOTAL

DAC EC

World

Bank France Japan

Social and administrative iiiiiiiii infrastructure 39.2

Economic infrastructure

Production

Multisector

Programme assistance

Sub-total

Source: own elaboration from DAC database

16.3

6.5

5.7

5.0

72.8

27.3 47.1 29.7 17.4

24.1

6.3

9.6

18.7

86.0

37.3

14.8

0.8

-

100.0

20.1

5.7

10.6

11.4

77.6

36.3

12.4

2.7

4.4

73.2

35%

30%

25%

20%

15%

10%

5%

0%

2003

World Bank lending by theme and sector to SSA: % of total lending 2003-2008

2004 2005 2006 2007 2008

Rural Development

Public Sector Governance

Agriculture, Fishing, and Forestry

Law and Justice and Public Administration

20

Aid and ‘good governance’ in practice:

Ambiguities and contradictions

Donor consensus?

Contradiction

– Lack of consensus on what is meant by ‘good governance’ / myriad indicators

– Lack of consensus on ‘good enough governance’

– Tension between focus on corruption/politics vs ‘investment climate’

The starlets of DAC donors

(Uganda, Mozambique) broadly characterised by slippage in fundamental aspects of the GG agenda

The political economy of forced consensus:

From the Ministry to the IMF/WB and viceversa

• Growing ‘incest’ between BWI and African governments. Some examples of top finance bureaucrats with employment history in

BWI: Antoinette Sayeh (Liberia, WB), Goodall Gondwe

(Malawi, IMF, ADB), Abou-Bakar Traore (Mali, IMF), Luisa

Diogo (Mozambique, WB), Makhtar Diop (Senegal, WB),

Alassane Ouattara (Cote d’Ivoire, IMF) and many more since

1980s

• More importantly, even greater number of upper-middle-level technocrats have attended training programmes offered or sponsored by BWI and like-minded donors (WB, USAID, DFID) through WBI, AERC, and Anglo-American academic institutions

• The WB has complemented this with ambitious support to research capacities and data collection at govt level

22

Source: Van Waeyenberge (2008) http://www.soas.ac.uk/cdpr/seminars/43473.pdf

Institutional fragmentation

From content to process conditionality

Ideology, technologies of policy processes and

‘capacity building’

State fragmentation

Institutional entanglement btw donors and SSA states

Epistemic communities and shared agendas

Shifting material priorities in allocation of fiscal resources

• Logic of ‘aid maximisation’

23

Spectrum of ‘government control’ over policy agenda and implemented outcomes

Ownership as ‘control’ and not as ‘commitment’

Strongest

Bostwana Ethiopia

Rwanda

Weakest

Ghana, Zambia,

Mozambique,

Tanzania, Mali

Key issues: structural conditions (economic, geopolitical, etc.)

 negotiating political capital

Source: Whitfield (2009, p. 331).

Some conclusions

• Aid flows have increasingly problematic governance implications. Question is what governance capacities arfe created and/or destroyed in the process

• Loss of policy space substantial but not complete and as much a product of powerful internal dynamics and social/economic/political changes as a result of external pressures – importance of context

• Operational imperatives of aid agencies impair progress towards reforms of aid architecture so much change must come from internal dynamics

25

Download