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EDF scores high in UK aid review

18-03-2011

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On 1 March, the UK government published reviews of it’s bilateral and multilateral aid programmes and announced that it will fundamentally change the way aid is allocated over the next 4 years.

The Multilateral Aid Review (MAR) rates the European Development Fund (EDF) “very good” and the European Commission’s (EC) development cooperation budget “adequate”.

The context within which the MAR has been published is important. The EC and EU Member States are currently considering the future direction of EU development policy – which also has the objectives of providing better value for money, ensuring that aid has the maximum impact possible and going towards a differentiated approach of developing countries. Discussions to date indicate that future policy will focus EU aid on sectors conducive to inclusive growth and sustainable development whilst also supporting efforts towards good governance.

Preparations are also ongoing for the launch later this year of negotiations for the next 5-10 year Financial Perspectives for the European Union’s (EU) Budget. Negotiations could include discussions on whether to integrate the EDF into the EU budget. The MAR seems to indicate that the UK would not be in favour of EDF “budgetisation.” It notes the upcoming budget talks and states “we will use our assessment in these negotiations to help to improve the effectiveness and focus of EC aid. DFID’s (the Department of International Development) priorities will include a more results-based approach to aid, more flexible procedures and decentralised financial decision-making, more transparent allocation criteria, an improved ability to recruit and maintain development expertise, and demonstrated progress on investing in girls and women.”

In his reaction to the MAR, EU Development Commissioner Andris Piebalgs said “the UK’s review comes at an opportune time to inform [EU development policy and EU budget] reforms and allow us to further improve our ability to support the development needs of our partner countries and make sure that European taxpayers’ money goes to help those who need it most”.

Specifically, the MAR states:

–        The EC suffers from weaknesses in its results reporting. Nonetheless, in most cases we were able to find indirect evidence of impact. The EDF fared reasonably well against our criteria. Objectives appear ambitious, there is good evidence of innovation, such as the Millennium Development Goals (MDG) contracts, external assessments indicate reasonable performance, and there are many examples of contributions to outputs and even outcomes at the country level. It was more difficult to find evidence of contributions to development objectives for the EC budget instruments.

–        The EC is seen as innovating for results with the MDG contracts. The MDG Contracts offer long term, predictable budget support with a variable performance tranche to low income countries, mainly in sub-Saharan Africa. The aim is to accelerate real improvements in reaching the MDGs by 2015. The MDG Contracts clearly link EDF funding to results. In Rwanda, primary school completion rates increased from 52% to 75.6% – and 80% for girls – between 2006 and 2009/10, and, in Zambia, the proportion of HIV pregnant women receiving anti-retroviral treatment increased from 40% in 2007 to 66% in 2009. The EC has also earmarked c1 billion of EDF funds to tackle the most off-track MDGs in Africa, the Caribbean and Pacific countries. The new country owned “MDG Initiative” will provide extra funds to partner countries’ strategic plans and budgets and help to address urgent challenges, including around maternal and child mortality and access to water.

–        Financial resource management is satisfactory in the EDF, but weak in the EC budget instruments. Both have strong financial accountability processes, and clear and transparent resource allocation procedures based on need and performance, although the EC budget instruments’ regional envelopes are broadly influenced by political considerations. Long programming cycles offer high predictability and there is a full range of instruments on offer. Funds are generally released on schedule, and this continues to improve. But there is limited flexibility to reprogramme funds away from poorly performing projects, or to respond rapidly to changing needs, and continued complaints of cumbersome procedures.

–        The EC has moderate to low administrative costs in delivering development assistance and good internal systems to ensure economy in project and programme implementation. However, some of these systems, such as the strict procurement rules designed to finance only the most cost-efficient tenders, may be delivering economy but slowing down implementation. The Commission is starting to develop a broader vision of value for money, including through assessing the potential efficiency savings that could be generated by implementing a Europe-wide aid effectiveness agenda, and its size and attention to harmonisation and alignment helps to reduce transaction costs for developing country partners.

–        The EC performed particularly well on partnership behaviour. It is strongly committed to the Paris agenda. It has a good record of aligning with country priorities and systems to reinforce the country led approach. It shows good leadership on donor co-ordination. Its budget support is not tied to policy conditionalities, and it can engage in joint co-financing arrangements with other donors. The EDF also benefits from a legal framework that includes joint (with developing countries) parliamentary oversight structures, joint Ministerial meetings, and joint reporting.

The EU budget is rated “weak” with regard to its contribution to UK development objectives.  Negative aspects are listed as:

–        Low poverty focus: 85% of budget instruments’ ODA spent on Middle Income Countries (MICs)

–        Limited evidence of how spend in neighbourhood and pre-accession countries contributes to MDGs and poverty reduction.

–        Variable evidence of impact/delivery against results across regions

–        Rules can be inflexible/cumbersome, hampering strive for results

–        Budget instruments are less innovative than the EDF.

–        Gender strategy is adequate on policy but weak on implementation.

But positive aspects are:

–        Sheer size (7 billion euro per year) and a regional coverage make the Commission an important development player.

–        High complementarity with UK bilateral Official Development Assistance (ODA) as instruments support 90 countries; many are UK priorities but do not receive UK aid.

–        Strong mandate and policy framework for dealing with fragile and conflict sensitive situations, and increasing work on climate change.

–        -Impact of wider EU policies in trade, agriculture, fisheries, migration and climate change make the EU a key actor.

The EU budget is rated “satisfactory” with regard to organisational strengths. Positive aspects are listed as:

–        Strong monitoring and financial management systems, with moderate administration costs.

–        Predictable funding and funds generally released on schedule.

–        Strong transparency practice: Commission has signed up to the International Aid Transparency Guarantee.

–        Good partnership behaviour though model varies per region.

–        Increasing levels of budget support with results based tranches encourage partner countries to look at value for money issues.

Negative aspects are listed as:

–        Non-budget-support assistance has less of a focus on value for money.

–        Less flexible in allocations than EDF: amounts are allocated per region and partly based on political considerations.

–        No clear overall results framework is in place.

–        Limited flexibility after funds have been programmed and cliff edge issue at the end of the funding cycle.

–        Broadly meritocratic recruitment practices but continued challenge in recruiting development-specific expertise

With regard to the likelihood of positive change in the EU Budget, the MAF says there is proven capacity for change and substantial scope for reform with a new institutional set-up and commitment from EU Member States.

The MAF rates the EDF’s contribution to UK development objectives as “strong”. Positive aspects are listed as:

–        EDF’s activities and mission fit closely with DFID’s objectives and structural reform pillars.

–        Sheer size (3.6 billion euro per year) and strong poverty focus (approximately 85% of funds spend in LICs) make the EDF critical for progress on the MDGs and poverty reduction.

–        EDF gives crucial support to Commonwealth countries and UK Overseas Territories.

–        EDF demonstrates delivery against challenging development objectives

–        Impact of wider EU policies in trade, agriculture, fisheries, migration, climate change and security are key to ACP economies

–        Strong mandate and policy framework for dealing with fragile and conflict sensitive situations, and increasing work on climate change.

Negative aspects are listed as:

–        Rules can be inflexible/cumbersome, hampering strive for results

–        Gender strategy is adequate on policy but weak on implementation.

The organisational strengths of the EDF are rated “strong”. Positive aspects are listed as:

–        Built on a unique partnership model that is highly appreciated in country and accompanied by political dialogue.

–        Strong monitoring and financial management systems, with moderate administration costs.

–        Predictable funding, allocated according to needs and performance

–        Strong transparency and accountability practice: Commission has signed up to the International Aid Transparency Guarantee.

–        Funds are only drawn from Member States when needed, and are generally released on schedule.

–        High levels of budget support with results based tranches encourage partner countries to look at value for money issues.

Negative aspects are listed as:

–        Non-budget-support assistance has less of a focus on value for money.

–        No clear overall results-framework is in place.

–        Limited flexibility after funds have been programmed and cliff edge issue at the end of the funding cycle.

–        Broadly meritocratic recruitment practices but continued challenge in recruiting development-specific expertise.

With regard to the likelihood of positive change in the EDF, the MAF says there is proven capacity for change and substantial scope for reform with a new institutional set-up and commitment from EU Member States.

In total, aid to 43 international funds and organisations through which the UK spends aid was evaluated in the MAR and funding for some multilateral organizations rated as providing poor value for money will be cut.

Bilateral programmes will end in 16 countries which are now no longer in need of British aid or where the UK is not the best placed aid provider.

To achieve value for money and with a view to helping countries to build open and responsive political systems and tackle the root causes of poverty, there will be greater accountability for the results of aid, concentration on fragile states, greater emphasis on the private sector and a cross-government approach so that other government policy instruments can also promote development objectives. There are, however, no indications given on how the specific results envisaged will be achieved and no references to developing country-led development strategies and donor harmonization, notes the Overseas Development InstituteODI also considers whether linking development more explicitly to security means more attention on the needs of the poor in conflict-affected states or is putting Britain’s security interests ahead of those of the poor. For more on this and further analysis from stakeholders, see this week’s Weekly Compass Extended Version.

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