The Aid Effectiveness Agenda: Benefits of a European Approach
Official Development Assistance (ODA) is subject to a number of characteristics, which reduce its effectiveness, among them:
1. ODA is not a homogenous, forward-looking concept but only the ex post summation of annual disbursements by some twenty to thirty donor governments’ foreign aid programmes, each following its own individual aid policies, procedures and programmes;
2. Each donor programme is delivered through a multitude of channels such as bilateral donor government agencies, multilateral institutions and funds, which in turn implement aid ‘projects’ through a multiplicity of agencies, contractors or NGOs and – occasionally – the partner government itself; and
3. Aid flows lack long term predictability and are often volatile: donor parliaments allocate their aid budgets on an annual basis and partner governments are therefore often faced with disparities between agreed commitments and disbursements of funds.
Partner governments must therefore deal with many entities, whose sheer number often lead to duplication of efforts and the corruption of allocation procedures for national resources. Furthermore, the programming of projects is often donor-driven and not always aligned with national priorities, sometimes because recipient governments lack overarching development strategies, which are sufficiently detailed. However, even where these exist, aid is still often disbursed outside the partner country budgets and financial management systems through donor banks, using donor procurement and audit systems. This assistance is therefore not taken into account in national planning. Some assistance is still tied to procurement of goods and services from donor countries, raising the costs of aid significantly.
Ineffective aid therefore carries a number of direct costs (overhead costs associated with preparation, negotiation, implementation, evaluation, etc. of aid activities) and indirect costs (distortion of government ownership, allocative inefficiencies, etc.). These costs represent an inefficient provision of development assistance, and reduce the development impact as well as the quality of governance, economic growth and the sustainability of reforms.
