[Stephen P. Groff] Making development aid work

As the world’s advanced economies continue to limp toward recovery from the global economic downturn, questions are again being raised about the need for ― and value of ― official development assistance.

In these times of fiscal restraint, critics are increasingly asking: Is aid worth it? Does it make a positive difference in the lives of poor people in developing countries? Or does it merely line the pockets of corrupt officials and fuel the consultancy industry in donor countries?

A very positive response to these questions can be found in the Republic of Korea, where global development partners are meeting in Busan for the fourth High Level Forum on Aid Effectiveness. Having leapfrogged from “third world” status to a developed country within a generation, Korea provides a shining example of a country that made development assistance work. Its per capita GDP has grown astonishingly from $255 in 1970 to more than $20,750 by 2010, and today Korea is helping neighboring countries in developing Asia help themselves through both financial and technical assistance.

Underpinning Korea’s success were effective institutions that used external resources to support the country’s own development strategies. This “country ownership” is the first principle of the Paris Declaration ― a global compact signed at the first High Level Forum in 2005 to improve the effectiveness of ODA. In essence, the principle of ownership recognizes that donors can best contribute to development by supporting countries’ own efforts to build more effective governments and institutions. At the same time, the compact calls for a greater focus on producing and measuring development results, with greater accountability for both donors and developing countries.

While implementing their own projects may give donors a greater sense of control, experience has shown that it does not produce the long-term impact needed. Donors are often compelled to make their investment spending “visible.” Shiny new hospitals or schools provide compelling photo opportunities, yet if there aren’t enough well-trained doctors or teachers to staff them, and no reliable stream of funding to sustain them, these one-off projects will not add up to development.

The only way donors can ensure that their funding is well utilized is if governments and donors work together to support and monitor implementation of a country’s development strategy, making decisions based on the whole picture rather than a small part of it.

Six years after the Paris Declaration, some progress has been made in implementing its commitments, but action is still needed on several fronts.

First, we must make aid more predictable by being transparent and ensuring that developing country governments receive timely information on how much they can expect to receive from donors in advance and over a period of several years. Without an accurate picture of available resources, it is difficult to make the sound budgetary decisions that in turn can increase the effectiveness of aid.

A second challenge relates to reducing aid fragmentation. The average size of aid funding has been cut in half over the past 10 years. There are over 4,000 bilateral programs in developing countries, with all the associated costs, but half of them amount to less than 5 percent of total aid flows. This fragmentation is increasingly difficult for developing countries to manage. Moreover, inefficiencies from this fragmentation may cost up to $5 billion annually.

A final challenge is to build consensus with emerging donors to enrich development cooperation based on their experiences, and better ensure all players contribute equally to improved development effectiveness. While most of the so-called BRIC countries ― Brazil, Russia, India and the People’s Republic of China ― have signed on to the Paris Declaration, they have not been as central to the discussions as many had hoped, leading to the risk that a critical perspective will be diluted in the final outcome of this forum.

Beyond these challenges, we must recognize that the world has changed dramatically in recent years. The global financial and economic crisis highlighted the critical importance of deeper, more inclusive global cooperation. The High Level Forum in Busan offers an opportunity to build a fresh, more flexible global development partnership that reflects this shift ― a partnership that draws together a wider, more diverse set of development stakeholders, including civil society and the private sector.

Inherent to this new partnership is a broader paradigm for development that includes more resources, better coordination and more coherence. We must break down the old distinctions between “donors” and “recipients” and between north and south. We must recognize that it is the best interest of all of us to resolve the very real problems of poverty ― and to do this more effectively, and together.

In these times of economic uncertainty, the world simply cannot afford anything less than effective aid. Busan is a critical milestone on the path to greater development results ― and Korea a fitting showcase for what can be achieved. 

By Stephen P. Groff

Stephen P. Groff is the vice-president Operations Group 2 of the Asian Development Bank, responsible for East Asia, Southeast Asia and the Pacific. ― Ed.