The Paris High Level Forum on aid effectiveness in early 2005 set out a strategy to reform the way aid is provided to recipient governments. Participants stressed the need for national ownership of development plans and more co-ordinated and predictable donor allocations. But will it work and can expected benefits be assessed?

A report from the Overseas Development Institute, UK assesses the implications of the ‘Paris agenda’ and the constraints on achieving the goal that aid practitioners are increasingly referring to as ‘mutual accountability’.

In Paris there was agreement in principle on a set of targets for changes in donor and recipient behaviour. Country and international level efforts are already underway in pursuit of the Paris goals. In many countries donors and recipients have formed groups to co-ordinate budget support and sector-wide approaches. These usually involve a joint performance assessment framework – in some instances with targets for donors as well as recipients – and standard procedures.

Benefits of the new approach are primarily presented in terms of reduced costs of aid management, which would in future either no longer be borne by recipients, or be saved by donors and passed on in the form of added net flows. However, by this narrow ‘transaction cost’ standard, there is no evidence that the Paris agenda approach is succeeding. It will not be possible for many years to tell whether there have been major savings in aid-related transaction costs.

The research cautions against over-optimism as long as the aid industry has divided opinions about conditionality. Donors aspire to stable, long-term, predictable aid partnerships but want to keep the right to cancel contracts at any time. There is no easy resolution of the tension between the intentions of partnership and political pressure to reflect domestic donor concerns.

The report also cautions that:

• There is a risk that progress indicators currently under discussion could prove superficial.
• The goal of aid harmonisation, like any collective action involving large numbers of independent actors, is difficult to sustain as long as there are no penalties for non-compliance.
• The Paris agenda effectively aims that aid agencies eventually cease to exist: although this may be a valid aim, it does not suit the personal and institutional incentives for most donor agencies.
• Recipient states are receiving money from more donors than before, implying greater competition at country level.

The researcher’s main recommendation is to reserve a significant portion of all aid, in the form of long-term support linked to specific sectoral outcomes such as primary education completion. The Paris agenda could be further strengthened by:

• establishing a permanent mechanism for bidding out donor assessment contracts to independent professional analysts
• putting multilateral agencies’ performance ratings in the public domain and subject to scrutiny
• ending the practice whereby national strategies – especially Poverty Reduction Strategy Papers – are effectively ‘self-censored’ on the basis of external assessment of what resources may be available
• establishing a reserve facility – perhaps managed by the World Bank or the International Monetary Fund – to support countries when there are fluctuations in aid commitments.

Source(s):
‘Aid harmonisation and alignment: bridging the gaps between reality and the Paris Reform Agenda’, Development Policy Review, 23 (5): 531-552, by Andrew Rogerson, September 2005

id21 Research Highlight: 12 July 2006

Further Information:
Andrew Rogerson
Centre for Aid and Public Expenditure
Poverty and Public Policy Group
Overseas Development Institute
111 Westminster Bridge Road
London, SE1 7JD, UK

Tel: +44 (0) 20 7922 0381
Fax: +44 (0) 20 7922 0399
Contact the contributor: a.rogerson@odi.org.uk

Overseas Development Institute

Other related links:
'Official aid giving no longer a Northern phenomenon'

'Donors can lead in the practice of good governance'

'Aid that works? Multi-donor budgetary support in Ghana'

Paris High-Level Forum, 2005

Eurodad Report on the Paris High Level Forum on Aid Effectiveness