AID EFFECTIVENESS, DFID’S RESPONSE AND THE IMPACT OF CHINA ON AFRICA

AID EFFECTIVENESS, DFID’S RESPONSE AND THE IMPACT OF CHINA ON AFRICA

International Poverty Reduction Research Centre6 July 2006

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

MORE EFFECTIVE AID

Supporting developing country leadership and broad national ownership

Comprehensive – addressing multi-dimensional nature of poverty

Alignment with developing country systems and procedures (long term and predictable approach)

Better joined up working by donors Focusing on the desired outcomes in support of the

MDGs Strengthening mutual accountability between donors

and recipients


WHAT SHOULD WE BE DOING?

Supporting partner countries to set priorities and manage donor coordination

Alignment of assistance strategy with country priorities (Poverty Reduction Strategy or similar)

Use and/or strengthening of government systems: public financial management; procurement; disbursement; reporting (M&E)

Joint working with other donors (including common arrangements for planning, funding and managing aid)

Improving quality of government – donor dialogue (ie. open dialogue between partners that respects national policy making processes)

Increasing country and programme focus


MILESTONES IN 2005/6

Gleneagles – commitments on more aid to be delivered through country led processes

2005 Poverty Reduction Strategy Review – lesson learning Commitments on Better Aid - Paris Declaration on Aid

Effectiveness WP III and Comprehensive Spending Review – Doing

development better UK commitment to 0.7% target by 2013 – UK aid programme

will treble from £5 - £15 billion a year by 2015


LESSONS FROM LAST 5 YEARS – POVERTY REDUCTION STRATEGY EVALUATIONS AND REVIEW

Progress in some but not all countries – initial conditions important, need for flexibility

Difficult to judge impact on outcomes Evidence of institutional change – foundations for “better

government” Approach not realising full potential e.g limited change in

donor behaviour International pressure to demonstrate results – need for

realistic expectations


ACHIEVEMENTS TO DATE

(A) Most progress made in countries with clear commitment to poverty reduction and with reasonable capacity

(B) More engagement with civil society

(C) More attention to alignment


PRIORITIES FOR IMPROVING POVERTY REDUCTION STRATEGIES

Prioritisation - sequencing Strategic focus – importance of growth Scaling up scenarios Cross cutting issues – gender, environment Focus on results - poverty analysis and monitoring and

common objectives Implementation and capacity constraints – long term focus


INSTITUTIONAL ISSUES

Ownership – line ministries, Parliaments, civil society, local government

Political economy – where do poverty reduction strategies sit in political priorities/agendas?

Better systems – policy, planning, budgeting, monitoring Central versus local level engagement Participation as a route to domestic accountability Donor behaviour - harmonisation and alignment


THE LEAKY BUCKET?

It’s our aid – we have our own targets and priorities to meet

Our aid needs to be visible for us to maintain our influence Government systems are weak and unreliable Aid is spread too thinly so that it fails to make a long term

difference We’re overstretched by working in too many sectors Our aid is not enough to tackle the whole problem


FUTURE CHALLENGES FOR DONORS

Where and how to scale up aid? Alignment in difficult environments (politics, governance and

capacity) Minimum standards on poverty reduction strategies – should

there be any? Predictability – can we deliver? Mutual accountability – are we ready to be judged? The other 95% of aid – multilaterals, bilaterals Accountability and results – demonstrating aid works and aid

effectiveness makes a difference – reducing scepticism about aid


DFID POLICY RESPONSE

Substantial increases in DFID’s overall annual programme – from £5 billion in 2005 to £15 billion in 2015

Scaling up aid - more aid to low income countries and under aided countries

New instruments which promote ownership (e.g budget support)

Conditionality paper – common benchmarks – aid not tied to progress on specific policies

Joint frameworks – public financial management Medium term action plan on aid effectiveness – response

to Paris Longer term agreements in some countries - Afghanistan,

Vietnam, Tanzania Approach in fragile states


HOW WILL DFID SCALE UP TO MEET THE 0.7% TARGET

1. Deliver 2005 commitments

10. Manage risks (climate change, oil prices); show results (health, education); avoid corruption

2. Country-led approach (not vertical funds)

3. Improve aid allocation: orphans/ darlings; countries with worst indicators, least resources

4. Improve aid effectiveness: predictability, harmonisation, accountability, conditionality etc

5. Include fragile states

6. Capacity-building and aid absorption

7. Multilateral allocations required to support objectives (e.g. via a more coherent architecture)

8. Support “resources and results meeting”, DAC co-ordination on forward aid projections, aid allocation, fragile states watch list, political conditionality

9. Launch International Finance Facility (IFF)


What choices and trade-offs need to be made?

Laid out in White Papers 1 and 2; International Development Act Poverty reduction and commitment to Millennium Declaration and

the MDGs, (enshrined by PSAs) Human Rights Responsibility to Protect and recognition of limits to sovereignty

Predictable aid flows & long term relationships with countries Need to have a country-level approach as well as addressing

global level issues Existing commitments eg. 90% of DFID’s bilateral spend will be in

low income countries, commitment to Africa etc Headcount pressures

The core DFID objectives and

obligations

… but there are additional important

objectives for DFID …

… and other factors that

influence resource allocation

Transfer of resources and influencing and promoting change to make effective use of all aid not just DFID’s

Country led approach – alignment with country Poverty Reduction Strategies (as committed to in the Paris declaration)

Supporting good performers as well as countries with greatest need as well as fragile states

Recognition of the importance of global public goods Reduce transactions costs and number/burden of donors Minimum fiduciary accountability/commitment to development

by recipients Addressing social exclusion


CHINA IS AN (EXPONENTIALLY) GROWING PLAYER IN AFRICA

DFID bilateral aid to Africa: $1.5 billion (2004/05)Cumulative growth rate: 35% (2000/01 – 04/05)

China’s trade with Africa: $39.7 billion (2005)Cumulative growth rate: 610% (1999-2005)

Annual growth rate: 35%


CHINA AND AFRICA: FACTS AND FIGURES

Trade volume: $40 bn (2005) $100 bn (2010) 800 Chinese companies have invested $1 bn in Africa 480 China-Africa joint ventures 78,000 Chinese workers in Africa engage in engineering and labour work Tariffs scrapped on 190 kinds of imported goods from 28 African countries In 2004, 45,000 Chinese tourists visited Egypt and South Africa, while a

further 26,200 visited 12 other approved destinations in Africa. China is increasingly engaged in state-owned enterprise reform and

privatisation (e.g. Nigeria).

CHINA TO ADD 1-2% TO AFRICA’S GROWTH IN 2006


ADDRESS AT THE UN MILLENNIUM REVIEW SUMMIT

Strong endorsement of the UN

Strong endorsement of the Millennium Development Goals

Five point plan of debt relief, tariff-free access, concessionary loans, manpower training and medicines

Establishment of International Poverty Reduction Centre in Beijing

Followed up at African Head of State level in Beijing in early-November 2006


IMPLICATIONS

China really matters and it matters big!

New relationship needed – no longer development assistance, but strategic partnership of equals

Sustainability has to be at the core - without Chinese buy-in there is limited prospects for sustainable development at the global level

Implies a cross-country, cross-departmental and long-term agenda


WHAT’S THE OVERALL ASSESSMENT? - NEGATIVES

Many Africans concerned – accusing Chinese companies of underbidding local firms and not hiring African workers

African and international voices – pursuit of national interest ‘sold as’ south-south co-operation. Africa risks losing out (again)

International observers concerned – say that the way China does business undermines local efforts to increase transparency and good governance and international efforts at macroeconomic reform led by the World Bank and the IMF


WHAT’S THE OVERALL ASSESSMENT? - POSITIVES

It’s growth and trade, not aid, that will generate the sustainable resources to pay for e.g. Hilary Benn’s call for an NHS for Africa

Roads, bridges and dams built by Chinese firms are low cost, good quality & completed in fraction of the time normally required in Africa

China contributed 1,500 peacekeepers for UN Missions across Africa Cancelled $10 billion in bilateral debt Sends medical teams Trains thousands of African workers in a way we have stopped doing China has considerable power which can be used to good effect

e.g. Iran, North Korea


CHINESE MESSAGES?

Encourage China to join and play increasing role in multilateral development fora, in-country donor groups and consultative processes

Look at an approach which more closely relates to NEPAD and the AU Follow international aid standards as promoted by DAC Stand ready to help China understand implications of new

arrangements such as the Extractive Industries Transparency Initiative, the Africa Infrastructure Consortium, the Partners Forum, and the Investment Climate Facility

AID EFFECTIVENESS, DFID’S RESPONSE AND THE IMPACT OF CHINA ON AFRICA

Documents

Transcript of AID EFFECTIVENESS, DFID’S RESPONSE AND THE IMPACT OF CHINA ON AFRICA