A Knotty Problem: Turning Words into Action on Tied Aid

“Tied aid doesn’t work.” That was the verdict of the UK’s top development minister at a recent parliamentary hearing.

And the evidence bears the minister out. Tied aid – aid that can only be used to buy goods or services from the country providing the aid – is having a negative impact on the world’s poorest people.

Tied aid generally costs more than untied aid – an estimated 15 – 30 % more for many goods and services, and more still in the case of food aid. It also tends to deliver less, since it is less well suited to local contexts and preferences. This isn’t just a question of bean counting. Tied aid is used in sectors from emergency response to malaria control: bad value for money can cost lives and put basic rights in jeopardy.

Tied aid also holds back the long-term development of communities in the global south, because it goes against the fundamental principle that effective development should be led by local priorities, and channelled where possible through country systems. In particular, this type of aid makes it impossible to support local producers – even though doing so could bring a “double dividend”, delivering both project results and building up the local economy for the long term.

This is why untying aid has been high on the agenda in successive agreements on effective development cooperation (reinforced again in Nairobi in 2016) , and why donor governments have signed up to a (limited) agreement on aid untying.

Yet despite these promising commitments, tying persists. The latest data from the Organisation for Economic Co-operation and Development’s Development Assistance Committee (OECD DAC) reports a figure of around US $16.8 billion – more than the entire ODA budgets of Italy, the Netherlands and Norway combined.

That’s just the tip of the iceberg. Those US $16.8 billion relate to aid that is ‘formally’ tied – where the contract explicitly states that goods or services must be bought from the country providing the aid.

Even more worrying is the level of aid that is tied informally – where the contract doesn’t specify a particular supplier country, but in practice barriers in the procurement process stop companies from outside competing – for example, if tenders are only advertised in the donor country language.

It’s impossible to say exactly how much aid is tied informally, but the best available proxy is to look at data on which firms are actually winning aid contracts. This data paints an alarming picture. In 2014 (the most recent year for which data is available), donors reported to the OECD on some 15 billion US dollars’ worth of individual aid contracts. Of this, 46 percent  went to firms in the donor country and just 4 percent went to firms in the poorest countries.

In some donor countries the share of contract spending with domestic firms was higher still – even in countries reporting very low levels of aid as formally tied aid (Figure 1).

Source: Eurodad analysis of OECD DAC, 2017 Report on the DAC Untying Recommendation
Notes: this data covers bilateral aid within the scope of the DAC’s Recommendation on Untying ODA (and excludes administration costs and in-donor refugee costs). The completeness of reporting on contract awards varies among donors, and some (Czech Republic, Finland, the Netherlands, New Zealand, Norway, Poland, Slovak Republic, Slovenia and Sweden) did not report at all in 2014.

Most attempts to monitor donor progress on untying aid have only told half the story. The OECD DAC Development Cooperation Report; OECD DAC peer reviews; as well as a range of donor rankings produced by third parties all focus on formal tying. While the OECD DAC does report regularly on the distribution of contract awards, this is a technical document that attracts only limited attention beyond specialist circles.

However, the current review of the indicators for the Global Partnership for Effective Development Co-operation’s (GPEDC) monitoring report, offers hope that this pattern will change. Through its wide-ranging coverage and diverse global participation, the GPEDC monitoring exercise attracts worldwide attention. Indicator 10 deals with untying aid. Eurodad is calling for the indicator to include systematic reporting on the values of contracts awarded to companies in different countries, in addition to data on formal tying.

This could have a powerful influence on how donors approach untying. The more untying aid is seen to be about where the money actually goes, the more pressure there will be for donors to remove barriers that prevent companies in the global south from competing.

Getting a comprehensive picture of informal tying will take time. A complete view would require not only full data on contract awards, but also information on sub-contracts, on who really benefits from companies located in the global south (‘beneficial ownership’) and on the tied aid implications of more aid being channelled through so-called private sector instruments.

For now, basic data exists, and could in the short term be supplemented by case studies. In the longer term, the drive for better data on aid procurement could encourage the use of country procurement systems (part of GPEDC indicator 9b), and boost the drive for transparency of over beneficial ownership – potentially contributing to a virtuous circle for effective development cooperation.

It would be an exaggeration to say that better monitoring of informal tying is enough to cut the Gordian knot of tied aid. As a recent Eurodad briefing set out, a whole sequence of actions is needed – from stamping out formal tying, through changes in procurement procedures, to pro-active policies to procure in favour of the poorest. But an increase in emphasis on informal tying in the GPEDC monitoring report could tilt the balance towards a new way of approaching aid procurement – a way that does work, for the poorest people, not just for the commercial interests of multinationals in the global north.


Partnering to achieve the SDGs: Lessons learned from monitoring civil society’s engagement in development

At the next High-Level Political Forum – the apex of global follow-up and review of the Sustainable Development Goals (SDGs) – in July, forty countries are expected to engage in Voluntary National Reviews (VNRs) of their own progress at national and sub-national levels. As per the 2030 Agenda for Sustainable Development and its guiding principles, follow-up and review should be: voluntary and country-led, taking into account different national realities and capacities; open, inclusive and participatory; and supportive of reporting by all relevant stakeholders.

The Global Partnership for Effective Development Co-operation (the Global Partnership) applies similar principles to its monitoring exercise. The Global Partnership is a unique, multi-stakeholder platform to support the delivery of effective development co-operation for the realisation of development efforts, including the SDGs. Its ten-part monitoring framework tracks progress in the implementation of effective development co-operation commitments. The Global Partnership monitoring process is voluntary and country-led and a number of its indicators require a multi-stakeholder monitoring approach, including Indicator Two, which tracks civil society’s ability to “operate within an environment which maximises its engagement in and contribution to development.”

The Global Partnership conducted its last monitoring round in 2015/16. Meanwhile, the Task Team on CSO Development Effectiveness and Enabling Environment (Task Team) conducted a stock-take of the country-level experiences with the multi-stakeholder monitoring approach of Indicator Two. Given the similarity of the guiding principles, lessons learned from the monitoring framework’s Indicator Two could also be informative for SDG follow-up and review, particularly for countries engaging in VNRs in 2017. We’ve selected three main recommendations coming out of the stock-take, which could also be relevant to SDG follow-up and review.

1. Work with focal points and encourage intra-stakeholder group coordination

For the monitoring of Indicator Two – which called for the engagement of national government, civil society organizations (CSOs) and development co-operation providers – the Global Partnership recommended stakeholder groups to each work through a focal point to help coordinate stakeholder participation and inputs to the monitoring. The stock-take confirmed the value of working with focal points for inter and intra-stakeholder group coordination. However, it also found that the value could be further enhanced by broadening engagement across and within various stakeholder groups, including outside of capital cities. Moreover when working with this method, it is crucial that the roles and responsibilities of the focal points be clearly outlined.

2. Make sufficient time and resources available for multi-stakeholder processes

Probably unsurprising is that multi-stakeholder processes are challenging and resource heavy. It is therefore important to initiate the process early and to secure sufficient human and financial resources. Time is needed for sensitization, to get stakeholders on board, and to identify focal points. Meanwhile, effective multi-stakeholder dialogue requires building a common understanding of the subject matter and the objective at hand.

Important to keep in mind is that the ability to conduct more robust multi-stakeholder processes can be limited by capacity constraints such as insufficient financing, shortage of personnel and lack of experience and awareness. In its 2016 Monitoring Report, the Global Partnership compared the countries reporting and receiving external support with those that did not receive external support. It found that amongst countries with no external support, only 59% reported on Indicator Two. This figure increased to 92% for countries that did receive external support. Further, the stock-take found that experience and know-how was an issue for state and non-state actors alike. Consideration should thus be given to country-level capacity development and financing to design and implement effective multi-stakeholder processes for follow-up and review of the SDGs.

3. Organize follow-up to discuss the findings

When it comes to monitoring – whether of the SDGs or the Global Partnership’s development co-operation indicators – the interest and value lies not only in the numbers, but in knowing where the ship is sailing in order to adjust course accordingly. One of the broader aims of the Global Partnership’s monitoring exercise is behaviour change. This does not necessarily come out of the monitoring exercise itself, but rather out of follow-up based on the monitoring results. Participants of the Indicator Two monitoring were interested in follow-up steps, including multi-stakeholder dialogue on the findings. Given that countries are to engage in annual reviews of the SDGs, consideration could be given to convening, institutionalizing and maintaining ongoing multi-stakeholder dialogue on particular SDGs. Similarly, consideration could be given to reflection in single stakeholder groups on country reports, including the implications for their own practices as well as actions needed to make progress.

Overall, the Global Partnership monitoring is relevant for SDG follow-up and review in light of the multi-stakeholder process, but also in terms of its content. The Task Team’s stock-take found, for example, that stakeholders deemed Indicator Two relevant for SDGs 16 and 17 on inclusive societies and accountable institutions, and partnerships for sustainable development respectively. Countries could build on the Global Partnership’s monitoring framework to inform follow-up and review of these two SDGs (as well as others, like SDG 5). This would also be in line with 2030 Agenda’s guiding principle that follow-up and review should build on existing platforms and processes.

To conclude, engaging in and organizing a multi-stakeholder monitoring exercise is anything but easy. However, participants of Indicator Two monitoring found it worthwhile from the perspective of collective interest in making progress. The same can be said for the SDGs. Inclusion – and more specifically the principle of leaving no one behind – is a cornerstone of Agenda 2030. It calls for multi-stakeholder engagement throughout SDG design, implementation and follow-up and review. After all, this is “an Agenda of the people, by the people, and for the people and this, we believe, will ensure its success.”

Interested in more information? You can hear stakeholders speak about their experiences with the multi-stakeholder process of monitoring Indicator Two in the summary video of our side event at the Second High-Level Meeting of the Global Partnership in late 2016. You can also read the summary or full report of the Task Team’s Stock-take of Indicator Two monitoring.

About the Author:

The Task Team on CSO Development Effectiveness and Enabling Environment is a multi-stakeholder body that seeks to advance the role of civil society in development. Its participants come from three stakeholder groups: governments that provide development cooperation, recipient governments and civil society organizations (CSOs) affiliated with the CSO Partnership for Development Effectiveness (CPDE). The Task Team leads Global Partnership Initiative 2 (GPI-2).

Effective Development Co-operation Monitoring Workshop Summary Now Available

Monitoring effective development co-operation: what have we achieved; how can we do better?, a workshop at the margins of the Second High-Level Meeting (HLM2) of the Global Partnership for Effective Development Co-operation, took stock of progress in implementing the commitments for more effective development co-operation, mapping existing bottlenecks and discussing possible solutions.

Held on 29 November 2016 in Nairobi, Kenya, the workshop also assessed emerging challenges for development effectiveness and reflected on how to update the existing global monitoring framework in the context of the Addis Ababa Action Agenda and the 2030 Agenda for Sustainable Development. Discussions drew on the findings from the 2016 Global Partnership Progress Report, online consultations, regional consultations and other preparatory events held ahead of HLM2. Its conclusions were reported during HLM2’s first plenary.

The monitoring workshop’s six sessions gave participants the opportunity to engage in critical dialogue around the following topics:

1. Overview of the 2016 monitoring round
2. Increasing the focus on development results
3. Strengthening country ownership
4. Creating inclusive partnerships for development
5. Improving transparency and accountability
6. Updating and refining the Global Partnership’s monitoring framework for the future

Click here to read the summary of the workshop.
Click here to read the workshop’s agenda (French, Spanish).