This week, Devex featured several stories about the role country systems play in boosting development. Our latest special coverage follows several years of monitoring and reporting on how the greater reliance on these systems is altering the way foreign aid is delivered around the world.
In a Devex Executive Analysis entitled “For country systems, momentum but a rocky path,” Devex correspondent Mark Ashurst suggests that many challenges remain as donors shift increasing amounts of aid toward general budget support and sector support.
We also published a guest opinion by Richard McCall, senior vice president at the U.S. development consultancy Creative Associates. McCall contends that there is some misunderstanding about country-led development and the use of country systems. To ensure sustainable development, he argues, the international community should focus more on building inclusive institutions in partner countries.
Why the focus on country systems? Because no matter what role you play in international development, this trend will impact your work.
Recall that a nod toward country systems is implicit in two of the four principles in the historic 2005 Paris Declaration on Aid Effectiveness: alignment and ownership. The Accra Agenda for Action sought to operationalize these Principles, and last year’s Busan conference went even further, establishing “building blocks” for the use of country systems.
Today, while deliberations over country systems continue, it is fair to say that donors are moving beyond the proclamations and promises of Paris, Accra and Busan by putting new policies into practice. A quick assessment of the world’s major donors yields telling results:
USAID. USAID plans to channel 30 percent of its aid through country systems by 2015 and no less than 14 percent of program funds in 18 countries by 2013. Meanwhile, USAID Forward, the agency’s overall reform initiative, stresses country-led development and contracting with more local host country organizations.
DfID. In 2008-‘10, the United Kingdom’s premier aid agency channeled about two-thirds of its money through country systems. DfID’s administrative outlays have been cut by 33 percent as the department continues to pursue procurement reform predicated on decentralization, direct budget support, and partner country systems.
AusAID. After an independent review of Australia’s aid program in late 2010, AusAID has is changing the way it disburses aid, and coursing aid through recipient governments will continue to be a priority. According to the 2011 Quality of Australian Aid report prepared by AusAID’s Office of Development Effectiveness, the agency is already channeling 23 percent of its money through country systems.
EuropeAid. The European Commission’s goal is to channel 50 percent of government-to-government assistance through country systems. EU aid funding focuses on initiatives that are in line with recipient country priorities, and there have been efforts to decentralize management, build local capacity, and discourage parallel structures.
The international community will have to address the “chicken-and-egg” dilemma associated with country systems and highlighted in our coverage this week: The countries that may benefit the most are often among the most fragile and volatile ones, putting significant financial and operational risk on donors. The question, then, is: Are developing countries ready for the influx of money expected to be funneled through domestic systems in the coming years? Who will ensure accountability? How will implementing organizations adapt to procurement changes?
With this in mind, aid implementers should begin to recalibrate their business development strategies and reposition themselves in the development market to bid with national governments rather than just donor agencies. They may also need to strengthen business development and project delivery capacity at more local levels.
Indeed, aid organizations may be best served by expanding their network of local partners now – or risk being left behind as global development business adapts to the New Normal of country-led development.
Read last week’s Development Buzz.
About the author
Pete Troilo
Former director of global advisory and analysis, Pete managed all Devex research and analysis operations worldwide and monitors key trends in the global development business. Prior to joining Devex, Pete was a political and security risk consultant with a focus on Southeast Asia. He has also advised the U.S. government on foreign policy and led projects for the Asian Development Bank and International Finance Corp. He still consults for Devex on a project basis.
