In Unification Town, Liberia, the London-born novelist Zadie Smith encountered a 14-year-old schoolgirl named Evelyn. The teenager “practically vibrates with impatience and intelligence,” posing at a school typewriter for photographs “as a politician might to a humiliating, necessary photo op.” When the visitors prepare to leave, Evelyn becomes abruptly assertive: “You will write the things we need: You have a pencil?” she tells the author. The list is concise, but exponential: history books, science books, exercise books, pencils, more desks, teachers, electricity, electricity for teachers.
Evelyn’s list is an inventory of failures. Some may be particular to Liberia – the world’s most aid-dependent country. Many others are familiar to many states where local authorities struggle to meet even basic needs, while foreign donors aspire to make good the deficit.
“It was a strange look she had,” Smith recalled, “So willful, so much in want, and yet so completely without expectation.”
The episode offers a glimpse of the vast dissonance – a realm of confusion, misunderstanding and often recrimination – which separates donors from the recipients of their aid. It illustrates why many of the best minds in development firmly believe in the new mantra of “country systems.”
As a response to hydra-headed problems, the core idea of country systems is that all aid should complement the institutions and characteristics of recipient states.
“You must end the practice of creating your own strategies independent of a country-led plan,” U.S. Secretary of State Hillary Clinton told 3,000 delegates at the Fourth High Level Forum on Aid Effectiveness in Busan, South Korea, in December 2011.
Among leading agencies in member countries of the Organization for Economic Cooperation and Development, policymakers accept that, ultimately, what donors want is far less important to the effectiveness of aid than what its recipients can do.
Direct cash transfers to the treasuries of recipient governments exemplify the ethos of country systems. Under general budget support, donor funds are transferred to government treasuries. Sectoral support is a variation on the same principle, involving resources channeled via bilateral and multilateral agencies to specific priorities such as health, infrastructure or the management of public finances. Countless other models of delivering aid can be positioned under the wide umbrella of country systems. From adopting local procurement processes to funding the local private sector or civil society – any definition of country systems is malleable – it is more a general direction, than a specific route.
“Partner government systems are not the automatic default,” Laurie Dunn, assistant director-general of the Australian Agency for International Development, told Devex.
One long-standing scheme devised by the Japanese government demonstrates the variety in the policy mix. For 25 years, Japan has dispersed cash loans to underwrite its own trade in commodities. Recipient governments, including Liberia, invest profits earned from trading with Japan – say, importing Japanese fuel – in social projects such as schools and hospitals. By the standards of most recent debate, the scheme is conservative: All loans are tied to trade with Japan, all spending is conditional under the terms of the Japan International Cooperation System. Yet, the alignment of commercial interests to fund social goods has attracted attention from both the U.K. Department for International Development and U.S. Agency for International Development. In the new world of country systems, the old scheme suggests a template for more classically liberal economic models of allocating cash.
For historians of international development, some new ironies are apparent. Throughout the Cold War, donors routinely paid in cash for the loyalty of friendly states. Development was a low priority, trumped by the foreign policy imperative to secure cooperation from compliant governments. Attempts to influence how the money was spent were deftly thwarted, most flagrantly, perhaps, in the construction of presidential palaces by the kleptocratic Mobutu Sese Seko in former Zaïre, now Congo. Mindful of that legacy, recent international agreements between donors – in Paris, Accra and Busan – emphasize the need to assist recipients to manage donor resources.
A broad church
The emerging consensus implicitly accepts a catalogue of past errors. Aid has been too prescriptive, too diffused, complex, disruptive of local capacity, and overdependent on “technical assistance” from donor-country consultants. The still-fledgling principles of country systems are a broad church, emerging from the long debate among donors over “authorship” and “ownership” of aid policy and programs.
“Developing countries should have ownership and they should set the priorities,” Malcolm Bruce, chairman of the U.K. parliamentary committee on international development, told Devex. In a period of austerity, OECD governments are vulnerable to the charge of throwing good money after bad.
To persuade skeptical parliaments and taxpayers, donors hope that greater leverage from country systems will demonstrate better “outcomes” from aid. The onus on recipients is acknowledgement that building effective states is not within the gift of outsiders. As the concentration of global economic growth moves eastward, it has become harder for OECD governments to insist on the broadly liberal tenets of development policy as a necessary condition to reduce poverty.
“Command economies seem to be most effective,” conceded Bruce. “India has told us that they can’t deliver growth the way the Chinese do.”
Arguments over the merits of strong government as a corrective to weak states often converge on the mountainous central African state of Rwanda. Widely lauded for the country’s economic recovery after the Hutu-led genocide of 1994, President Paul Kagame’s government has adopted an unusually firm stance in relation to its foreign sponsors. Donor activities are strictly circumscribed, reporting quarterly to ministers in Kigali to demonstrate compliance with government objectives. Aid dependency has fallen from 86 percent of the government budget in 2000 to 45 percent in 2011. Over the same period, an industrial-scale reorganization of peasant farmers into vast cooperative estates has made Rwanda self-sufficient in food for the first time in recent memory.
Vision 2020, Rwanda’s national development plan, takes the industrial and technology-led booms in Singapore and South Korea as models for development. Kagame himself is a militarist who is routinely accused of repressing dissent and curbing press freedom, and has deftly criticized donors while commandeering aspects of their programs. Resourcefully, he endorsed the anti-aid polemic of Zambian economist Dambisa Moyo – even while recruiting the services of former U.K. Prime Minister Tony Blair, a strenuous proponent of aid, as his “governance” adviser. Some observers contend that Kagame has capitalized on the collective guilt of Western powers for their nonintervention during the 1994 genocide.
Donors’ tolerance of authoritarian traits is a fact of history. More recently, it reflects some dilution of the liberalizing orthodoxy that has prevailed since the late 1980s. Advocates of country systems are cautious of stating how and when to impose conditionalities. To set detailed criteria for aid – beyond intermittent progress on the scoreboard of the Millennium Development Goals – is to create new hostages to fortune.
In Westminster, Bruce adopted a double negative to communicate his advice to DfID: “Our committee has said that aid should not be unconditional.”
For AusAID, Dunn chose a similar formulation: “AusAID is never without strings.”
Instead, a broadly common checklist for assessing aid is becoming institutionalized within the “results framework” pioneered by the Asian Development Bank. The new criteria includes: the MDGs, the impact of national contributions, operational efficiency and social goods.
The Accra Agenda for Action, ratified in 2008, commits donors “to channel 50 percent or more of government-to-government assistance through country fiduciary systems, including by increasing the percentage of assistance provided through program-based approaches.” Yet, even keen proponents of general budget support have a long way to go. The European Commission, Sweden and U.K. will allocate about 20 percent of total spending to GBS in 2012. Australia directs less than 10 percent of its aid through direct government channels. American legislators, meanwhile, remain deeply uncomfortable about any spending not directly accountable to Congress.
An urgent test of the commitment to local fiduciary systems is in conflict and post-conflict zones. Afghanistan and Iraq may be exceptional examples, where donors are subject to unusually keen scrutiny. A 2010 report from the U.S. Senate Foreign Relations Committee estimated that $60 billion in military and development spending had been squandered through waste and corruption in both countries. Under pressure from the military drawdown, the United States intends to channel at least half of its aid money to Afghanistan through the Afghan government’s core budget by the end of 2012 – a drastic change of course from Washington.
In stark contrast, the evolving response to South Africa’s AIDS epidemic illustrates a policy U-turn driven by competition within the ranks of its governing elite. Former President Thabo Mbeki’s skepticism over the use of antiretrovirals to treat HIV was largely subdued by December 2008, when he was ousted by rivals within the African National Congress. His successors have asserted their autonomy over health policy, even as they fell into line with orthodox opinion. In a January 2012 report, the U.S. Center for Strategic and International Studies found that “increased South African ownership has brought unprecedented levels of money and political will to the battle against HIV/AIDS.” A multiyear hand-off will reconfigure U.S. aid, away from direct management and service delivery to more limited “technical assistance.”
Higher aid budgets, as leading donors edge closer to the U.N. target of 0.7 percent of donor countries’ gross national income, will test the absorptive capacity of recipients. Here, supporters of country systems confront a chicken-and-egg conundrum: The risks are highest in the most fragile states but, without resources, fragile states cannot develop competence. Early academic research suggests that budget transfers enable better alignment of donor interests and can be conducive to better management of public finances. The critical first hurdle is to conduct effective due diligence.
“We wouldn’t dream of giving GBS to the Democratic Republic of Congo, for example. It is too chaotic,” said Bruce.
A stubborn problem in many low- and middle-income states is the vulnerability of local oversight bodies. DfID, Sweden and the World Bank invest heavily in programs to improve management of audit institutions, such as accounting software and professional training. The United Nations Development Program’s Deepening Democracy project provides financial resources to foster greater autonomy of parliaments – a perpetual contest against party machines, and the Westminster-style “whip” system on which governments rely to rubber stamp legislation. Such programs are emblematic of the shift to country systems, premised on the assumption that donors and recipients share a mutual interest in “partner engagement.”
In practice, political imperatives are always local. Faced with huge competition for resources, most ministers prefer to bargain with donors behind closed doors. Parliamentarians and public auditors at the margin of these relationships can find themselves excluded from the real circles of power. In Tanzania, a series of energetic parliamentary committees has exposed corruption in government and at the central bank. Bunge Lenye Meno, Kiswahili for “a parliament with teeth,” became a household phrase.
“The ideal situation is to have the teeth, and the meat to chew on,” said Samuel Sitta, a former speaker of Bunge, or parliament, who was restored to the Cabinet in November 2010.
A crowded field
The country systems approach is more an evolutionary step than a revolutionary one. As a systemic concept, it is a big idea in a field crowded by many competing actors, methods and interests. Increasingly, the influence of donor agencies is eclipsed by private sector growth, more trade and higher remittances from abroad. Development assistance has slumped from a peak of 70 percent of capital flows to poor countries in the 1960s to just 13 percent by 2011. In 2009, for example, China eclipsed the World Bank as the leading source of foreign investment in African infrastructure, much of it via state-backed commercial lenders and industry.
Recent agreements among donors have extended the rationale of poverty reduction strategy papers, required by donors in the late 1990s as a condition for aid, into the realm of actual practices and behavior. Then, policies which met donor objectives qualified for poverty reduction strategy credits. Now, the ethos of country systems has elevated local “ownership” into a test of viability for both new and old concepts in aid. A 2006 survey of budget support in Nicaragua conducted by the University of Birmingham suggests the likely outcome of recent trends. It found that policy shifts are “a limited basis for country ownership; this means that the international partners, in practice, take a leading role in defining targets and conditions.”
Donors are trying to achieve more when their relative influence is in long-term decline. No broad evidence exists that aid can improve the productivity of recipient economies – the only route to economic growth. Hence, donors have regrouped in their effort to tackle poverty.
“We may not have all the answers,” Donald Kaberuka, president of the African Development Bank, told shareholders in 2011. “But I am confident we are at least beginning to ask the right questions.”
A useful test of their changing approach will be whether the actions of donors can nurture the assertiveness – succinct, forceful, as yet not optimistic – of Evelyn in Unification Town.