How much are major donors spending on local contracts?

In recent years, localization has been at the center of the conversation about how donors — both private and public — should spend their money. The United States, in particular, has become a leading figure in this after Samantha Power, the administrator of the U.S. Agency for International Development, vowed nearly two years ago that a quarter of all eligible money will be allocated to local partners. USAID is far away from its goal, although it is making progress. But what are the other big players in the world of development doing? In order to find out, we turned our attention to the other leading figures in the development sphere, mainly the four biggest bilateral donors after the U.S. — Germany, Japan, France, and the United Kingdom. Based on the preliminary data from the Organisation for Economic Co-operation and Development, these four donors spent $84.1 billion on aid in 2022 — 41.2% of the total official development assistance, or ODA, from the Development Assistance Committee member countries. In a recent analysis on Devex, which looked at European donors, we found that there was relatively little evidence that those donors had made much progress on local funding. Having attempted to quantify the progress, we found that it was hard to get clear evidence, but it appears that all funders are spending relatively low amounts. What data did we examine? In this analysis, we looked into the data and reports from these donors' lead aid agencies to see how much of their total contract spending went to organizations in low- and middle-income countries. This includes the Agence Française de Développement, or AFD, Deutsche Gesellschaft für Internationale Zusammenarbeit, or GIZ, Foreign, Commonwealth & Development Office, or FCDO, and Japan International Cooperation Agency, or JICA. Unlike in our USAID pieces, where we were able to compare the place of performance with the location of the recipient organizations, in this piece, we only looked at the portion of the money going to organizations in low- and middle-income countries. This is due to the limited information available in the datasets that we used. We looked at contract data because usable grant data for these agencies was not publicly available. In all cases, we used the most recent data available and converted figures using historical rates. What did we find? In our analyses of USAID data, we found out that between 5% and 6% of its assistance, worth $1.2 billion, went to local organizations in fiscal year 2021-22. On the other hand, around 4.7% of the total, worth $276.9 million, was awarded to local organizations through contracts. This sets a benchmark for other funders to compare to — and most are in the same ballpark. For Germany, just 6.4% of the total was disbursed by GIZ to local organizations. For Japan, the rate is significantly higher — 87.9% of the total amount spent on international contracts. However, this only represents a fraction of Japan’s total contract spending. We found that if we compare it with the amount spent on Japanese contractors, the proportion goes down to between 13% and 14%. The French Development Agency also shares data on how it spends its budget. But in the case of contracts, it’s limited to those with EU financing. Of this, just 2.8% went to LMICs-based contractors. Finally, the U.K. disburses more than half of its ODA through FCDO. Of the amount it spent on contracts, 17.3% went to LMICs. However most of this went on a single contract, and comparison with other years is needed to see if this level remains consistent. Germany Germany is the largest European donor and the second biggest among DAC member countries after the U.S., with $35 billion ODA in 2022 — 0.83% of its gross national income and 17.2% of the total. One of the agencies implementing its ODA is GIZ — which is responsible for technical cooperation with partner countries. According to GIZ’s latest procurement report, the agency spent €‎2.4 billion ($2.8 billion) through contracts and financing in 2021 — €1.1 billion through services and goods, €1 billion through grants, mainly to multilaterals and nonprofits, and the rest through other instruments. The report did not provide the full list of recipients, but it included the 100 biggest contractors for both services and goods. We found that overall, the top 100 service contractors received €‎340.6 million, while the top 100 goods contractors received €‎62.9 million — culminating in 36% of the total amount spent on goods and services. Of this, just 6.4%, or €25.7‎ million, went to LMICs-based contractors — €12.5 million to lower-middle-income countries, €9.8 million to upper-middle-income countries, and €3.5 million to low-income countries. Ghana was the biggest recipient among LMICs, with €3.4 million. Then Iraq, with €2.4 million, Jordan and Ethiopia, with €2.1 each, and Indonesia, with €2 million. Japan Japan has been the largest Asian aid donor for years, spending around $17.5 billion in 2022 — 0.39% of its GNI and 8.6% of the total ODA from DAC donors. JICA implements most of the development activities, with the budget coming from the Ministry of Finance. In FY 2020-21, JICA's total operations amounted to nearly ¥1.8 trillion ($16.2 billion) — ¥83.9 billion in grants, ¥131.6 billion in technical cooperation, and ¥1.6 trillion in finance and investment cooperation. A portion of its budget is disbursed through contracts, which are divided into two main categories: domestic — or those awarded to Japanese contractors — and international — or those awarded to foreign contractors. Tracking JICA’s procurement activities is difficult, as it removes older data from its website after some time. Devex was able to collate all of the international contracts awarded in FY 2020-21. As of writing, the international contracts for the fourth quarter of FY 2021-22 have already been uploaded but were not included in this piece as the information was not available prior to the analysis. Overall, JICA spent ¥20.5 billion on international contracts in FY 2020-21. Of this amount, ¥18 billion went to LMICs — 87.9% of the total international contracts. The biggest portion of this, worth ¥10.8 billion, went to contractors in lower-middle-income countries — 52.5% of the total. Another ¥5.2 billion went to upper-middle-income countries and ¥2 billion to low-income countries. Contractors in high-income countries accounted for ¥1 billion, while ¥1.4 billion went to contractors — mostly individual consultants — with undisclosed locations. Indonesia was the biggest recipient of contracts among LMICs, with ¥1.3 billion — 7% of the total. Kenya followed, with ¥1.2 billion, Vietnam, with ¥986.9 million, and Mexico, with ¥870.2 million. Although the percentage going to local organizations may appear significant, this amount only represents a fraction of Japan’s total contract spending. Based on the only available data, JICA awarded ¥113.7 billion to Japanese contractors in FY 2021-22. Assuming that around the same amount of money was spent on international contracts that year, then the percentage of contracts going to LMICs would be between 13% and 14%. France France spent $15.9 billion on aid in 2022 — 0.56% of its GNI and 7.8% of DAC’s total. Over 10 agencies carry out French aid. The newly formed Presidential Development Council sets the development policy; the Interministerial Committee for International Cooperation and Development, or CICID, acts as the chief coordinating body among other actors; while the other agencies, including AFD, the Ministry for Europe and Foreign Affairs, and the Ministry of the Economy and Finance, implement development activities. Based on the most recent data, more than 40% of the country’s ODA in 2021, worth $7.9 billion, was disbursed by AFD. AFD publishes data on procurement activities and project financing through Open Data. However, it only includes a list of awards co-funded by the European Union. Based on the data, AFD, with EU participation, spent €23.4 billion on contracts between 2017 and 2021. Of this amount, just €662.7 million, or 2.8% of the total, went to contractors in LMICs — €551.7 million to lower-middle-income countries, €108.4 million to upper-middle-income countries, and €2.5 million to low-income countries. The largest chunk went to French contractors — €20.7 billion, or 88.8% of the total. Among LMICs, Tunisia received the biggest amount, worth €490.3 million. Then Turkey, with €64.7 million; India, with €46.4 million; and China, with €34.6 million. United Kingdom Despite rounds of budget cuts beginning in 2020, the U.K. has remained a significant source of development aid among DAC member countries. Its ODA amounted to $15.7 billion in 2022 — 0.51% of its GNI and 7.7% of the total. Of this, around $4.5 billion was spent on domestic refugee costs. Based on the latest data, nearly three-quarters of U.K.’s ODA in 2021, worth £8.2 billion ($11.3 billion), was disbursed through FCDO — £3.4 billion in bilateral aid, £1.1 billion in bilateral aid through multilateral, and £3.7 billion in multilateral aid. According to its data, FCDO procured close to £1.1 billion ($1.3 billion) in FY 2021-22 through contracts — just around 13% of its total spending. More than half of this, worth £636 million, went to U.K.-based contractors. Around £186.1 million, or 17.3% of the total, went to recipients in LMICs — £175.1 million in low-income countries, £6.4 million in lower-middle-income countries, and £4.6 million in upper-middle-income countries. However, the money allocated to LMICs mostly went to the Democratic Republic of Congo, which received £174 million, or 93.5% of the total. Almost all of that went on a single security contract, suggesting that the overall U.K. figure is not representative of typical annual spend. Other top recipients included India, with £3 million, South Sudan, with £858,000, and Russia, with £795,000. Try out Devex Pro Funding today with a free five-day trial, and explore funding opportunities from over 850 sources in addition to our analysis and news content.