Over the past 15 years, country ownership has become one of the central tenets of the aid effectiveness agenda and a part of every development worker’s vocabulary. Yet, we have never adequately reconciled the concept of ownership with the need for a country to be accountable for its policies, including controlling patronage and corruption.
This is partly because both donors and their development partners are willing to treat development partnerships and activities as technical interventions insulated from local politics rather than explicitly recognizing that the allocation of scarce resources, including foreign aid, is inherently political.
This tendency has resulted in country ownership being defined in a narrow, unidirectional manner that makes confronting the binding policy constraints to economic and social progress much more difficult. In these circumstances, the concept of country ownership is too often invoked to protect the status quo instead of advancing sustainable development.
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It is easy to understand why this is the case: ownership matters. As foreign actors, donors must be careful to respect their development partners’ right and responsibility to manage their own affairs. Cultural differences, nationalist sentiments and the legacy of exploitation and distrust from the colonial and Cold War eras amplify these sensitivities. Periodically, tensions flare up, such as when the World Bank was demonized for making its loans subject to “policy conditionality,” a term that gained so much opprobrium that it is no longer used in development parlance.
And therein lies the rub. Donors want their funding to produce transformative change, which by its very nature touches on political choices and threatens the status quo. Recipient countries, on the other hand, would prefer a more transactional relationship both because of the understandable desire to protect their sovereignty and keep foreigners out of their internal affairs and because donors can be more easily “managed” if their activities are, by definition, limited to specific technical interventions.
However, thinking of country ownership as a way of excluding or controlling external stakeholders runs against another fundamental lesson of development: policy matters. Few countries have rapidly raised living standards in the absence of a policy environment that promotes private enterprise, ensures a reasonable level of predictability and controls patronage, clientelism and corruption.
There are models in both the private and public sectors that show how external investments can both rely on and reinforce ownership while at the same time confronting underlying policy constraints to development.
There has been a lot of talk recently about how private investment has eclipsed aid as a source of development finance. However, the reality is that foreign investors demand all sorts of assurances, both legal and political, before committing resources. And they won’t invest if they believe a country or business partner won’t keep its word or is too corrupt to do business with.
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Assessing and negotiating the conditions for an investment is just a normal part of doing business. That is why we see nearly all of the increase in private investment going to the countries that have improved their policy environment and have the confidence to negotiate policy changes to attract investment. These are mostly countries that have already moved into lower-middle income status but include some low-income countries, such as Rwanda. Where domestic resources and external commercial investment predominate, countries assert their priorities and donors have limited influence. For example, in South Africa where foreign aid accounts for less than 1 percent of its gross national income, donors have never had much influence on policy matters.
The Millennium Challenge Corp. provides an example from the public sector of an aid program for low-income countries that upholds country ownership and at the same time takes a multidimensional approach that combines technical work with policy reform (what before 2000 would have been referred to as policy conditionality) as an integral part of program design. It does this by restricting eligibility to countries that meet a set of independent, internationally accepted criteria for governance, social investment and public financial management; explicitly stating that MCC funds may only be used to overcome binding constraints to economic growth; and allowing qualifying countries to identify those constraints themselves through a rigorous analytical process.
Because the countries own the design, they have shown themselves remarkably willing to muster the political will to enact tough reforms, such as retiring parastatal debt (Malawi), restructuring the power sector (Ghana, Tanzania), replacing moribund parastatal management of irrigation schemes with private, farmer-led management (Armenia, Mali, Moldova, Senegal), and enacting laws to give women full legal status (Lesotho).
As these examples show, it is possible to uphold the principle that a country must set its own priorities but at the same time honestly confront poor governance, outdated or ineffective policies, and the role of corruption in limiting the impact of development investments.
Let’s hope that at this week’s third International Conference on Financing for Development the discussion includes an updated, more multidimensional view of country ownership that responds to the realities of an increasingly globalized, sophisticated world.