On country ownership, major aid donors still have a ways to go

For several years now, country ownership — the principle that aid recipients should be in charge of their own development — has been gaining traction across the donor community. Most notably, country ownership was one of four basic principles for development cooperation agreed upon by development stakeholders, including major aid donors, at the latest high-level forum on aid effectiveness in Busan in November 2011, building on commitments made in Accra in 2008 and Paris in 2005. In the two and a half years since Busan, country ownership has also emerged as a key element of donor reform efforts in London, Canberra and Washington. Even the U.S. Agency for International Development has rebranded the implementation and procurement reform component of USAID Forward as Local Solutions. The Global Partnership for Effective Development Cooperation — which held its first high-level meeting last week — recently released a report that is meant to "take stock" of progress on the commitments made in Busan, including country ownership. Using data from 46 aid recipients and 77 donors, the report suggests that despite recent strides, more needs to be done to further country ownership. In this Devex analysis, we took a closer look at three key indicators of country ownership. The GPEDC reviewed a fourth indicator — effective use of country results frameworks — but the report says it is still “too early to assess progress.” Country systems The GPEDC report indicates that aid donors have made little headway — if any — toward increasing the use of country systems over the past three years. In 2013, 48 percent of multilateral and bilateral aid disbursements for governments in 38 countries used country public financial management and procurement systems, which is unchanged from 2010 levels. GPEDC — among others in the aid community — considers PFM and procurement systems to be a proxy for the use of broader host country institutions. According to the report, 16 of 37 aid donors have decreased their use of country PFM and procurement systems since 2010, while 19 donors have seen an increase and the remaining two have seen no change. Despite its reputation as one of the most effective aid donors, the United Kingdom posted one of the largest decreases (21.3 percent) in the use of country systems. Meanwhile, the Inter-American Development Bank — which has been particularly aggressive in its adoption of country procurement practices — recorded the biggest percentage increase (562.5 percent). The slowing momentum toward country systems — between 2005 and 2010, donors’ use of country systems increased substantially — may have much to do with the fact that many host countries’ absorptive capacity remains sorely lacking. In its report, GPEDC further revealed that there has been no overall change in the quality of country countries’ PFM systems since 2010. Unsurprisingly, donors have made much further headway in embracing country systems in countries with relatively stronger government institutions such as the Philippines and Kenya. This brings to the fore the chicken-and-egg dilemma associated with country systems: while the risks may be highest in the most fragile states, putting their institutions through the country systems test may be just what they need to build absorptive capacity in the long run. In Busan, the development community had re-affirmed a pledge from the 2005 Paris Declaration to strengthen country systems, while at the same time, increasing their use. Untied aid Progress on aid untying — an OECD-DAC commitment that dates back to 2001 but was re-affirmed in Busan — also seems to have slowed recently, the GPEDC report reveals. In 2012, 79 percent of bilateral ODA was reported as untied, compared with 77 percent in 2010 and 72 percent in 2008. Before major aid donors pledged to untie aid 13 years ago, less than half of bilateral ODA had been untied. As the GPEDC report points out, some major aid donors have been under increasing domestic pressure to reconsider their commitments to aid untying following the global financial crisis. Even more recently, the election of a conservative Australian government in September of last year has prompted concern that Canberra might make a U-turn on its untied aid policy as part of its efforts to re-elevate Australian national interest in the country’s aid policy. For now at least, the GPEDC report reveals that Australia remains committed to fully untying its aid. Although not among the four donors that have completely untied aid — Iceland, Ireland, Norway and the United Kingdom — Australia is pretty close: 99.85 percent of its bilateral aid is currently untied. Twelve other donors, meanwhile, have increased their untied aid share over the past three years while seven decreased their untied aid share. Interestingly, Italy — which has been building up its aid regime despite economic woes at home — has seen the second-biggest increase (41 percent) in its untied aid share, next only to South Africa (53 percent). On the other hand, Greece — the aid donor hardest hit by the eurozone crisis — has had the largest decrease (87.5 percent) in its untied aid share since 2010. Despite the remarkable if uneven progress on aid untying over the past 15 years, many in the aid community contend that in practice, donors still remain reluctant to broaden their partner bases to include local firms. As Devex analyses have revealed, U.K., U.S. and Australian firms continue to win the vast majority of awards from the U.K. Department for International Development, the USAID and the Australian aid program, respectively. On-budget aid In line with commitments in both Busan and Accra, aid advocates and analysts have also urged donors to increase the share of aid that is counted in national budgets and thus subject to public scrutiny — part of an effort to ensure that country ownership doesn’t just mean host government ownership. In Afghanistan, for instance, many contend that the fact that the majority of foreign aid to Kabul has been disbursed on an off-budget basis has only helped fuel the corruption and mismanagement that has become endemic to the Afghan aid program. The GPEDC report suggests that aid donors seem to be heeding this message. According to the report, the share of aid disbursed on an on-budget basis has increased substantially over the past three years — from 57 percent in 2010 to 64 percent in 2013. Over the same period, 23 of 37 donors have seen their on-budget aid share increase, including the United States, which has seen political resistance to ramping up on-budget aid. Meanwhile, 13 other donors have seen their on-budget aid share decline since 2010, with Austria and the Asian Development Bank seeing the largest decreases. Looking ahead, GPEDC has called for foreign aid donors to increase the share of aid disbursed on-budget to 85 percent by 2015. Currently, only seven countries (Bangladesh, Cape Verde, Kenya, Lesotho, Mozambique, Nepal and Samoa) capture at least 85 percent of their aid receipts in their national budgets. 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