10 June 2010

Can DFID Leverage Reform in the Multilateral Aid World?

DFID, as part of its review of spending has launched a review of its multilateral aid spend.

Is the UK taxpayer getting value for money from 30 or so global organisations? Let's look at some of the potential criteria.

Transactions costs. Channeling money through multilateral aid agencies may reduce transactions costs for recipients and for bilateral donors. But on the ground, countries still have to deal with 30 or so bilateral donors and 30 or so multilaterals. In addition the UK taxpayer may simply be paying two sets of administrators--in the UK to get the money out and in Washington, Rome and New York to allocate the money.

Ownership. Can multilaterals support government systems better than direct budget support? I'm not sure. And I'm not even sure the best way to find out-who to ask? Civil society in the South? Recipient Governments? The new Aid Watchdog?

Impact. It is harder to demonstrate to donor citizens that their taxes are having a particular effect when resources are pooled in multilaterals. Interesting to note that the main point made by the International Development Select Committee when they reviewed the DFID-World Bank relationship in 2008 was that the World Bank needed to do better on making impact a central part of how it measured its effectiveness.

Credibility. This depends on governance and representation. While the heads of multilateral agencies bypass standard human resource best practice (job and person description, open competition, selected on merit by internals and externals) it is hard for these agencies to lecture on governance. On representation, change seems to be happening very slowly.

It seems to me that the multilateral agencies should prioritise their efforts on things that the bilaterals cannot do or at least cannot do as well. This means focusing more on:

* dealing with collective action failures around climate, trade and security--all the while making sure that they are fair and focus on poverty reduction
* setting norms for our collective visioning about the kind of word we want to live in
* setting standards that promote sustainable and equitable growth
* developing data sources and methods that allow us to measure and monitor the things we really care about
* being highly alert about and responsive to disasters

Perhaps the multilateral review can incentivise some movement along these lines.

There are lots of people out there who are much more knowledgeable than I am on these global public goods issues. I would love to hear from you.


JAB said...


Two points occur to me from your piece.

Transaction costs. DFID appears to believe that giving funds to multilaterals (and indeed as budget support) cuts transaction costs. But as you say, it is perhaps the case that all it really does is move transaction costs. (And in the cse of an HMG Department, it moves the transaction costs from staff to financial resources.) But DFID seems - occassionaly - to forget that monitoring effect also generates transaction costs. So advisory (and political) capacity is still required - just in a different form and at a different time.

Collective action. I think you may be right in the list of issues more suited to collective action. (Certainly on security/conflict which is my issue.) But I wonder if there isn't a link back to transaction costs here? Ideally HMG would decide what it wants and then identify the best way to get it. Sometimes (often?) this will be multilaterally or in some form of coalition; but sometimes it will be bilaterally. The problem is that DFID has increasingly few staff resources to devote to this kind of labour intensive (but relatively cheap) analysis and strategy making. And the FCO ought to help, but it too seems to be intent on withdrawing from the debate unless the issue poses a proximate security threat (to the UK).

We need to go back to employing people (and not just money) who understand both the issues and the political and operational environment; and stop assuming that just because the aid budget has been ring fenced we can purchase outcomes through sub-contracting.

Sorry - a bit opinionated.


Rohinton Medhora said...

Dear Lawrence,

I like your assessment below and would make only one comment on the five bullets that enumerate the areas in which the multilaterals might have a comparative advantage. While not being näive about their governance or interests, I would explicitly add the multilaterals' capacity to represent the views of the emerging economies and poor countries to rich powerful interests more capably than bilaterals or private philanthropic organizations are capable of doing. As examples, I observed the World Bank's research on the impact of agricultural subsidies on poor countries to have been highly effective in changing the nature of the debate in many G7 capitals; ditto perhaps for IMF reform and capital account regimes?

I suspect this point is implicit in some of your bullets but might be worth making explicitly.

Rohinton Medhora
Vice-President, Programs International Development Research Centre