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Development effectiveness

In the Financing for Development outcomes, governments commit to efforts to enhance the effectiveness of international development cooperation and ODA in particular. The Addis Ababa Action Agenda presents a range of commitments to enhance the quality, impact and effectiveness of international development cooperation, including adherence to agreed development effectiveness principles. 

In this regard, development partners committed to align activities with national priorities, untie aid, promote country ownership, support results orientation and strengthen country systems, use programme-based approaches where appropriate, strengthen partnerships for development, reduce transaction costs, and increase transparency and mutual accountability. They also committed to make development more effective and predictable by providing developing countries with regular and timely indicative information on planned support in the medium term. The Addis Agenda also notes that efforts to pursue effective development cooperation will be addressed primarily in the Development Cooperation Forum (DCF) of the United Nations Economic and Social Council (ECOSOC), while taking into account the efforts of other relevant forums, such as the Global Partnership for Effective Development Cooperation (GPEDC). 

National development cooperation policies (NDCPs)

As both the 2030 Agenda and the Addis Agenda reflect a broader concept of development cooperation, including diverse modalities and actors, countries are starting to shift from aid policies to a more comprehensive national development cooperation policy approach. Some countries have started to reflect key aspects of the 2030 Agenda for Sustainable Development, such as the importance of all three dimensions of sustainable development, commitments to address inequality, and the universality of the new agenda and its applicability to all countries in their policies.

Country results frameworks

 

Over half of the developing countries participating in the 2018 Development Cooperation Forum Survey had adopted country-led development cooperation results frameworks, to encourage use of their own country systems and to reduce the administrative burden caused by multiple donor reporting systems. Only 12 per cent of countries reported that development partners still had completely parallel results frameworks. Nonetheless, only 38 per cent of the countries that had country results frameworks in place reported that monitoring had “highly improved” the alignment of partners’ activities with national priorities. Moreover, while many developing countries have set targets for what information they need to provide in their national results frameworks, bilateral donors have adopted targets in less than a third of the countries that have these frameworks. A rising challenge is also to monitor donor engagement with local private sector partners, the overwhelming majority of which do not include the national Government as a partner.

Untying of aid

Uuntying aid can allow countries to source more competitively priced inputs; support local or regional firms; generate local expertise and promote better alignment of ODA with the objectives and financial management systems of recipient countries.

In 2016, the share of untied aid reported by DAC countries accounted for 79.8 per cent of total ODA. For the countries covered by the 2001 DAC recommendation to untie ODA to LDCs and non-LDC Heavily Indebted Poor Countries (Untying Recommendation), this share was higher, reaching 88.3 per cent of ODA. The reach of the Untying Recommendation was extended in October 2018, when the DAC agreed to add 10 countries to the list of covered countries. It now covers 65 countries but still excludes many countries and key sectors.

DAC procurement statistics illustrate that “informal tying” remains a major challenge. In 2016, 51 per cent of the value of bilateral ODA contracts reported to the DAC flowed to firms in donor’s own countries. Development partners must take urgent action to remove barriers, to allow developing countries, including LDCs, to better tap into the important double dividend that local procurement can bring when economic conditions are right. This is particularly critical against the backdrop of ongoing efforts to scale up blended finance. Without the appropriate regulatory or policy framework, increased reliance on blended finance poses a real risk of a proliferation of tied or “informally tied” aid. 

Tracking allocations for gender equality and women’s empowerment

The OECD has introduced a marker to track ODA that is focussed on gender equality and empowerment of women as either a significant or principal objective. This marker shows an upward trend, reaching 39 per cent of total bilateral allocable aid in 2017 (figure 7). While this is an improvement, only 4 per cent of bilateral aid was dedicated to gender equality as the principal objective. Regarding other population groups, efforts are currently under way to introduce a new marker on ODA for persons with disabilities. Work is also ongoing to better match sectoral ODA flows to SDG outcomes. As the SDGs by their very nature can only be achieved through combinations of multi-sectoral interventions, it will be important to better align and trace sector financing strategies with SDGs and national development priorities for their achievement. In addition to ODA, such tracing could also include other official flows (OOF), to gauge the impact of all official development finance on SDG outcomes.

Transparency and quality of data

Many development actors have made progress in the comprehensiveness of publicly available information on development cooperation, and moderate progress in upgrading reporting practices to make reporting more timely. However, publishing forward-looking information to enable countries’ effective planning and strategic management of diverse development resources remains as a challenge. 

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Development co-operation providers have made important progress in reporting on their development cooperation to the OECD-DAC Creditors’ Reporting System (CRS), including non-DAC members voluntarily reporting to the CRS. The number of providers being assessed on their timeliness, completeness and quality of reporting has increased from 25 in 2014 to 46 in 2016. The overall picture is positive, with 71 per cent of the 46 assessed providers scoring good or excellent in their timeliness, completeness and quality of their reporting.

The OECD also conducts the Survey on Donor’s Forward Spending Plans. An assessment of the timeliness, completeness, accuracy and public disclosure of Forward-Spending information of 42 development partners, including non-DAC members, for their 2015 data revealed significant progress, with two-third of providers scored in the good and excellent categories. However, 11 providers have experienced a decline in the scores since 2013. Completeness and accuracy of the reported aid forecasts were among the key weaknesses of those providers that obtained lower scores.

More than 500 organizations, including donors, NGOs, foundations, development banks and private sector, publish data through the International Aid Transparency Initiative (IATI), a voluntary, multi-stakeholder initiative. IATI data is timely, comprehensive and forward-looking in a format that is machine-readable, comparable and openly accessible.

In 2016, IATI has worked to better meet the needs of humanitarian actors and to this end has worked to establish new guidance on the reporting of humanitarian data. The most recent update to the standard to version 2.02 also includes the ability to publish results and needs assessments and to tag activities to specific SDGs. These upgrades to the standard together with sustained outreach activities by UNDP in its role as coordinator of the IATI Secretariat have also led to an increase in membership numbers in IATI from 66 to 75 members, including four additional UN agencies (UNIDO, UNEP, FAO and WHO). Concerted efforts are being made to increase the use of available data, particularly at country level, and several countries announced plans to integrate IATI data into their Aid Information Management Systems. See IATI website for more.

While acknowledging progress in completeness and timeliness of data from development partners on development cooperation, the latest DCF Accountability Study calls for greater attention and efforts to address the persisting challenges facing developing countries, including uneven accessibility of development cooperation information systems for different stakeholders; difficulties in collecting quality data through existing development cooperation information systems; and lack of financial resources to develop and strengthen development cooperation information systems.

 

Similarly, the GPEDC 2016 monitoring found that while a number of countries have aid or partnership policies in place, progress in enhancing mutual assessments at the country level remains hindered by the lack of inclusiveness and transparency in the review process. While more than two-thirds of countries (69 per cent) that participated in the GPEDC 2016 monitoring conduct joint review of progress towards country-level targets together with their partners, less than half of the countries involve local governments and non-state stakeholders in these assessments or make the results public.

Development cooperation funds that are on-budget and thus subject to parliamentary oversight for governments receiving these funds provide greater clarity on available resources, and help to avoid undermining domestic decision making and accountability procedures with regard to the allocation and use of cooperation funds. The 2016 Global Monitoring Report found that two-thirds of development co-operation finance now recorded in budgets is subject to parliamentary oversight, and a growing number of countries track gender budget allocations – almost twice as many compared to the previous monitoring round. There is room for improvement, however, in budget planning processes and information management systems for public expenditure.

Effectiveness of the United Nations system
The United Nations development system is seeking ways to improve the effectiveness of its development cooperation through the Quadrennial Comprehensive Policy Review (QCPR). Restricted aid earmarked for specific projects contributes to fragmentation, competition and overlap among entities, and discourages United Nations system-wide focus, strategic positioning and coherence. Mobilizing of core funding is one of several issues addressed in the Secretary-General’s proposed Funding Compact, an agreement by Member States and the United Nations development system that aims to reverse highly fragmented funding and improve transparency and accountability. 
In presenting his proposals on repositioning of the United Nations development system to better respond to the 2030 Agenda for Sustainable Development, the Secretary-General has placed the effectiveness of the system’s development cooperation front and center, emphasizing three key principles: reinforcing national ownership; developing country-contextual responses; and ensuring the effective delivery of development results on the ground
Tax exemptions on aid goods and services
Aid-funded projects are often exempt from taxation, through tariffs on imported goods, value-added tax, or income taxes for personnel and enterprises, with a view to ensuring that a greater (or the full) share of aid is allocated towards the targeted project or programme. However, such exemptions run counter to broader efforts to reduce exemptions in tax systems, and to the overall aim of strengthening the mobilization of domestic resources. In response, Members States committed in the Addis Agenda to “consider not requesting tax exemptions on goods and services delivered as government-to-government aid, beginning with renouncing repayments of value-added taxes and import levies.” 
 
 
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This issue has been on the agenda of the United Nations Committee of Experts on International Cooperation in Tax Matters since its first session in 2005. Draft guidelines were produced in 2007. The International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), United Nations and World Bank Group have since continued to raise the issue. While progress was initially slow, it has recently gathered momentum. Following the early example of France, the World Bank, the Inter-American Development Bank and the Asian Development Bank, the Netherlands and Norway started to refrain from asking for tax exemptions. In 2015, Denmark, the Netherlands, Poland and Sweden submitted a joint letter to the European Commission, calling on the European Union to phase out the practice. In 2017, the Addis Tax Initiative decided to examine the issue. The United Nations Tax Committee will also continue its work on this topic in its current session. In February 2018, at the first Global Conference of the Platform for Collaboration on Tax, the Platform’s partners (i.e., the IMF, OECD, United Nations and World Bank Group) noted that they intended to “review current practice, and provide guidance and recommendations, on the tax treatment of ODA funded goods and services”.

South-South cooperation and effectiveness

Read more on the estimates of South-South flows in the section on South-South cooperation. Southern partners have stepped up their own cooperation assessment systems and processes. While they have stressed that a single definition and methodology for reporting on South-South cooperation is neither feasible nor desirable, a growing number of them are developing approaches to assess the quality, effectiveness and impact of their development cooperation, measured against their national circumstances and priorities. Efforts are being made to share evaluation procedures and standards at the regional level, the most advanced example being that of the Ibero-American countries.

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