GRIPS Development Forum

Summary Report of GRIPS-ODI Feedback Seminar

"Good Donorship and the Choice of Aid Modalities
--Matching Aid with Country Needs and Ownership" 15 March 2005, Tokyo

This note provides: (i) the summary of seminar presentations; (ii) the main points discussed; and (iii) reflections and the way forward. The main purpose of this GRIPS-ODI Joint Feedback Seminar was to exchange views with the ODI researchers* (Overseas Development Institute, a leading London-based think tank on development and aid policy) on the choice of aid modalities. Additionally, taking opportunities of the publication of GRIPS study reports, Good Donorship and the Choice of Aid Modalities (English and Japanese), the seminar aimed at providing feedback to Japanese aid professionals and researchers the findings of the GRIPS research and stimulating discussions on this topic.

The seminar presentations consisted of: (i) the overview of new aid agenda and general framework for considering modality choice—challenges and dilemmas in the new agenda by Ms. Karin Christiansen (ODI); and a conceptual framework for the choice of aid modalities by Izumi Ohno (GRIPS); and (ii) case analyses\the case of primary education sector in Tanzania by Shoko Yamada (GRIPS), and the case of the health sector in Vietnam and Uganda by Yumiko Niiya (GRIPS).

Approximately 30 aid professionals participated in the seminar, including policy makers, practitioners, consultants, researchers, and NGOs. The participants appreciated the GRIPS and ODI researchers for sharing their research results, as well as providing an opportunity to discuss the modality issue in an open and objective manner. Active discussions took place over: (i) the perception of aid modality debates in Japan; (ii) the relevance of the proposed framework; (iii) the nature of the process of choosing aid modalities; (iv) alignment and the use of general budget support (GBS); and (v) East Asiafs development and aid experiences, and so on.

*Ms. Debbie Warrener (ODI), who was originally to serve as moderator of the seminar, could not attend for health reasons.

Summary of Presentations

  1. Karin Christiansen (ODI) gChakugan Taikyoku: Challenges and Dilemmas in the New Aid Agenda" (pdf file, 44KB)

    The speaker first introduced a number of common elements in the gnew aid agendah including country ownership, result orientation, alignment, harmonization, focus on political context and economic analysis. She went on to highlight a series of gtensionsh within the agenda: (i) aid modalities vs. donor behavior; (ii) harmonization vs. alignment; (iii) results vs. process; (iv) quality of policy vs. ownership; and (v) rewarding good performance vs. building better performance. Some of these tensions were seen as more difficult to reconcilable than others, but the general for proposal set out for attempting to respond to these challenges focused on: (i) great clarity by donors around their objectives and the trade offs between them (aid-trade-security etc); (ii) distinguishing means from ends (e.g. GBS and PRS processes as means not ends); (iii) greater realism, honesty around expectations and results and more feasible time frames; (iv) assessing potential benefits associate with different approaches or choices as well as risks.
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  2. Izumi Ohno (GRIPS) gA Conceptual Framework for the Choice of Aid Modalities: Marching Aid wit Country Needs and Ownershiph (pdf file, 52KB)
    --Handout (pdf file, 34KB)

    The speaker stressed the importance of sharing the process for modality choice between partner countries and donors so that the actual needs of partner countries can be better reflected. So far, this process tends to be donor-driven. The speaker first presented the general framework and factors to be considered in deciding aid mix. More specifically, to take account of the country-and sector-specific situations, she introduced two perspectives: (i) gpriority country needsh (as shown by Development Priority Matrix); and (ii) grecipient-donor relationshiph (as shown by Typologies of Ownership). She also provided the overview of Vietnam, Tanzania, and Cambodia, which have come out with different aid mix. The three countries differ significantly in terms of aid dependency, the degree of core government functions, potentials for private sector development (PSD), aid management capacity, seriousness of transaction costs, and openness to external influence. Finally, she highlighted elements of ggood donorshiph that should be honored across all aid modalities.
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  3. Shoko Yamada (GRIPS) "Priorities and Equity of Resource Distribution: the Case of Primary Education Development Program (PEDP) in Tanzania"(pdf file, 31KB)
    --Handout 1 (pdf file, 13KB)
    --Handout 2 (pdf file, 22KB)

    The speaker discussed the meanings of the increased public funds to be allocated to primary education under the PRS framework and the primary education sector program in Tanzania, in light of: (i) aid flow and the trend of education resource allocation at the level of central government; (ii) efficiency and equity of the financial resource distribution from central to the district and school level (using the data from the Public Expenditure Tracing Survey (PETS)); and (iii) effectiveness of the public funds to improve educational outcomes. The speaker pointed out that the mere increase of budget allocation does not guarantee that the money reaches the school fully or that the educational system yields better outcomes. While noting the potential of new aid approaches (including sector programs and PRS) in improving the efficiency and effectiveness of aid, she stressed that such efforts of developing a comprehensive policy and aid framework need to be complemented by the responsive and context-sensitive assistance so that the political and financial prioritization at the central government results in the actual positive changes on the ground. Finally, the speaker suggested the importance of: (i) striking a balance between articulating a comprehensive aid framework and attending urgent needs on the ground; (ii) developing the capacity and negotiation power of the government to balance different donor approaches; and (iii) fostering mutual respect among donors for different aid modalities.
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  4. Yumiko Niiya (GRIPS) gSector and Country Context for the Choice of Aid Modalities: The Case of the Health Sector, Uganda and Vietnamh (pdf file, 42KB)
    --Handout (pdf file, 25KB)

    The speaker discussed the health sector in Uganda and Vietnam from a comparative perspective, by using the conceptual framework for gpriority country needsh and grecipient-donor relationship.h The speaker first presented typology of sectors by the role of public expenditure and argued that appropriate choice of aid modalities can differ, according to the stages of development of public health services. For example, while priority needs in Uganda are to strengthen public expenditure flow in the system, those in Vietnam are rather to promote private service providers. She then examined grecipient-donor relationshiph in light of aid dependency, aid management, openness to external influence at the sector level and suggested: (i) in Uganda which highly depends on aid and needs recurrent financing, SWAp with common fund can be useful to improve harmonization and alignment; but (ii) in Vietnam, priority should be given to improving the quality of donor intervention within the existing aid modality.

Main Points Discussed

Perception of modality debates in Japan

  • Several participants noted that, in Japan, debates over new modalities tend to become emotional and end up with unhealthy divisions. There is general appreciation to presenters, which attempted to provide frameworks and criteria for deciding aid mix. At the same time, many participants stated that the proposed GRIPS framework could be further improved by accumulating a larger number of case studies at the country and sector levels. (See the next section)

  • A participant questioned whether and to what extent current modality debates are relevant in light of Japanese aid experiences. For example, Japanese aid emphasizes the use of the existing government structure, avoiding the creation of new Project Management Units (PMU). Thus, Japan and the other donors may have different perception of project aid. This point should be duly recognized when pros-and cons of project aid are discussed.

  • A participant welcomed the approach presented that the choice of aid modality is not the core of development issues in itself and should be viewed as part of overall approach to development assistance. It is important to consider how the sector is organized and how resources for development (both recurrent and capital) are managed. The role of aid modality should be analyzed within this context. This is so particularly in the health sector, which is organized by multiple systems (e.g., PHC, hospital management, medical insurance).

  • A participant stated that the two presentations (Christiansen and Ohno) were inspiring because these illustrate how aid modalities are perceived by two different cultures—the West and Japan (or Asia). While the ODI presentation highlighted gtensionsh over modality choice, the GRIPS presentation stressed gaid mixh implying the co-existence of various modalities.*

*Christiansen later clarified that this is entirely a misinterpretation of UK position on aid modality. For example, the DFID policy paper on Poverty Reduction Budget Support (PRBS) states: gOur choice of types and combination of aid instruments will reflect country circumstances and the evolution of our relationship with the partner country. In most partner countries, the provision of PRBS will generally be complemented with other aid instruments. h(DFID 2000: p.1)

The relevance of the proposed conceptual framework for modality choice

  • A number of participants asked how widely the proposed GRIPS framework could be applied across sectors and countries. The country examples provided by the GRIPS team (i.e., Vietnam and Tanzania) belong to two extremes, in terms of priority needs and ownership. In reality, many countries are somewhere between this spectrum. For example, institutional capacity can be analyzed from various dimensions, e.g., managerial, financial, technical. Thus, it would be desirable to consider the choice of aid modality more concretely, according to different dimensions of capacity to be strengthened. Another participant cited an example of some Sub-Saharan African countries, where infrastructure projects appear to be working despite their relatively weak administrative capacity.

  • Regarding the sector, the GRIPS speaker (Ohno) noted that the role of aid and appropriate modality in supporting PSD merits further investigation. The issue of growth promotion and aid flows the issue closely related to the gaid exith strategy, as discussed in the seminar. (See the section of alignment and the use of GBS)

  • Regarding ownership, the GRIPS speaker (Niiya) highlighted the importance of identifying appropriate gentry pointsh for donors-government dialogue. In the health sector, the Vietnamese government treats systemic issues as purely internal matters and does not wish donor intervention. Thus, it remains to be answered how the donor community, as outsiders, could and should effectively engage partner countries in addressing upstream, systemic issues.

  • There was general consensus that the in-depth analyses of sectors, countries with different types of capacity and ownership, etc. will be useful to refine the conceptual framework presented by the GRIPS team and that such research should be encouraged among those interested.

The nature of the process of choosing aid modalities

  • Several participants commented that the process of choosing aid modalities is political— often driven by donors—and path-dependent. They questioned whether and to what extent there is room for the real gchoiceh of aid modalities for partner countries and donors. A question was also raised whether it is possible to choose modalities from a gzero base.h Both ODI and GRIPS speakers (Christiansen and Ohno) responded that it is possible to choose aid modalities, while recognizing such limitations. For example, in Tanzania and Vietnam, Japan chose to participate in the General Budget Support (GBS) group in order to enhance the effectiveness of its ongoing assistance (including project aid). Choosing one modality does not necessarily mean excluding the others.

  • Acknowledging such donor-driven nature associated with modality choice, the GRIPS speakers (Ohno and Niiya) reiterated that this is precisely the reason why they have decided to conduct this research so that common ground be established for both partner countries and donors to discuss and consider this issue. They stressed the importance of respecting ownership of partner countries in the process. The ODI speaker (Christiansen) suggested that the ultimate responsibility of donors should be to help partner countries manage them (= donors) better. This requires a greater emphasis on supporting aid management capacity as a means of achieving alignment.

  • The GRIPS speaker (Yamada) noted the importance of paying attention to the political environment where modality issues are discussed in partner countries. Individual professionals may have different perception on the goal of modality debates, subject to their own perspectives. Some professionals may emphasize the macro picture (e.g., consistency of the overall policy and institutional framework), while the others may pay greater attention to the micro-level, field activities and implementation on the ground. To discuss the effectiveness of aid modalities, without realizing the diversity of perception about their goals, would cause an unproductive misunderstanding. She also stressed the importance of fostering the environment where diverse views can be allowed and openly discussed in countries.

  • There is shared understanding at the seminar of the need to investigate the more diverse dimensions that affect the process of deciding aid mix and donor behavior. Such dimensions should include the political context of development partnership (as pointed out by Yamada).

Alignment and the use of General Budget Support (GBS)

  • A participant questioned whether GBS can be effectively used for those countries with extremely weak capacity, although the GRIPS speaker (Ohno) hinted its usefulness in the case of the government with restricted core functions. Ohno responded that the GRIPS research does not cover gfragile states,h since this issue would require separate examination due to its complexity. Thus, the research covers only those countries which have gminimum capacityh to exist as the government, whatever it may be weak.

  • The ODI speaker (Christiansen) stressed that in general the priority is likely to be alignment to the national budget process. This maybe easier with GBS but can be done across all modalities. She also commented that GBS is unlikely to be appropriate for some types of gfragile statesh, for example those where there are serious and far reaching concerns about the ewillingnessf of government to engage in policy implementation or policy are explicitly aimed at the systematic abuse of their population. In other fragile states, such as those with epost conflict transition regimesf such as Afghanistan, East Timor or Sierra Leone, GBS is likely to be an important component of rebuilding the state systems.

  • In addition there are two types of possible systems alignment: (i) directly working through government systems alignment; and (ii) shadow systems alignment which particularly for fragile states, could contribute to strengthening or at least not undermining the long term development of government capacity.

  • In connection with alignment, Christiansen introduced the concept of gHorizontal National Programming,h where many contracts are arranged with service providers, such as NGOs under a common nation wide framework with a national policy and standards across the whole country. This is a way to internalize project-based activities without undermining the integrity or potential development of national policies systems. Many possibilities exist, including arranging contracts by geographical area (s).

  • A participant noted that in East Asia, project aid, particularly for infrastructure development has been effective in promoting growth-oriented poverty reduction. Infrastructure projects supported dynamic economic network in the region. Nevertheless, he suggested that Japan become more realistic about the use of GBS in Sub-Saharan Africa. Specifically, African countries have more serious capacity constraints and faces pressing social needs including recurrent cost financing. Under this circumstance, GBS can be a useful tool to transfer the funds and promote alignment to the governmentfs strategy.

  • Several participants expressed their concern about the lack of the gaid exith strategy, when GBS is applied to recurrent budgets. It is questionable whether and how fast the reliance on GBS can lead to economic take off of Sub-Saharan African countries. Furthermore, by dealing with the budget, GBS necessarily implies that donor intervention in the governmentfs sovereign issues. To what extent donors should get involved in the domestic budget process needs to be answered. The ODI speaker acknowledged their concern about the lack of the gaid exith strategy and the long-term sustainability of GBS, particularly if donors focus their conditions of high recurrent spend activities such as health and education systems.

  • The ODI speaker (Christiansen) stressed the importance of assessing benefits, not only risks in the decision making around aid modalities. If we only focus on risks we might end up missing potential large benefits to be gained. Benefits can be higher in the weak environment country. This links back to the issue around whether the aim is to greward good performanceh or gbuild better performanceh. The latter tries to change behavior and may bring greater benefits. A participant supported the importance of benefit vs. risk analysis when introducing particular aid modality. He suggested that a possible use of the methodology for portfolio analysis be examined.

  • A participant noted that each modality has merits and demerits and that it is absolutely right to use respective modalities, according to their comparative advantages. GBS can be viewed as a kind of investment trust, and there is nothing special about it. It is merely one amongst a range of tools that is more appropriate in some settings and less so in others.

East Asiafs development and aid experience, its replicability in Africa, and the role of Japanfs aid

  • The ODI speaker (Christiansen) stated that there is a need to deepen the understanding of the entire process of East Asiafs development and use of aid, particularly the role of gDevelopmental States.h A key success of East Asia seems to be derived from the existence of governments and leadership that had a relatively comprehensive vision and strategy and capacity for integrating projects and aid under this strategy. Even if there are some imperfections, these states had a strong sense of ownership and consistently implemented their own visions. Thus the fundamental question would seem to be how to encourage the emergence of such gDevelopental Statesh and needs further investigation.

  • Nevertheless, she considers that some of the East Asian experiences are more difficult to apply directly to Africa. The Green Revolution has not really happened in Africa (in a sharp contrast to Asia). Agriculture-led growth appears to still be the main option for most of Africa, but there are serious questions about how to generate it with the high transportation costs (affecting the costs of fertilizer and goods to market), and the Asian experience (including Green Revolution) must be adapted to the African context.

  • Christiansen commended that Japanfs aid consistent emphasis on the productive sector and the focus on growth strategies. This strong sector concerns are valuable and should be maintained in the future. This is so especially when many donors have prone to fads and have been emphasizing potentially unsustainable levels of investment in the social service sectors.

  • The GRIPS speaker (Niiya) suggested the need to conduct the evaluation of Japanfs past ODA, in order to internalize the modality debates among the Japanese aid professionals and draw implications for Japanfs ODA reforms. Some donors conducted the evaluation of their past aid approaches and experiences.

  • The ODI speaker (Christiansen) suggested that it is important to recognize that not all the Asian countries have succeeded in development and that some countries face the problems similar to Africa. Absolute poverty still exists in Asia, and in fact, Asia has the largest population below the poverty line.

Other issues

  • A participant stated that it may be prejudiced to conclude gfailure of conditionality to induce reformh was one of the factors leading to the emergence of new aid modalities, as explained by the GRIPS speaker (Ohno). The appropriateness of conditionality needs careful examination, and it is not necessarily bad that donors use conditionality to urge policy and institutional reforms in partner countries. Ohno responded that there is general understanding that conditionality was not effective to enhance country ownership. This is why the World Bank decided to shift from SAL to PRSC (from ex-ante to ex-post conditionalities). There is no doubt about the importance of policy dialogue between donors and partner countries; but the issue is how to conduct such policy dialogue.

  • The ODI speaker (Christiansen) stressed that from a recipient perspective priority be placed on goptimizing the impact of aid h rather than gaid flow maximization.h

Reflections and the Way Forward (by GRIPS)

  • The seminar confirmed the importance of respecting ownership of partner countries in the process of choosing aid modalities, as a common starting point. At the same time, the discussions revealed that the topic of the choice of aid modalities remains controversial in Japan and is perceived quite differently, according to respective professional perspectives.

  • Key issues emerging from the seminar discussions include: (i) to what extent there is room for real gchoiceh of aid modalities, particularly for partner countries (and implicitly the relevance to discuss this topic), given that this is path-dependent and a political process; and (ii) to what extent the current modality debates are relevant in light of Japanfs aid experiences (particularly in East Asia). On the other hand, it is also true that a large number of participants emphasized the importance of building the coherent government system and held the views that the modality issues be considered to support that process. Thus, the participants have diverse views.

  • As suggested by a number of participants, there is a scope for refining the analytical framework of the GRIPS research by accumulating a larger number of case studies at the country and sector levels, and also by including the more diverse dimensions that affect the process of deciding aid mix (including the political context of development partnership).

  • Based on the above, at least, three types of future research/activity agenda can be identified:

  1. Conducting in-depth case analyses at the sector and country levels, as well as sharing the findings of such analyses widely with policy makers and practitioners. Such analysis should also include the role of aid and use of modality in supporting PSD and growth promotion.
  2. Deepening the understanding of the process of choosing donor behavior and aid programming including aid modality, recognizing its political nature. Such analysis should include the political context of development partnership
  3. Supporting the ongoing ODA reforms in Japan by: (i) compiling and disseminating good practices in the field, in collaboration with practitioners and building on the recommendations in the GRIPS report (as suggested in the Japanese version in particular); and also (ii) sharpening the agenda for longer-term ODA reforms. Nevertheless, it is important to stress that the relevance of modality debates to Japanfs ODA must be examined, based on the evaluation of Japan aid experiences in different regions.

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Last Modified: 13 April, 2005