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Donor Coordination and Good Governance: Donor-led and Recipient-led Approaches

Author: P de Renzio and S Mulley
Date: 2006
Size: 29 pages (1.35 MB)

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Summary

How do donor-led and recipient-led aid coordination efforts affect governance? This paper from the Global Economic Governance Programme looks critically at recent trends in the ‘Harmonisation and Alignment’ (H&A) agenda and assesses two alternative but complementary approaches to donor coordination. Donor coordination can have positive impacts on governance. However, if it strengthens accountability to donors at the expense of domestic accountability, or significantly reduces the scope of recipient governments to make political decisions over policy, it may have long-term negative impacts on governance.

Donor coordination and recipient leadership in the aid relationship can form part of a virtuous circle whereby ownership, alignment and harmonisation are mutually reinforcing factors. Recipient-led H&A initiatives should mitigate the risk that donor activities have negative impacts on ownership and good governance. The paper is based on the experiences of three recipient countries - Tanzania, Mozambique and Afghanistan - which in recent years have tried to shift the terms of the aid relationship by putting in place mechanisms to better manage or regulate aid in-flows.

There are several ways in which donor-led coordination can have positive impacts on governance, although a number of issues remain unresolved:

• Coordination can reduce transaction costs and thus free up political and bureaucratic capacity in the recipient country.
• Coordination, especially when it takes the form of alignment, can provide a strong incentive to improve recipient country systems for policy development and administration.
• Coordination can make donors more effective in promoting good governance directly.
• If donors promote policies which are inappropriate to the country context, however, efforts to promote good governance may be undermined by poor development results.
• The H&A agenda has so far failed to adequately address issues related to engagement in fragile states and building sustainable capacity to implement and manage development policies, and the challenges of scaling up aid volumes.

Donor-led coordination exercises are likely to lead to only limited progress on aid effectiveness. There is a risk that donor-led coordination may undermine, rather than support, the emergence of good governance and ownership.

• When recipient governments take the lead, donor coordination is more likely to happen at country level, and can bring about limited but significant improvements in institutions and governance.
• The key question for donors is how to support recipient leadership in the aid relationship in a way which genuinely promotes recipient capacity and ownership and which also maximises aid effectiveness.
• The challenge for recipient governments is to successfully move from ‘partnership’ to ‘leadership’ in the aid relationship and from ‘ownership’ of policies and systems to ‘sovereignty’ over them.

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Source: De Renzio, P. and Mulley, S., 2006, 'Donor Coordination and Good Governance: Donor-led and Recipient-led Approaches', Managing Aid Dependency Project, Global Economic Governance Programme, University College Oxford, Oxford
Author: Paolo de Renzio , pderenzio@odi.org.uk