Chapter 4 - Aid effectiveness in fragile contexts

Aid allocation, donor policy and co-ordination

It is now widely acknowledged that conventional aid instruments and principles of aid effectiveness are difficult to apply in fragile situations. This page introduces the particular challenges surrounding aid allocation, co-ordination, and alignment in fragile situations.

Aid allocation in fragile states

Recent years have seen a historic shift from a focus on aiding ‘good performers’ towards a greater recognition that fragile states should not be neglected and exposed to the risk of becoming ‘aid orphans’ (McGillivray, 2006). In spite of this, research has shown that fragile states continue to receive disproportionately less aid, and more volatile aid flows, than other low income countries. States with weak authority and legitimacy receive less aid than states with low capacity (Carment, 2008). Yet calls for increased aid to fragile states often spark concerns about the effectiveness and absorptive capacity of aid in environments where institutions are weak.

McGillivray, M., 2005, ‘Aid Allocation and Fragile States’, UNU-WIDER, paper presented at the Senior Level Forum on Development Effectiveness in Fragile States, OECD-DAC, 13th-14th January, London
How can donors provide poverty reducing and efficient aid allocations, particularly in relation to fragile states? This paper summarises research on aid allocation and effectiveness, with a particular focus on fragile states. It finds that historically, fragile states have received less aid relative to need and absorptive capacities than most, and some – categorised as 'aid orphans' – have received far less than others. Donors need to resolve the co-ordination problem that leads to donor orphans and excessive aid flows.
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Levin, V. and Dollar, D., 2005, 'The Forgotten States: Aid Volumes and Volatility in Difficult Partnership Countries', paper prepared for the OECD-DAC Learning and Advisory Process on Difficult Partnership Countries Senior Level Forum, 13th-14th January, London
Is aid efficiently distributed? Do some countries receive less than might be predicted by their need as well as their policy and institutional strength? This paper examines aid patterns between 1992 and 2002. It argues there is a set of 'forgotten states' with low income and weak institutions, which receive significantly less aid than other recipients, even controlling for the variables discussed in aid effectiveness studies.
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Carment, D., Prest, S., and Samy, Y., 2008, ‘Determinants of State Fragility and Implications for Aid Allocation’, UNU WIDER, Helsinki
How can aid be deployed most effectively in fragile states? This paper argues that such aid should bolster the underlying determinants of fragility. In particular, donors should direct the flow of aid to context-specific weak points of fragile states in terms of authority, legitimacy and capacity (ALC). Measuring ALC components, along six dimensions of government performance—economics, governance, security and crime, human development, demographics and the environment—yielded a fragility index for the period 1999-2005.
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To draw attention to the risks of fragile states being marginalised in aid flows, the OECD-DAC publishes an annual report on the allocation of resources to these states:

OECD-DAC, 2010, 'Ensuring Fragile States are Not Left Behind', Summary Report, OECD-DAC, Paris
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OECD-DAC, 2009, 'Resource Flows to Fragile and Conflict-affected States', Annual Report 2008, OECD-DAC, Paris
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Further information on resource flows to fragile states is available on the OECD-DAC website. 

McGillivray, M and Feeny, S., 2008, ‘Aid and Growth in Fragile States’, Research Paper No. 2008/3, UNU-WIDER, Helsinki
This paper examines possible links between aid and economic growth in fragile states. It addresses a gap in the literature, examining the hypothesis that interaction between aid and policies in fragile states yields less growth than in non-fragile states. It concludes that donors should be particularly concerned with highly fragile states. Many highly fragile states are substantially over aided in that they receive more aid than they can efficiently absorb.
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Principles for international engagement

The OECD-DAC’s principles for good engagement in fragile situations stress that aid should be flexible, long-term, harmonised, and integrated in such a way as to bridge humanitarian, recovery and longer-term development phases of assistance. The principle of ‘do no harm’, meaning not reinforcing societal division or engendering corruption, is also seen as central to good international engagement in fragile states. The Accra Agenda for Action adopted at the 3rd High Level Forum on Aid Effectiveness reinforces these principles, committing donors to monitoring their implementation.

OECD-DAC, 2007, ‘Principles for Good International Engagement in Fragile States’, Learning and Advisory Process on Difficult Partnerships, Development Assistance Committee (DAC), OECD, Paris
This brief outlines the following principles for good international engagement in fragile situations: 1. Take context as the starting point; 2. Ensure all activities do no harm; 3. Focus on state building as the central objective; 4. Prioritise prevention; 5. Recognise the links between political, security and development objectives; 6. Promote non-discrimination as a basis for inclusive and stable societies; 7. Align with local priorities in different ways and in different contexts; 8. Agree on practical co-ordination mechanisms between international actors; 9. Act fast… but stay engaged long enough to give success a chance; 10. Avoid pockets of exclusion (or “aid orphans”).
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3rd High Level Forum on Aid Effectiveness, 2008, ‘Roundtable 7 Summary: Aid Effectiveness in Situations of Fragility and Conflict’, Third High Level Forum on Aid Effectiveness, Accra, Ghana, 2-4 September
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Harmonisation and alignment

The Paris Declaration principles of harmonisation and alignment are seen as vitally important for building country ownership and developing state legitimacy in fragile situations. But the context of fragility often makes these principles particularly difficult to apply. Alignment and ownership are problematic where states lack capacity and/or legitimacy. Often there is no nationally-owned development strategy behind which donors can align. Evaluations of the applicability of the Paris Declaration in fragile situations suggest that needs assessments, joint planning and prioritisation tools and joint donor offices have supported greater harmonisation, alignment and ownership.

OPM/IDL, 2008, 'The Applicability of the Paris Declaration in Fragile and Conflict-affected Situations', Oxford Policy Management and The IDL Group, Oxford
What are the challenges of applying the Paris Declaration in fragile and conflict-affected situations? This report examines aid effectiveness and state-building in fragile states and includes case studies of Afghanistan, Burundi, the Democratic Republic of Congo and Nepal. A harmonised approach by development partners is particularly relevant in fragile situations, and shared approaches to context, conflict and risk analysis are required.
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Whole of government approaches

It is increasingly recognised that external assistance in fragile situations should be designed and implemented in a coherent, coordinated and complementary manner both across departments within donor governments as well as between national and international organisations. The range of actors involved, the complexity of aid instruments, and the interconnectedness of governance, economic and security needs in fragile states necessitates close collaboration among diplomatic, security, economic and development actors. But there are significant impediments to donors adopting so-called ‘Whole of Government Approaches’ in fragile situations, including the different and often conflicting objectives, mandates, approaches and resources among ministries. Development and foreign policy objectives, for example, are not always coherent or complimentary. 

Whole of government approaches are in their infancy, and there are risks that coordination within capitals can drive out co-ordination between capitals (OECD-DAC, 2008). Evidence suggests that considerable gaps remain between what has been agreed in principle and the practice of implementation.

OECD-DAC, 2006, 'Whole of Government Approaches to Fragile States', DAC Guidelines and Reference Series, OECD-DAC, Paris
How can a Whole-of-Government Approach (WGA) be implemented by development practitioners to address the specific needs of fragile states? This study assesses the mechanisms and processes that contribute to effective WGAs in fragile states. Drawing on recent field-level case studies, the paper assesses the appropriateness of the Principles for Good International Engagement in Fragile States and makes recommendations for putting them into practice.
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Patrick, S. and Brown, K., 2007, 'Main Findings and Recommendations' in Greater than the Sum of its Parts? Assessing "Whole of Government" Approaches to Fragile States, International Peace Academy, New York, pp 128-144
Promoting security, good governance and recovery in weak, failing and war-torn countries requires integrated, coherent approaches. Many international donors are adopting ‘whole-of government’ approaches that bring together their diplomatic, defence and development instruments: the 3Ds. This report examines these approaches in seven leading donor countries. It argues that policy coherence remains a work in progress.
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Anten, L., van Beijnum, M., and Specker, L., 2009, ‘3C Approaches to Fragile and Conflict Situations – Taking stock of commitments and challenges’, Netherlands Institute of International Relations (Clingendael), The Hague
How can the international community advance the implementation of a coherent, co-ordinated and complementary (3C) approach in fragile states? This paper outlines the findings of previous OECD-DAC studies on whole of government approaches as well as the main recommendations of three thematic meetings in 2008. While progress has been made, a number of challenges remain, including how to develop common objectives for diplomatic, defence, security, finance and development actions.
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Donor policy

Bilateral donor policies on fragile states are often grounded in OECD-DAC principles, reflecting the international consensus on the need for coherent and joined-up approaches, for increased and sustained engagement in fragile situations, and for adapting to context.

Elhawary, S., Foresti, M. and Pantuliano, S., 2010 ‘Development, Security and Transitions in Fragile States: Meeting Series Report’, Overseas Development Institute (ODI), London
This report outlines the key messages and recommendations from a meeting series on ‘Development, Security and Transitions in Fragile States’. Donors should understand better the key features of transition in each situation through frequent political economy analysis, strengthening personnel skills and reducing staff turnover. An improved international architecture with more integrated and coherent approaches among different actors is needed. There is a need to recognise the scale of the tasks involved and ensure missions have the necessary resources, strategies and support to carry them out. Work with political settlements and engage with and build on local civilian capacity. The international community needs to be much more realistic about what it can achieve and recognise that transition processes require long timeframes and depend largely on domestic processes and actors..
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African Development Bank, 2008, ‘Strategy for Enhanced Engagement in Fragile States’, African Development Bank, Tunis
How should the African Development Bank (ADB) enhance its engagement with fragile states? This strategy document advocates strengthening incentives for fragile states to pursue good economic management as a means of facilitating transitions out of conflict or state failure. Recognising the diversity of state fragility, it concludes that the ADB must establish units and financing facilities dedicated to environments of state fragility and reform several of its practices to most effectively engage with fragile states.
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Department for International Development, 2005, ‘Why we need to work more effectively in fragile states’, DFID, London
Why has aid not reduced poverty in fragile states? Why do donors need to work more effectively in fragile states, and how should they go about this? This policy paper brings together the latest analysis from DFID and others on how to make development more effective in fragile states. It sets out some objectives and makes commitments about how DFID will work differently in the future.
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European University Institute, 2009, ‘Overcoming Fragility in Africa: Forging a European Approach’, European Report on Development, 2009
This report analyses the EU’s current engagement with fragile countries as well as the potential for EU development policy to assist national stakeholders in enhancing resilience. It concludes the main general direction for improvement in EU operations is to narrow the implementation gap between the theoretical policy framework and specific interventions on the ground. The EU must draw on its comparative advantages and ensure its interventions are properly tailored, reach a solid understanding of the local context, make EU trade policy more responsive to the specific needs of Sub-Saharan African fragile states, shift from responsive to preventive interventions and better understand how the security and development nexus can be properly handled.
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USAID, 2005, ‘Fragile States Strategy’, United States Agency for International Development, Washington
What factors should donors consider when identifying an approach to reverse decline in fragile states? How do fragile states differ from those that are stable and able to pursue development? This paper outlines a strategy for its engagement with fragile states. It details how USAID can respond effectively by identifying strategic priorities, initial directions for programming and a new management and administrative approach.
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Foresti, M., Denney, L. and Metcalfe, V., 2011, ‘Security, Humanitarian Action and Development: Navigating a shared space for international engagement in fragile states’, ODI Briefing Paper 67, Overseas Development Institute, London
This briefing paper outlines the key opportunities and challenges presented by a more integrated approach to international engagement to build stability in fragile states. In particular, it considers the risks and benefits of greater coordination between humanitarian, development and security agendas, suggesting that the potential tension between these objectives must be recognised and addressed in a pragmatic and principled way.
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France Diplomatie, 2007, ‘Fragile States and Situations of Fragility: France’s Policy Paper’, France Diplomatie, Paris
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Fragile States and Australia’s Aid Programme
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Aid instruments

The choice of aid instrument in fragile situations is often based on a context-specific assessment of government capacity and level of consensus on policy priorities. There is much debate about the conditions under which the conventional aid instruments of general budget support (GBS) and Poverty Reduction Strategy Papers (PRSPs) can work in fragile settings. A critical concern for donors is how to manage fiduciary risks whilst wherever possible channeling funds through government. Recently there has been some success with multi-donor trust funds, national programmes, social funds community driven development, and the formation of national compacts, all of which are viewed as ways to align donor funds behind national and community priorities.

Dom, C. and Gordon, A., 2011, 'Budget Support in Fragile Situations', Oxfam Discussion Paper, Oxfam, London
This study examines the rationale, challenges of and conditions applied to budget support to fragile states; the effects of budget support on spending and the delivery of social and agricultural services; and the ability of parliaments and civil society to hold governments and donors to account for public spending. It highlights the current volatility of General Budget Support provision, and emerging good practices.
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Foster, M., 2008, ‘Aid Instruments in Fragile and Post Conflict States:
A Desk Review for DFID Nepal’, Mick Foster Economics Ltd, London
Which aid instruments are most effective in promoting a sustainable exit from conflict? Which sectors should be prioritised for support in post-conflict environments? This report reviews the literature on aid instruments in fragile and post conflict states. A range of aid instruments can enable donors to manage the fiduciary risks of working in post-conflict situations. Both national programmes and the aid instruments that support them should be flexible and adaptable.
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Leader, N. and Colenso, P., 2005, 'Aid Instruments in Fragile States', PRDE working paper no. 5, Department for International Development, London
What type and mix of aid instruments are currently being used in difficult environments? How can donors work more effectively in fragile states? This paper describes the limitations of current approaches to aid instruments and discusses the emerging understanding of their use within fragile states. In addition, a selection of aid instruments that may be more effective in achieving objectives in difficult environments is highlighted.
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Vincent, F., 2009, ‘Effective Poverty Reduction Strategies in Fragile and Conflict-affected Countries: Lessons and Suggestions’, World Bank, Washington
How can Poverty Reduction Strategies (PRSs) in fragile and conflict-affected countries be made effective? How can the World Bank and other international bodies assist this process? This paper argues that well-designed PRSs offer the best hope for many countries to move from poverty and conflict to development and stability. Outsiders can promote effective PRSs by supporting five guiding principles: promote a conflict perspective, perform relevant analysis, provide policy support, strengthen national capacities and share examples of effective PRSs.
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Ghani, A., and Lockhart, C., 2008, ‘International Compacts: Sovereignty Strategies’, Chapter 8 in Fixing Failed States: A Framework for Rebuilding a Fractured World, Oxford University Press, Oxford 
What is the best way achieve global stability and prosperity? This chapter argues that a stable world requires functioning states in order to overcome challenges to the political and economic system. Domestic and global leadership must find a new approach to transform states so that they provide security and prosperity for their citizens and also act as responsible members of the international community. The study terms this a sovereignty strategy. A long-term state-building strategy tailored to specific contexts should be an organising principle for the international community. It requires harnessing collective energies and capital.
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Robinson, M., 2004, 'Community Driven Development in Conflict and Post-conflict Conditions: the Northern Uganda Social Action Fund (NUSAF project)', paper prepared for the World Bank LICUS initiative, Institute of Development Studies, Brighton
How appropriate is it to work through local governments and communities as a response to endemic poverty, weak capacity and the legacy of violent conflict? This study reviews the lessons arising from the design and implementation of the Northern Uganda Social Action Fund Project (NUSAF) in conditions of ongoing conflict and post-conflict recovery. It argues that considerable demand from communities for project resources and rapid implementation of infrastructure and income generation projects confirms the validity of working through local communities.
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