Friday, October 8, 2010

Effectivess of AID - Country Comparison Study Released

A new study is comparing donor countries and agencies in regards to the effectiveness of assistance provided to transitioning societies. 

Donors, academics, and development advocates have long recognized that not all aid is created equal. Often, the impacts of aid are blunted because it’s spent in the wrong places or isn’t coordinated with recipient government programs. How can we know which donors give aid well, and which donors need to improve?

Nancy Birdsall, president of the Center for Global Development, and Homi Kharas, deputy director of the Brookings Institution’s Global Economy and Development program are the co-creators of the Quality of Official Development Assistance (QuODA) assessment, a new tool that tracks and compares donor programs against four dimensions of aid quality.

With aid budgets under pressure and the 2015 deadline for achieving the Millennium Development Goals quickly approaching, donors and recipients are striving to make the most of available aid. However, until now, there has been no consistent measure of how well donor countries and agencies provide aid.

The new assessment tool strives to analyze the comprehensive quality of aid assessment that evaluates each donor country or agency on four dimensions of aid quality. The first annual Quality of Official Development Assistance (QuODA) assessment compares the aid quality of 31 donor countries and multilateral agencies, as well as 152 individual development agencies.

The four dimensions of aid quality measure:

- Maximizing efficiency, or how smartly aid funds were distributed.

- Fostering institutions, or the degree to which aid is building the capacity of recipient governments.

- Reducing the burden on recipient countries, or how much effort aid recipients need to put in to secure funds.

- Transparency and learning, or how much information about the flow of aid money is available.

"Our ratings bring fresh rigor to the international dialogue about aid effectiveness," says CGD president Nancy Birdsall, who devised the system with Homi Kharas, deputy director and senior fellow of the Global Economy and Development program at Brookings.

Kharas adds that "There is broad international consensus about what constitutes high-quality aid, but without measurement, a lot of that is just hot air. There's lots of room for improvement. We hope that the QuODA rankings will spur donor countries and aid agencies to do a better job."

As summarized in a recent Devex article by Ivy Mungcal,  the four categories are an attempt to capture donors’ adherence to international standards outlined in the Accra Agenda for Action and the Paris Declaration on Aid Effectiveness as well as their commitment to transparency, the report explained.

The study ranked donors on each of the four indices of aid quality. It did not provide an overall ranking that aggregates all four categories.

Ireland and the World Bank’s International Development Association were on the top 10 in all four dimensions of aid quality. They were the only two donors to receive high marks on all four indices.

The Netherlands, Denmark, Inter-American Development Bank’s Special Fund and the Asian Development Fund were in the top 10 in three out of the four categories, while 18 of the donors assessed made the top 10 in at least one of the aid quality indices.

Some countries, including the U.S., Switzerland and Greece, did poorly across all categories. The three countries were consistently in the bottom 10 rankings in the four indices.

The U.S. was rated poorly on nine of the 30 indicators, including share of untied aid, use of recipient countries’ financial systems, minimization of fragmentation across its multiple aid agencies, contribution to multilateral agencies, and reporting of the aid delivery channels it uses.

Multilateral agencies had higher average rankings on three of the four aid quality categories. The agencies took the top five rankings on maximizing efficiency, four of the top eight slots on fostering institutions and the top three on reducing burden. Multilaterals, however, with the exception of IDA and the European Commission, performed poorly in terms of transparency and learning.

The study also assessed individual aid agencies of the countries in its sample. It found that “agency performance can vary widely for a single bilateral donor.”

This variety was specifically evident among the U.S. aid agencies. The study indicated that the Millennium Challenge Corp. did well on the majority of the categories, while the U.S. Agency for International Development and the U.S. Defense Department performed poorly on most.

CGD and the Brookings Institution excluded the consideration of humanitarian aid in both country- and agency-level analyses. The authors, including CGD President Nancy Birdsall, explained that humanitarian aid serves a different purpose and its effectiveness is already measured by a separate index

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