BUILDING CAPACITY FOR MUTUAL ACCOUNTABILITY

1. BUILDING CAPACITY FOR MUTUAL ACCOUNTABILITY Matthew Martin Development Finance International ECOSOC DCF Preparatory Meeting Vienna, 20 April 2007 DFI, April 2007

2. STRUCTURE • Introduction and Context • Why Capacity is Important • Current Levels of Capacity in LICs • Current Efforts to Enhance Capacity • The Way Forward DFI, April 2007

3. INTRODUCTION AND CONTEXT • HIPC Capacity-Building Programme works at demand of 36 HIPCs to unleash capacity to manage government financing (orig. debt relief) • Funded by six DAC donors (Austria, Canada, Ireland, Sweden, Switzerland, UK) • Capacity-building organised in country by sustainable regional organisations run by developing countries – and executed by 150 developing country experts (South-South) • Presentation based on country views and much wider paper on DCF prepared for UNDESA • For more details see www.development-finance.org and www.hipc-cbp.org. DFI, April 2007

4. WHY CAPACITY IS IMPORTANT • Ownership: no chance of genuine “ownership” (preferably leadership) unless have designed and implemented own strategies • Sustainability (long-term): cannot depend eternally on TA and donor funding for consultants to monitor • Mutual Accountability: impossible to hold donors accountable unless capacity to monitor, analyse and negotiate improved behaviour • Ensuring Alignment: is lack of capacity to be used as an excuse (“only align if capacity to produce results”) ? • Avoiding complacency ? Paris Indicator 4 comes out of recent survey as 43% country-led though DCR expresses doubts on the results (+ no quality indicator). HIPC country evaluations indicate <20% both country-led and building capacity DFI, April 2007

5. RECENT/CURRENT CAPACITY LEVEL • Broadest possible definition of capacity-building: political, institutional, individual – commitment/institution-building, training etc • HIPC CBP assesses capacity of 36 countries annually on 1-5 scale (5 highest) • Countries assess own capacity to maximise ownership, analyse next steps and partners which could help • Then quality-controlled by implementing agencies to ensure realistic • Divided into three major categories: • Back office – recording/monitoring • Middle office – analysis and strategy design • Front office – capacity to implement and negotiate • Issues cut across all offices - eg managing for results DFI, April 2007

6. AID CYCLE DFI, April 2007

7. RECENT/CURRENT CAPACITY LEVEL • Back office: major/accelerating improvement since 2001 • Middle office: considerable improvement but lags behind • Front office: began higher but slower improvement DFI, April 2007

8. CURRENT EFFORTS TO ENHANCE CAPACITY • Level and Progress Reflect Capacity-Building Efforts by International Community • Back office: • Major effort put into recording – DAD/AMP/DCR plus inclusion in Commonwealth Secretariat debt system • Outstanding issues • only just starting to monitor quality/effectiveness issues and adapt software ? • Insufficient transfer of software design/maintenance to countries DFI, April 2007

9. CAPACITY-BUILDING EFFORTS (2) • Middle office • Design of aid policies • Mostly written/facilitated by consultants, negotiated with donors • Too closely linked to Paris criteria, not enough adapted to country problems eg conditionality, shocks, donor volatility/variability • Limited to overall principles and processes • Design of aid strategies • Virtually no countries have designed a detailed strategy for negotiating alignment by each donor, as well as forecasting impact of alignment on aid needs/effectiveness + development • Must be major focus of future capacity-building for alignment • Analysis of macro- and micro-level absorptive issues • Macro, Dutch Disease – dominated by IMF, excessive caution • Micro – not enough analysis of aid cycle and blockages DFI, April 2007

10. CAPACITY-BUILDING EFFORTS (3) • Front office: • Public financial management (budgeting, accounting, auditing) – WB/PEFA • Procurement – OECD/WB • Too dominated by donor perceptions of best practice and of partner performance – much more mutual discussion needed to enhance ownership • Coordination and Mobilisation – UNDP/WB – more need to focus on Results and Resources and big picture rather than sectoral plans etc • Negotiation of New Financing – WHO IS DOING ? • Key need is building capacity to negotiate alignment DFI, April 2007

11. CAPACITY-BUILDING EFFORTS (4) • Location of Capacity • Far too much for Ministries of Finance and Planning • Insufficient support to parliaments (finance, planning and sectoral committees), decentralised agencies (states, municipalities), independent bodies such as auditor-general/national audit office, civil society • Generally these stakeholders therefore assess based on non-results issues • (AfDB Study) – results are achieved where parliament, decentralised agencies, other bodies such as auditor-general, and civil society have capacity to monitor and analyse RESULTS and mechanisms to hold government accountable DFI, April 2007

12. BUILDING CAPACITY FOR MUTUAL ACCOUNTABILITY: WHAT NEXT ? • Mutual accountability can spring only from country-run (government + civil society) design of national aid strategy • Thereafter countries monitor donors – not self-reporting – to compile National Compendia of Donor Practices, complementing Paris Surveys to set baselines • Compare with Global Compendium of Donor Best Practices, to agree annual targets with each donor • Negotiate greater alignment of each programme or project, refuse bad funding (“free riders”) • Diversify (for most LICs) or rationalise donors • Improve government own performance and be held accountable not just by donors but by parliament and civil society • Publicise donor progress to hold mutually accountable, use independent monitoring to resolve tricky issues • Monitor progress and refine strategy as needed DFI, April 2007

13. WHAT ELSE IS NEEDED ? • DONOR POLITICAL OPENING: Clear demonstration that countries can go beyond Paris both in breadth and ambition, agreement to bilateral targets • PARTNER POLITICAL COMMITMENT: Honest discussion with donors, will to hold accountable and be held accountable by civil society, and to learn from best practices in other countries • GLOBAL INFORMATION: • Analyse global issues eg allocation criteria, scaling up, orphans • Global Compendium of Donor Best Practices (drafted) • Exchange information (at regional and international level) on relative performance of multilaterals, NGOs, vertical funds, “emerging” donors • Without dramatic reinforcement of evaluation, analysis and negotiation capacity, supported by donor openness and partner commitment, little chance of genuine mutual accountability, alignment or attainment of MDGs DFI, April 2007