I. Discussion of William Easterly’s views on Aid

Before we spend the whole evening dicussing aid, I want to agree with Easterly – and many others before him – that TRADE is more important than aid.  Goal 8 is as much about the way rich countries  undermine the opportunities  for poor countries to take their responsibilities, because of the way we deliver aid, and because of our trade policies, which deny poor countries the chance to earn their way out of poverty by selling their products on our rich consumer markets. Even worse, our agricultural  policies destroy their local markets: 70% of the world’s poor live in rural areas, depend on agriculture, but can not compete against our subsidized exports. In the meantime in Europe, these policies cost the average European family 100 euros a month, without helping our own poor farmers, or our environment.
I also agree with his attack on the insulting paternalism of some parts of the international aid community – as if it is just up to us to fix global poverty- in total denial of the primary responsibility of the developing countries  to fix themselves – as agreed in numerous international conferences, and.  embedded in the division of labor in the MDG’s.
Achievement of the Millennium Goals will not happen unless developing country governments take full responsibility for their actions and their governments  work properly: That’s the “GLOBAL DEAL”, concluded at the Monterrey conference: no excuses – even in the poorest country. Moreover, even in the most aid-dependent countries aid is a minor part of overall development finance. The way a country spends its OWN resources is much more relevant for the achievement of the goals..
Those who deny that developing  countries  have the primary responsibility for their own development and that deny there are serious problems with governance, including, but not just corruption, are not being helpful in the fight against poverty.

So Easterly is right when he attacks simplifications as if money, let alone aid can “buy” achievement of the MDGs or end poverty. Particularly, traditional “Technical Assistance” (or “Cooperation” as the euphemisme goes today) fits in perfectly with the myth of Western superiority – and even reinforces it: we lecture – you listen; we give – you receive; we know – you learn; we take care of things – because you can’t. Undermining Africans’ selfconfidence – we take over. Neo-colonoliasm, is what I call it… ( but we do face this powerful lobby for the interests of our domestic Technical Asssitance industry). Or as an African friend of mine once told me: “ When you move to Africa, you are per definition an expat expert. But when I move to Europe I am only an immigrant”

In the meantime, independent evaluations have been telling us for decades that massive technical assistance has often weakened capacity in Africa, including by displacing local expertise. Nevertheless even today a quarter of ODA to Africa (and the number for Germany is even higher…) continues to be spent on this The attitude of “we (standing for experts/money) will save Africa ; “we” will end poverty leads to undermining incentives for poor people to demand action from their own government. The most important aid reform is to realize that we donors do not develop developing countries, but that they develop themselves. This implies that we need to realise that our role is to enable them to take full responsibility.  This was what was agreed when making the global deal of the Millennium Development Goals.  
Outsiders –donors – simply can NOT ensure sustainable education, health, or poverty reduction for developing countries’ citizens: that is the responsibility of their OWN government. This implies donors have to deliver aid in a fashion that does not allow developing country governments to shirk that responsibility, nor shift their citizens’ expectations away from their own governments to those of the donors.
Finally, I  wholeheartedly agree with Easterly’s criticisms of certain aid practices:
•    too much goes to countries that do not need external concessional  resources – because of geopolitical and  foreign policy reasons;
•    tied aid, motivated by donor economic or export promotion reasons;
•    donor tendencies  to “plant their flags” in all countries and every sector, leading to inefficiencies, fragmentation, and, may I add, huge transaction costs for recipients.

In summary, I agree with Easterly that there is very little point in increasing aid unless it is made more effective. In the past, the typical model of aid was a plethora of donor-driven isolated projects. At best, these projects were islands of perfection in the midst of seas of despair. And even these projects usually fell rapidly into decay once the donor left, as governments could not afford to continue to pay doctors or teachers, or even the electricity bills.  Moreover, each project – of which there might be thousands – burdened the government with a host of rules and reporting requirements, draining weak local capacity, leaving governments unable to run their own countries. Worse still, governments felt accountable to donors and not to their own citizens, undermining governance. This aid did not work because it was based on the assumption that donors develop poor countries. They do not.  Aid by itself cannot “buy” the MDG’s . Particularly “one project (or village) at a time”  will not make a dent, as it bypasses  and ignores government policies and responsibilities.
Developing countries develop themselves, and they must be allowed to assume this responsibility and be accountable to their citizens. This is what the Millennium Goals are about: An agreement between governments of rich countries and poor each of which must be held accountable by their citizens. But this “deal” also acknowledged that poor countries cannot do it by themselves:they do need aid…
So, I strongly disagree with Easterly’s conclusion that if aid does not work, we  should quit the aid business. We should not throw our the baby with the bathwater.
Regarding his specific criticisms: where “aid”  is given for geopolitical or export promotion objectives, it was never intended to reduce poverty; thus we  should not  be surprised if it did not.
We need to condemn where aid failed. But – while aid is not the miracle answer, we should not dismiss it, but should draw the lessons from where it succeeded, and build  these them into the aid programs of all needy countries.

Aid works, when it backs serious home grown social and economic reforms. Mozambique, one of the poorest countries in the world, has made giant steps in development – more than 7% , uninterrupted growth  per year for more than 20 years, and on track for most MDGs – while heavily depending on aid. But the aid it received was increasingly aligned with its development priorities; and donors minimized the burden they imposed on the governement by harmonizing their procedures; over the last years most aid was given it in the form of budget support.
Easterly  is out of touch with what  is happening in the aid business. Now, seriously, for the first time in aid history  we do have a broad-ranging agenda of measures to ensure that future aid genuinely contributes to development. This agenda is outlined in the 2005 Paris Declaration on Aid Effectiveness to which almost all donor countries and many developing countries are signed up.
The Declaration aims to improve ownership of the development process by the recipient, and to ensure that donors assist by aligning their policies and procedures to those of the recipient. In addition, the Declaration requires donors to streamline and harmonise their practices and requires all players to focus on tangible results. It also recognises the mutual responsibility of rich and poor countries for development. These aims are not just slogans or buzzwords – each is backed up by a series of practical reforms, deeply grounded in reality, and responding to past failures. We  do not have a silver bullet, that will magically improve everything. But we have the beginnings for a more effective partnership that will ensure that aid contributes to the achievement of  the MDGs.

If we can implement this agenda, then we will have gone a long way in ensuring that aid responds to genuine local needs, builds local capacity to manage development, and makes governments responsible and accountable.

II. Developing Countries’ Responsibilities for  the MDGS

For achieving the MDGs, developing countries have the primary responsibility. The following issues are key to deliver results:
1. The Budget
Accountable and effective management of public financial resources is critical.   According to recent World Bank estimates approximately 5% of Global GDP still disappear through corruption and mismanagement.  This figure is much higher in developing countries that are lagging in achieving the goals.  If the Millennium Goals are to be achieved scarce resources must be spent on the needs of the people.  To get there, we need full transparency in budget processes and to ensure that policies are indeed pro-poor, gender-sensitive, as well as allow for sufficient public expenditures for basic social services;.and that public spending accrues to the poor, instead of to the rich, as is actually the case in most developing countries. Public finance is not just about expenditures.  Iit is also important to maximize revenues, e.g. by fair and effective tax legislation.  Domestic revenue mobilization is the only sustainable long term option for financing development. Resource-rich countries shoould join the Extractive Industry Transparency

Initiative (EITI) ensuring disclosure of all revenues from multinational mining operations. Here I pay tribute to Peter Eigen, without whom this issue would never have been on the international agenda

2.Sectoral Policies
Sectoral policies need to be translated into effective service delivery (in health, education, sanitation, water, etc.) for all citizens all over the country;.ensure that all policies (including trade and tax), do not discriminate against the rural poor in their constituencies and that the government invests enough in rural development.  Also, small farmers need support to get access to credit and markets.  And we must not forget that  trade policies need to be sufficiently pro-poor.  In many developing countries protective trade barriers in fact protect the rich, at the expense of the poor.

3. Legislation
In many countries inheritance, property and tax laws urgently need to be renewed to ensure women can fully participate and contribute to development.  Also, in order for poor people to lift themselves out of poverty by unleashing their entrepreneurial spirit, legal reform is needed to improve the business climate particularly for domestic investors.  In many developing countries the volume of capital flight is actually larger than that of aid received.

4. Governance
Last but not least, is the cross-cutting issue of improving governance, to create the capable state that is needed to achieve the Millennium Development Goals. This means  improving quality and efficiency of the public sector,  modernizing and reforming the bureaucracy, decentralization through empowerment of local authorities, and  ensuring that political processes are inclusive, not just politically representative through elected parliaments.  Robust public participation through media and civil society, particularly those groups that give voice to minorities and women that are at risk of missing the goals, is key. Active participation of citizens and their organizations at both the planning and implementation stages can help to ensure transparent and accountable government mechanisms that are responsive to the needs of all sections of the population.  Only then can corruption be effectively fought and the huge “integrity dividend” be redeployed. Again: tribute to Peter Eigen.  While most of us were dreaming of the “peace dividend”-which never materialized, his efforts are starting to pay dividends…

III. Aid Effectiveness

It is the primary responsibility of DEVELOPING countries to achieve the Millenniun Goals; and they are only likely to meet their commitments if they are held to account on their actions or inaction at home, by their own citizens and their elected representatives, and not – as too often has been the case – by donors from overseas.  But it is also the way that we deliver(ed) our aid that undermines developing countries taking charge.
Traditional aid practices have undermined governments’ capacity to govern well: this is perhaps the single greatest lesson from the past 40 years of development.  The stand-alone donor-led project approach to development undermines local capacities, and the chances of achieving sustainable development.  It does so in the following ways:
•    Donors poach the best and most talented staff from government Ministries to manage their projects and offer salaries higher than those the domestic civil service    can ever afford;
•    A raft of small, stand-alone projects implemented by different donors with different ways of working, different administrative, financial and reporting procedures, with a series of monitoring meetings, result in a massive and wasteful workload for development country governments, with already weak and fragile institutional capacity.  Imagine a civil servant in the Ministry of Finance  in Zambia  with fragile  limited institutional capacity having to produce thousands of quarterly reports to all these different donors. The end result is that governments do not have the time or the capacity to run  the country, and the policies, programmes and budgets required for development and the achievement of the MDGs, let alone be accountable to their own citizens.(Tanzania asked donors for 2 months a year “mission free”…..)
•    Furthermore, these projects are outside the budget and definitely not subject to domestic auditing systems.  This has led to eroding the appropriate accountability of developing country governments to their own Auditors General, their parliaments, their citizens, and their civil society. Without such overall accountability, the Goals will not be achieved.

Even if such projects  reflected local priorities, as they were not embedded in government policies, programs and budgets, they failed to result in the kind of systemic changes which ensure sustainable long term overall progress. Worse, projects have a bias for “visible” investments allowing photo opportunities for development ministers and plaques on the walls of schools or hospitals reminding future generations  of “the solidarity of the Swedish/Dutch or whichever people”.  
During their implementation projects might create islands of paradise in oceans of misery, which, however, collapse back into the ocean the moment the donor leaves…      
Sub Sahara Africa is littered with decaying unused primary school and health post buildings, built by donors, without thinking of who was going to pay the nurses,teachers after they had left, resulting in an ever growing claim on their tiny    budget for recurrent costs for investments    outside    of their own development plans.    
Developing country governments must set their own priorities in full collaboration with their own citizens, particularly the poorest, and they must manage and be responsible for the development process themselves. But most of all, they have to be accountable to their own citizens for all of this.   
But to enable them to take that responsibility, we – donors – need to radically change the design and implementation of all of our aid.
•    We must support homegrown poverty reduction strategies and MDG plans.  We must allow priorities to be defined locally and ensure that recipients don’t look at us as their paymasters, discounting the views and priorities of their own people. Governments are accountable to their own citizens first and foremost, instead of to us, foreign donors.  We must stop thinking about “our” German or Dutch or Japanese projects, and instead think about “their” development process.  We must move away from building “our” schools or hospitals to supporting “their” education or health policies.
•    We have to align our efforts – both our policies and our procedures – to those of the developing country, reflecting our aid in their budget – providing critical opportunity for their parliaments and citizens to engage and exact accountability.
•    And, as a donor community we must coordinate and harmonise our efforts.

The good news is that, at the OECD donors did acknowledge they were part of the problem and promised in the Paris Declaration in the Spring of 2005 to become part of the solution. They committed to respect home-grown strategies; to align donor support to these; to work together to coordinate and harmonize procedures; and to do away with individual projects, evaluations and missions. They even agreed to concrete measurable performance indicators and deadlines for the achievement  of these commitments: e.g. to produce joint analysis; have joint missions;    streamline and harmonize procedures and practices; and    run more joint    programs. And recipient countries committed to improve their procurement  and public financial management.
The ultimate way to respect ownership and align with recipients’policy and budget is by giving budget    support. Some     donors (and the Bundestag Budget Committee more than anyone) are hesitant to do so, even in countries that have a track record of spending aid well, as they work on improving their governance and have decent poverty reduction strategies. Actually, independent evaluations of budget support    have    been    quite positive:  the DAC’s  Multi donor Evaluation on General Budget Support (GBS) “found no evidence that budget support funds were in practice more affected by corruption than other forms of aid’.  On the  contrary, GBS is an effective means to limit the scope for corruption given its proven contribution to the strengthening of public finance management. Indeed GBS is the first aid instrument that creates genuine incentives on both sides (donors feel they need more safeguards; recipients want to qualify for GBS) to care for and invest in improved public finance management, including procurement, domestic transparency and accountability.  As the evaluation concluded, budget support, indeed, played a central role in strengthening public financial management.

And,what is appreciated by African Civil Society and I quote the Director of the Centre for Democratic Development     in Ghana): “Multi-donor budget support has the potential to stimulate domestic accountability processes, as more resources are channelled through the budget process.”.

IV.Concluding Remarks

So the Millennium Goals are a compact of shared responsibilities and mutual accountability between rich and poor countries. But is it a fair deal?
There is a lack of balance: the Goals for which develping countries have primary responsibility are elaborated with indicators, deadlines, and their progress is monitored by a hugh army of bilateral donors, IFI’s and, yes, the U.N.

However, in Goal 8, which reflects the responsibilities of rich countries, the acknowledgement that poor countires  need help to achieve the Goals, is – unlike the other goals – vague and lacks internationally agreed timelines – though within the EU and the OECD/DAC we see increasing efforts to elaborate and strengthen monitoring .
Goal 8 is not just about Aid. It is also about trade— as stated before – and both the OECD and the EU are utterly failing in  translating the lipservice to a “Development Round” into coherent pro-development action.
While increasing its effectiveness, the volume of aid does matter  too, as long as many  needy and worthy countries are underfunded. And on this point there is a lot of scope for Germany to improve its performance, three decades after it promised to spend 0.7% of its income for this purpose: with 0.36% of Germany’s National Income spent on Aid in 2006, Germany  is well below the donor country average, including below France (0.47%) and the U.K. (0.52%), and still far below the long promised 0.7%, which has been surpassed for many years by some of its neighbors…and it looks like your “check is still in the mail” by 2015…)
Today, Sub-Saharan Africa as a region is not on track to achieve any of the Goals – on average. But even in some of the poorest countries we have examples of impressive progress.  Some of the least developed countries in SSA (Mozambique, Tanzania, Mali, Ruanda, Uganda, Senegal) are on track to meet several Goals. Mozambique in particular has an amazing fifteen-year record of rapid growth supported generously with aid…

The “secret” behind these success stories is that the governments of these countries lived up to their promises and benefited from the fact that some donor governments do too,  respecting mutual responsibilities and the global division of labour. Aid  backing the development strategies of these reformers has contributed to incredible success stories, lifting tens of millions of people out of poverty, getting kids to school etc
This proves the Goals are achievable by 2015, IF all countries live up to their promises…
But we at the U.N. cannot hold our member states to account…

We live in a world of sovereign nations – and it is the citizens (and their elected representatives) of each country who can do so: in poor countries for their primary responsibility to achieve the first 7 Goals, and in rich countries for our efforts on Goal 8.

We – as Millennium Campaign – help to empower citizens to do so. And I enjoy having this debate here in these premises – as we hope to work together to train African civil society here to play their part in holding their governments to account –

In the meantime, as this audience is German – I would hope to count on you to ensure Germany does its part on Goal 8 – on more and better aid, but also as a leading nation in the EU for the reform of our trade policies to enable poor countries and people to earn their own way out of poverty.