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International Development –Policies, Architecture and Trends

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International Development – Policies, Architecture and Trends

Content

Chapter Title PageList of Abbreviations vi

1. Executive Summary 1

2. Major Agreements in Global Aid 5

2.1 Introduction__________________________________________________________________52.2 The Millennium Development Goals______________________________________________52.2.1 MDG1 Eradicate Extreme Poverty and Hunger______________________________________62.2.2 MDG2 Achieve Universal Primary Education________________________________________62.2.3 MDG3 Promote Gender Equality and Empower Women_______________________________72.2.4 MDG4 Reduce Child Mortality___________________________________________________72.2.5 MDG5 Improve Maternal Health__________________________________________________82.2.6 MDG6 Combat HIV/AIDS, Malaria and Other Diseases_______________________________82.2.7 MDG7 Ensure Environmental Sustainability________________________________________92.2.8 MDG8 Develop a Global Partnership for Development________________________________92.3 Paris Declaration on Aid Effectiveness___________________________________________102.3.1 Ownership_________________________________________________________________102.3.2 Alignment__________________________________________________________________102.3.3 Harmonisation______________________________________________________________112.3.4 Mutual Accountability_________________________________________________________112.3.5 Managing for Results_________________________________________________________112.4 Accra Agenda for Action_______________________________________________________112.4.1 Ownership_________________________________________________________________122.4.2 Inclusive partnerships_________________________________________________________122.4.3 Delivering Results___________________________________________________________122.5 Busan Partnership for Effective Development Cooperation____________________________122.5.1 Ownership of Development Priorities by Developing Countries_________________________122.5.2 Focus on Results____________________________________________________________132.5.3 Inclusive Development Partnerships_____________________________________________132.5.4 Transparency and Accountability to Each Other____________________________________132.5.5 Capacity Development________________________________________________________132.5.6 Aid Delivery________________________________________________________________132.5.7 Gender Equality_____________________________________________________________132.5.8 Fragile States_______________________________________________________________142.5.9 Private Sector_______________________________________________________________142.6 Summary__________________________________________________________________14

3. Aid Architecture 16

3.1 Introduction_________________________________________________________________16

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3.2 Aid Architecture_____________________________________________________________163.3 Non-DAC donors____________________________________________________________173.3.1 Bilateral Aid Flows___________________________________________________________173.3.2 Non-DAC Donor Summary_____________________________________________________223.4 Aid Fragmentation___________________________________________________________233.5 Aid Modalities_______________________________________________________________243.5.1 Project Aid_________________________________________________________________243.5.2 Sector Approach_____________________________________________________________253.5.3 General Budget Support_______________________________________________________253.5.4 Pooling of Funds____________________________________________________________253.5.5 Public Private Partnerships (PPPs)______________________________________________263.5.6 Loans_____________________________________________________________________263.5.7 New Modalities Summary______________________________________________________273.6 New Aid Packages___________________________________________________________283.7 Changes in Aid Needs________________________________________________________28

4. Current Trends in Aid Flow and Future Commitments 30

4.1 Introduction_________________________________________________________________304.2 Recent Trends in Aid Flow_____________________________________________________304.3 ODA______________________________________________________________________314.4 CPA______________________________________________________________________334.5 Recent Trends of specific DAC countries__________________________________________354.5.1 European Union_____________________________________________________________354.5.2 The Netherlands_____________________________________________________________354.5.3 United Kingdom_____________________________________________________________354.6 Non-DAC Donors____________________________________________________________364.7 Developing Trends in Aid Flow__________________________________________________364.7.1 Country Income Allocation Trends_______________________________________________364.7.2 General Technical Assistance Trends____________________________________________374.8 Summary__________________________________________________________________38

5. Donor Trends 40

5.1 Introduction_________________________________________________________________405.2 Department for International Development________________________________________405.2.1 Current trends, commitments, attitudes and goals___________________________________405.2.2 Modalities__________________________________________________________________415.2.3 Target Regions/Countries_____________________________________________________425.2.4 Target Sectors______________________________________________________________455.2.5 Recent Developments________________________________________________________465.2.6 Implications for Mott MacDonald________________________________________________475.3 European Union_____________________________________________________________485.3.1 Current commitments, attitudes and goals_________________________________________485.3.2 Modalities__________________________________________________________________505.3.3 Target Regions/Countries_____________________________________________________515.3.4 Target Sectors______________________________________________________________54

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5.3.5 Recent Developments________________________________________________________565.3.6 Implications for Mott MacDonald________________________________________________565.4 The Netherlands Ministry of Foreign Affairs and Nuffic_______________________________575.4.1 Current commitments, attitudes and goals_________________________________________585.4.2 Modalities__________________________________________________________________595.4.3 Target Regions/Countries_____________________________________________________605.4.4 Target Sectors______________________________________________________________605.4.5 Recent Developments________________________________________________________615.4.6 Implications for Mott MacDonald________________________________________________625.5 World Bank_________________________________________________________________625.5.1 Current Commitments, Attitudes and Goals________________________________________635.5.2 Modalities__________________________________________________________________645.5.3 Target Regions/Countries_____________________________________________________655.5.4 Target Sectors______________________________________________________________675.5.5 Recent Developments________________________________________________________685.5.6 Implications for Mott MacDonald________________________________________________69

6. Regions 71

6.1 Sub-Saharan Africa__________________________________________________________716.1.1 The State of Development in the Region__________________________________________726.1.2 The Nature of Aid in the Region_________________________________________________746.1.3 Opportunities for Mott MacDonald_______________________________________________766.2 South Asia_________________________________________________________________786.2.1 State of Development in the Region______________________________________________796.2.2 The Nature of Aid in the Region_________________________________________________796.2.3 Opportunities for Mott MacDonald_______________________________________________816.3 Middle East and North Africa___________________________________________________826.3.1 The State of Development in the Region__________________________________________826.3.2 The Nature of Aid in the Region_________________________________________________836.3.3 Opportunities for Mott MacDonald_______________________________________________846.4 Other Regions______________________________________________________________856.4.1 South East Asia_____________________________________________________________856.4.2 Eastern Europe_____________________________________________________________866.4.3 Central Asia________________________________________________________________876.4.4 Latin America and the Caribbean________________________________________________886.4.5 Pacific_____________________________________________________________________896.4.6 Opportunities for Mott MacDonald_______________________________________________90

7. Sectors 91

7.1 Wealth Creation and Economic Development______________________________________947.2 Infrastructure_______________________________________________________________947.3 Agriculture_________________________________________________________________957.4 Private Sector Development____________________________________________________957.5 Basic Services and Gender____________________________________________________967.6 Governance and Security______________________________________________________97

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7.7 Energy and Climate Change___________________________________________________977.8 Recommendations___________________________________________________________98

8. Post-2015 99

8.1 Sustainable Development Goals_______________________________________________1008.2 UN______________________________________________________________________1018.2.1 HLP on Post-2015 Development_______________________________________________1018.2.2 Rio+20 Working Group_______________________________________________________1028.3 OECD DAC_______________________________________________________________1038.4 EU______________________________________________________________________103

9. Recommendations 105

Glossary 107

Annexes

Annex I. The Millennium Development Goals 113

Annex II. DFID Country Sector Priorities 115

Annex III. Key Recommendations from the Report of the UN System Task Team on the Post-2015 UN Development Agenda 120

Annex IV. The Four Pillars of Sustainable Development 122

Tables

Table 4-1 Net ODA from the DAC and other OECD members in 2011, OECD, 2012.................................31Table 4-2 Net disbursements of ODA since 2004 at 2011 prices and exchange rates, OECD, 2012..........33Table 5-1 DFID’s top 10 recipients of gross ODA (USD million) in 2010, OECD, 2011...............................43Table 5-2 EU’s top ten recipients of gross ODA (USD million) in 2010, OECD, 2011.................................52Table 5-3 The Netherlands’s top ten recipients in 2010, OECD, 2011........................................................60Table 5-4 Top 10 World Bank Borrowers Fiscal 2012, World Bank, 2012...................................................66Table 5-5 IDA Lending by Sector, World Bank, 2012..................................................................................67

Graphs

Graphic 2-1 Children Enrolment Rates during the MDGs, UNESCO, 2012...................................................7Graphic 2-2 ODA Provided to Health, OECD, 2011......................................................................................8Graphic 3-1 ODA provided by non-DAC countries, 1970-2007, OECD, 2010.............................................19Graphic 3-2 ODA and Foreign Assistance from non-DAC Donors 2005-2009, Smith, 2011.......................19Graphic 3-3 Estimated Foreign Assistance Contributions from BRICS, 2005-2009, Smith, 2011...............20Graphic 3-4 Arab Countries ODA Disbursements, 2005-2009, Smith, 2011...............................................20Graphic 3-5 ODA from all other Non-DAC Donors reporting to the OECD DAC, 2005-2009, Smith, 2011..21Graphic 3-6 Gross ODA provided by DAC member countries, 2001-2011, in constant 2010 prices, OECD, 2012............................................................................................................................................................ 22Graphic 4-1 ODA flows since 2000, OECD, 2012.......................................................................................32Graphic 4-2 CPA volume and annual change 2005-2015, OECD, 2012.....................................................34Graphic 4-3 Regional allocation of CPA, OECD, 2012 (in USD billion).......................................................34Graphic 4-4 ODA allocation by country income, OECD, 2011.....................................................................37Graphic 4-5 Percentage of ODA spent on Technical Assistance by sector, OECD, 2010...........................38Graphic 5-1 IBRD-IDA Lending by Region Fiscal 2012, World Bank, 2012.................................................65Graphic 5-2 IBRD-IDA Lending by Sector Fiscal 2012, World Bank, 2012..................................................67

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Graphic 6-1 Net ODA to Africa by donor (constant USD 2009 billion), OECD, 2011...................................72Graphic 6-2 IBRD and IDA Sectoral Lending in South Asia, World Bank, 2012..........................................81Graphic 7-1 Gross ODA by Sector 2002-2010, OECD, 2011 (Source: Development Initiatives based on OECD DAC CRS data)................................................................................................................................ 91Graphic 7-2 Share of Global ODA by Sector, OECD, 2011.........................................................................93

Maps

Map 5-1 Map of DFID partner countries, DFID, 2012..................................................................................42Map 5-2 Map displaying the countries that the EU donates to.....................................................................52Map 5-3 The European Neighbourhood Policy countries (green) in relation to the EU and pending EU members (blue), EU, 2011........................................................................................................................... 53Map 6-1 Map of Sub-Saharan Africa, EU, 2012..........................................................................................71Map 6-2 Map Depicting Donors’ ‘Priority Countries’ and Key Recipients in Sub-Saharan Africa.................77Map 6-3 Map of South Asia.........................................................................................................................78Map 6-4 Map of Middle East and North Africa, 2010...................................................................................82Map 6-5 Map of South East Asia.................................................................................................................85Map 6-6 Map of Eastern Europe.................................................................................................................. 86Map 6-7 Map of Central Asia....................................................................................................................... 87Map 6-8 Map of Latin America and the Caribbean......................................................................................88Map 6-9 Map of the Pacific..........................................................................................................................89

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List of Abbreviations

AAA Accra Agenda for ActionACP Africa, Caribbean and the PacificAIDS Acquired Immunodeficiency SyndromeAWI Arab World Initiative BRICS Brazil, Russia, India, China and South AfricaCPA Country Programmable AidDAC Development Assistance CommitteeDFID Department for International DevelopmentDRC Democratic Republic of the CongoEC European CommissionENP European Neighbourhood PolicyEU European UnionEUR European Euro GBS General Budget SupportGBP Great British Pound (£)GDP Gross Domestic ProductGFM Grant Fund ManagementGNI Gross National IncomeGTZ German Technical Co-operation Foundation (Deutsche Gesellschaft für Technische

Zusammenarbeit)HCFC Hydro chlorofluorocarbonsHDI Human Development IndexHIV Human Immunodeficiency VirusHLF High Level ForumIBRD International Bank for Reconstruction and DevelopmentICAI Independent Commission for Aid ImpactIDA International Development AssociationIDD International Development DivisionIDLA International Development Lending AgencyIFC International Finance CorporationIFI International Financial InstitutionLAC Latin America and the CaribbeanLDC Least Developed CountriesLIC Low Income CountriesMDG Millennium Development GoalsMENA Middle East and North AfricaMFF Multiannual Financial Framework MIC Middle Income CountriesMM Mott MacDonaldNGO Non-governmental OrganisationODA Official Development AssistanceOECD Organisation for Economic Co-operation and DevelopmentOLIC Other Low Income CountriesPBA Programme-based ApproachesPDAE Paris Declaration on Aid EffectivenessPPP Public Private Partnership

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SABER Systems Approach for Better Education ResultsSDGs Sustainable Development GoalsSIDS Small Island Developing StatesSPSP Sector Policy Support ProgrammeSSC South-South CooperationSWAp Sector-Wide Approach TA Technical AssistanceTC Technical CooperationUAE United Arab EmiratesUK United KingdomUN United NationsUNDP United Nations Development ProgrammeUS United States (of America)USD United States DollarsVfM Value for MoneyWB World BankWTO World Trade Organisation

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1. Executive Summary

Since the adoption of the Millennium Development Goals (MDGs) by the international development community in 2000 international development has been evolving at an unprecedented pace. Economic shifts have made way for new donors, new modalities and a new approach to combating aid. The 2008 financial and economic crisis impacting on the amount of fiscal assistance traditional donors are able to provide, along with new beliefs in how aid should be delivered, including changing attitudes towards the harmonisation and ownership of aid, and the harrowing fact that achieving the MDGs by 2015 is looking nigh impossible, has led to new trends and increasing changes in aid flow, including new modalities for the delivery of aid, such as the pooling of funds and public private partnerships, the concentration on fewer aid recipients and a shift in sector focuses. This report was tasked with capturing and analysing the emerging and continuing trends in development and puts forth recommendations on how Mott MacDonald might best use this information to assist its business development, but as MM increasingly involves further units and divisions in international development work, it also provides an introduction to the field of international development for those from other backgrounds.

Understanding the ContextTo fully understand why the aid architecture is developing in the way that it is, it is important to assess the impact of the major international agreements on the flow of aid. These high level agreements have set out what the international community wishes to achieve through development, and as such, determine the flows of aid. The primary agreement, the MDGs, have been witnessing mixed results, not only between each other, but also between regions and countries. The progress of the MDGs has spurred the outcomes of numerous high level forums which dictate the direction of development assistance. Failing MDGs have forced a new paradigm on the way that development should operate, meaning that the development agenda is becoming increasingly recipient-focused and -led and inclusive of non-traditional actors, promoting ownership, harmonisation, and emphasis on results, and impacting on donors’ decisions and priorities. These principles have not only changed the nature of development, but also the nature of technical assistance (TA), which now must work increasingly closely with partner country systems and local actors, must provide greater emphasis on the undertaking and use of monitoring and evaluation, and be able to provide expertise on cross-cutting issues.

The transient nature of the approach to aid is contributing to the continuous evolution of the aid architecture. Now more than ever there are a greater number of donors, funds and forms of aid modality, meaning greater options and opportunities, but also creating the negative phenomenon of aid fragmentation. In the pursuit of enhancing the effectiveness and impact of their aid, and in line with new principles and agreements, donors are increasingly experimenting with

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different forms of aid modalities and packages. New packages and modalities require a slightly adjusted form of TA, but with their increasing use, MM should make sure it can adapt to new requirements that come with these modalities. However, the aid architecture also evolves outside the impact of the actions of high level institutions, and there are shifts of where aid needs to be targeted to focus on the poorest and neediest countries and people, but also taking into account the large levels of poverty still persistent in emerging Middle Income Countries (MICs).

Development aid is becoming an increasingly lucrative market; in 2011 the net Official Development Assistance (ODA) of the Organisation for Economic Co-operation and Development-Development Assistance Committee (OECD-DAC) provided its highest volume ever at USD 133.5 billion, with OECD statistics suggesting that around one quarter of all ODA was spent on technical assistance. Yet, this figure only represented 0.32% of the DAC’s combined Gross National Income (GNI), still a long way off the UN goal of donating 0.7% of GNI to development aid. This astounding figure also excludes many non-DAC, multilateral and private donors which provide alternative funding. Although Country Programmable Aid (CPA) is set to stagnate over coming years, as the effects of the 2008 economic and financial crisis are still felt, aid flows are at an all-time high and there will still be many development projects in the coming years particularly with the deadline for the MDGs in 2015. There is an increasing trend in aid allocation towards the world’s poorest countries. In line with the changing aid architecture, the proportion of ODA delivered to the world’s poorest has increased over the past decade from around 37% in 2000 to 46% in 2010. But changing attitudes and aims are also having an effect on technical assistance, transforming it increasingly into a support role, with heightened focus on local and regional expertise, and certain non-sector specific expertise, and a particular focus on capacity building and development, and monitoring and evaluation.

Changing TrendsThe evolving nature of aid has prompted donors, including the primary clients of MM, to alter their objectives and priorities, which MM needs to understand to ensure it remains a competitive choice for its clients. DFID’s primary objectives in its approach to development aid are the reduction of poverty by focusing on the poorest and most fragile states, as well as the realisation of the MDGs. As such DFID is changing its focus towards wealth creation, agriculture and infrastructure. DFID believes that these focus areas can be used to help countries build their own way out of poverty, and that they have run-off effects on other sectors. Regionally, the vast majority of the UK’s aid is sent to Sub-Saharan Africa and South Asia in line with its plan to focus on providing aid to the world’s poorest people concentrating on Least Developed Countries (LDCs). DFID’s top priority in Sub-Saharan Africa is to attempt to increase trade within the region and integrate the region into the global market. To facilitate this, DFID aims to assist in developing the region’s infrastructure and agricultural practices. In South Asia DFID plans to open up economic growth and trade, alleviate hunger and poverty, and improve maternal health.

The EU’s primary goal is the eradication of poverty in the context of sustainable development, including the achievement of the MDGs, whilst promoting democracy, good governance, and inclusive economic growth, delivering aid where it is needed most and where it will have the greatest impact. As such, the

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EU plans to prioritise sectors with a high impact on poverty reduction such as governance, social protection, health, education, employment, agriculture and energy. The majority of the European Union’s aid goes to the Africa, Caribbean and Pacific (ACP) countries, with Sub-Saharan Africa being the core focus. However, the EU is very much concerned with developing its own region, and a significant proportion of its aid is donated to development programmes in Eastern Europe and the Middle East and North Africa (MENA) region through the EU Neighbourhood Policy, designed to improve prosperity, stability and security between the EU and its neighbouring states.

The Netherlands recently redefined its approach to development assistance to better cope with the economic crisis and to respond better to a rapidly changing developmental context, whilst staying committed to the MDGs. The focus of Dutch aid has shifted away from social development towards economic sectors, supporting the self-reliance of developing countries and promoting the relationships among development objectives, public goods and Dutch national economic interests. And as such, the Netherlands has made some bold choices, including reducing the number of countries to which it provides bilateral aid to just 15 in South Asia and Sub-Saharan Africa and reducing its sector focus to just four ‘spearheads’, where Dutch aid is judged to be able to add unique value: security and the legal order, water, food security and sexual and reproductive health and rights.

The World Bank (WB) offers support to developing countries through policy advice, research and analysis, and technical assistance. Like the majority of donors, the WB puts fulfilment of the MDGs at the core of its development policy and goals, which are laid out in six strategic encompassing themes: the poorest countries, post-conflict and fragile states, middle income countries, global public goods, the Arab World, and knowledge and learning. The International Development Association (IDA) branch of the WB has agreed upon four ‘‘frontier’’ issues that it will put special emphasis on within these strategic themes: gender, climate change, fragile and conflict-affected countries, and crises response. The WB is committed to focusing on the poorest countries. Africa is therefore the largest recipient. The WB has two main themes that govern its programmes in Sub-Saharan Africa: economic development and employment, and mitigation of natural disasters and economic shocks, including strengthening public sector capacity and improving governance. South Asia is a core region for the WB, its priorities being to reverse economic slowdown and alleviate poverty. The WB aims to respond to the MENA’s calls for better governance, more jobs and better socioeconomic opportunities and more inclusive growth.

In line with constricted donor fiscal budgets and the need to concentrate on the poorest and most needy, the number of countries receiving ODA will decrease over the coming years, as donors try and achieve greater impact for their money. Concentration on the regions of Sub-Saharan Africa, South Asia and the Middle East and North Africa has already begun, and MM should look to increase its presence in these regions. Sub-Saharan Africa is by far the biggest regional recipient of global ODA. Its countries are at the top of most donors’ priorities as it is home to the majority of LDCs and the countries struggling most to meet the MDGs. Even though Sub-Saharan Africa is home to only 12% of the world’s population it has 1/3 of the world’s poor, as such poverty alleviation and quality and provision of basic services is high on the agenda. To reduce the poverty that undercuts many of Africa’s problems, economic growth and job creation through

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private investment need to be key factors. Africa remains poorly integrated in the global economy, so to boost growth, infrastructure projects and private sector involvement will be encouraged.

After Sub-Saharan Africa, South Asia looks to be the next core focus region with high levels of absolute poverty in the region despite recent economic growth. The primary focus is on South Asia, where poverty alleviation, economic development and mitigating climate risks are key priorities, as is promoting gender equality and reducing social exclusion; however, there is involvement in many other sectors.

North Africa and the Middle East will see an increase in aid due to the recent regime changes and conflicts in several of its countries after popular uprising, with focus being on governance, stability and security, economic development, job creation and sustainable growth, women and youth.

Over recent years the majority of ODA spent on various sectors has risen along with the increase of ODA. This means that there are no ‘‘bad sectors’’ to be involved in. However, since 2009 there have been some considerable changes in sector allocation with the impending deadline of the MDGs, coupled with the restrictions on donors’ budgets. As such, donors are looking to invest more in sectors that have the opportunity to have greatest ‘multiplier’ and ‘run-off’ ‘effects, whereby the project pursues more than one MDG and causes multiple direct and indirect benefits with wealth creation being the number one priority. Wealth creation includes multiple sectors that MM is active in, including economic development, job creation, private sector development, education, gender, and skills development. This ideal also means that Infrastructure development and agriculture are becoming increasingly important themes, as their run-off and multiplier effects for wealth creation and economic development are being better understood. However, sectors such as basic services, gender and climate change will still remain important.

Post-2015With the end of the Millennium Development Goals in 2015, the international community has already begun to investigate the next step: learning from the problems faced during the MDGs, it has started the process of the formulation of the ‘Sustainable Development Goals’ (SDGs). Although they have not yet been formally agreed upon, the SDGs are likely to follow the ‘Triple Bottom Line Approach’, i.e., economic development, environmental stability and social inclusion. It is also argued that this Triple Bottom Line Approach will be dependent on a fourth condition: good governance.

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2. Major Agreements in Global Aid

2.1 IntroductionThe flow of development aid is coordinated by the international community, through various international forums and agreements. Since 2000 the primary agreement that has governed the flow of development aid has been the Millennium Development Goals (MDG), and its subsequent High Level Forums (HLF)1. The MDGs and the key HLFs – Paris 2005, Accra 2008 and Busan 2011 – have determined the core direction of aid flows since 2000 and will continue to determine them until at least 2015. Understanding these agreements is important to understanding aid flows, these guidelines are an agreement by the international development community that dictate where and how aid is to be coordinated. The issues and provisions that have been the conclusions of these accords are what the vast majority of the development community believe to be the priority targets for development and therefore determine where aid is allocated.

2.2 The Millennium Development GoalsThe primary agreement that has determined the direction of aid flow since 2000 has been the ‘Millennium Development Goals’. These goals are eight key objectives for achieving a global minimum standard of development by 2015. They represent the international commitment to the reduction of poverty in all its dimensions. These are the agreed priorities of the development community and therefore determine the sectors and projects to which the vast majority of development assistance will be allocated2:

1. Eradicate extreme poverty and hunger: Halve the proportion of people on living on less than a dollar a day; achieve full and productive employment and decent work for all including women and young people and halve the proportion of people that suffer from hunger.

1. Achieve universal primary education: Ensure, by 2015, that all children, boys and girls alike, will be able to complete a full course of primary schooling.

2. Promote gender equality and empower women: Eliminate gender disparity in primary and secondary schools by 2005 and at all levels by 2015

3. Reduce child mortality: Reduce by two-thirds the mortality rate of children under five.4. Improve maternal health: Reduce by three-quarters the maternal mortality rate and achieve

universal access to reproductive health. Inadequate funding for family planning is a major hurdle to fulfilling the commitments to improve women’s reproductive health.

5. Combat HIV/AIDS, malaria and other diseases: Halt and begin to reverse the spread of HIV/AIDS; achieve, by 2010, universal access for HIV/AIDS treatment for all who need it; halt and begin to reverse the incidence of malaria and other major diseases.

6. Ensure environmental sustainability: Integrate the principles of sustainable development and country policies and programmes; reverse loss of environmental resources. Reduce biodiversity loss achieving, by 2010, a significant reduction in the rate of loss. Reduce by half the proportion of people without sustainable access to safe drinking water and basic sanitation. Achieve significant improvement in the lives of 100 million slum dwellers.

7. Develop a global partnership for development: Open further an open, rules-based, predictable non-discriminatory trading and financial system. Address special needs of least developed countries. Address the special needs of landlocked developing countries and small island developing states (SIDS). Deal comprehensively with debt problems of developing countries. In co-

1 The HLFs evaluate the on-going progress of the MDGs and on that basis provided provisions to increase the productivity of aid-

development2 For a more detailed breakdown of the MDGs see Annex I.

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operation with pharmaceutical companies provide access to affordable, essential drugs in developing countries. In co-operation with the private sector make available the benefits of new technologies, particularly information and communications.

It is these basic principles that govern the current overall direction of development aid. However, these goals are progressing at different rates and therefore, there are mixed successes in the achievement of these policies. There is not only a disparity between the success of different goals but also amongst different regions, countries, and sectors. The differing advancement of these goals has been the cause of the outcomes from the HLFs and dictates the wishes of the global development community.

2.2.1 MDG1 Eradicate Extreme Poverty and HungerMDG1 has been one of the most successful MDGs. Preliminary results suggest that in 2010, the goal of halving the number of people that were living on less than USD 1.25 in 1990 had already been achieved. The reason for the drop in global poverty is due to the large success of poverty alleviation in countries such as China and Vietnam. However, this will not mean that MDG1 will stop receiving attention. Despite the decline in the percentage of the global poor, the absolute number of poor people is actually increasing in Sub-Saharan Africa and South Asia. By 2015 almost 1 billion people will still be living on less than USD 1.25 a day, with many in Middle Income Countries (MICs). This means that instead of a more global attack on poverty the focus will shift to these struggling regions and countries.

It is widely recognised that the best way to combat poverty and hunger is through wealth and job creation, and economic development. Employment-intensive growth is central to reducing poverty. Evidence suggests that achieving full and decent employment requires addressing the lower participation rates, and higher unemployment rates of women and youth. Pro-poor policies are crucial to development and reducing inequalities and poverty.

An effective way of addressing MDGs is by synergising them. As such, in supporting sustainable agriculture and rural development, countries can increase food production. Not only will this alleviate poverty by creating jobs, but it will also alleviate hunger and could possibly increase food-based exports. Equitable provision of agricultural inputs, including subsidiary programmes, can contribute to higher food production and have a roll-over effect on the MDGs, as rapid hunger and poverty reduction are a result of high per capita growth driven by this agricultural productivity, employment creation and equitable distribution of income opportunities. Therefore agriculture and land management contracts in Sub-Saharan Africa and South Asia will continue to be prominent and even increase over the next few years to combat the increase in absolute poor in these regions.

2.2.2 MDG2 Achieve Universal Primary EducationThe net enrolment rate for children of primary school age rose from 80 to 90% between 1999 and 2010. However, the majority of this growth occurred before 2004 and unfortunately the enrolment rate has stalled. A recent report, released in October 2012, suggests that the primary goal of universal primary education for all will be woefully missed. Out of school numbers globally have stagnated and, in fact, in Sub-Saharan Africa, they have actually risen. It has been calculated that it is likely that the MDG goal of achieving universal primary school education for all will not be met until 2030. The primary reason for this shortfall is the lack of the volume of aid going towards education.

Evidence suggests that the abolition of school fees, supported by reforms in education systems and investments in school infrastructure and human capital, leads to higher enrolment rates in primary schools. Universal primary education is achievable if supported by measures that address student retention, particularly among girls, which has a further effect in the pursuit of the empowerment of women and girls, as well as maternal and child health. An increase in student numbers also requires an increase in teachers, hopefully creating more jobs and making education more widely available. Education experts argue that the sector is underfunded requiring a further USD (United States Dollars) 16 billion to achieve universal primary education for all. Particularly in light of these new findings it is likely that the proportion of

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development aid will be stepped up over the next few years and particularly in regard to the struggling region of Sub-Saharan Africa.

Graphic 2-1 Children Enrolment Rates during the MDGs, UNESCO, 2012

2.2.3 MDG3 Promote Gender Equality and Empower WomenMDG3 is seeing some success. By 2012 the primary school enrolment of girls equated that of boys, and women’s parliamentary representation accounted for 19.7% worldwide, a dramatic increase of 75% from 1995 (11.3% parliamentary representation worldwide), however, overall representation is still low and uneven between different regions. Despite achieving the goal of eliminating gender disparity in primary schools, it is unlikely that this can be achieved at all levels by 2015. Women are still underrepresented in global parliaments and social, economic and political empowerment is still far off its desired aims. Therefore aid will still concentrate on female empowerment, not only to achieve these goals, but also because it probably has the most significant run-off effect as a strong multiplier across all MDGs.

2.2.4 MDG4 Reduce Child MortalityThe specific goal was to reduce child mortality rates by two thirds between 1990 and 2015, from 93 children dying out of 1000 to 31. Between 1990 and 2008 children who died before their fifth birthday fell from 12.5 million to 9 million. Although child deaths are falling much still needs to be done to achieve the 2015 goal. Revitalising efforts against pneumonia and diarrhoea as well as bolstering nutrition could save

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millions of children. Focusing on health and agriculture can help achieve this target. Countries can make quick gains in children’s health via partnerships that support large scale immunisation campaigns and by increasing food production to battle undernourishment amongst children. Again Sub-Saharan Africa is the region that is struggling most in trying to achieve these goals with all 34 countries, whose under-five mortality rates are above 100 of 1000. This will again mean that there will be a focus on this region to try to bring the average below the 100 mark. There has been an increase in the amount of aid going into the health sector over the first decade of the 21st century, due to the knock-on effects it has on other MDGs. Education and schemes that produce increased food production will also be part of the attempt to reach this MDG.

2.2.5 MDG5 Improve Maternal HealthSince 1990 maternal mortality rates have halved but are still far off the target of reducing these rates by three-quarters and achieve universal access to reproductive health. Currently maternal mortality rates are decreasing at 1% annually, opposed to the 5.5% needed to achieve the MDGs by 2015. Again the focus needs to shift to Sub-Saharan Africa where 13 out of the 14 countries with the highest mortality rates (over 1000 per 100,000) are located. Poverty and lack of education contribute significantly to high adolescent birth rates. Inadequate funding for family planning is a major failure in fulfilling commitments to improving women’s reproductive health. These shortcomings have been a significant factor in the increase of ODA that has been dedicated to health in recent years, when the volume of aid spent on health tripled between 2000 and 2010. It also demands an increase in education for sexual health and family planning.

Evidence suggests that investments in skilled health workers, particularly birth attendants have considerable impact on reducing maternal, neonatal and child mortality, particularly in isolated rural communities.

Graphic 2-2 ODA Provided to Health, OECD, 2011

2.2.6 MDG6 Combat HIV/AIDS, Malaria and Other DiseasesThe results of the fight against HIV and AIDS are mixed. Now more people than ever are living with HIV. In 2011 34.2 million people were living with HIV, up 17% since 2001. The reasons for this are partially positive in that AIDS related deaths are down due to significant increase in access to antiretroviral therapy, however, infections are on the rise. Particularly in Eastern Europe and Central Asia, there is a worrying rapid increase in the number of new infections, spread by the use of illicit drugs. However, two-thirds of new infections and two-thirds of those currently living with AIDS are located in Sub-Saharan Africa. This is another reason why health specific ODA will become increasingly prescribed to Africa.

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2.2.7 MDG7 Ensure Environmental SustainabilitySuccess is being achieved with regard to MDG7. Most notably there has been a huge decrease of 98% in the consumption of ozone depleting substances. Since most of these substances are also potent greenhouse gases, the success is two-fold. However, work still needs to be done in reducing the amount of hydro-chlorofluorocarbons (HCFCs) being emitted. These are a class of global warming chemicals that are often used in place of ozone-depleting substances.

The goal of halving the number of people who lack dependable access to safe drinking water has been easily achieved. Despite this amazing feat, projections indicate that in 2015 more than 600 million people worldwide will still be using unimproved water sources. Due to the current success of MDG7 compared to the others it does not look as if much will change in regard to areas of focus.

2.2.8 MDG8 Develop a Global Partnership for DevelopmentThe 2008 financial and economic crisis had a significant effect on development aid. Development aid fell for the first time in a decade in 2009, due to the fiscal constraints of donor countries. Few donors managed to meet their promised commitments. In 2011 global ODA reached its highest ever total, in real terms, of USD 134 billion, however, when adjusted for 2010 exchange rates and prices, this was actually a decrease on the previous year. Many countries are still to reach the agreed target of donating 0.7% of their Gross National Income (GNI) by 2015 and ODA growth looks to slow to 2% increase per annum over the coming years. The OECD and the UN continue to scrutinise donor countries to make sure that they stay true to the promises they have agreed on. It is likely that the international community will continue to put pressure on itself to increase aid, make aid more effective and realise its goals3.

The UNDP is calling for a concentration on the failing MDGs. With the swift approach of the deadline of the MDGs, in 2015, the UN is calling for the use of proven strategies, policies and interventions whilst making a radical break from those that do not work. Therefore, despite increasing calls for the reduction of the share of aid spent on technical co-operation (TC), it is likely that technical co-operation will still play an important role in development aid over the next few years.

The MDGs are ambitious targets of achievement but progress has been made more difficult by the combination of high food and fuel prices coupled with the impact of the financial and economic crisis in 2008. The financial crisis led to a reduction in economic growth in many countries, and caused reductions in foreign direct investment, exports and tourism. The financial crisis also meant that many bilateral donors reduced the volume of aid they made available for development.

Sub-Saharan Africa is likely to see a swift increase in the proportion of development aid allocated to the region. In most sectors it is falling behind the rest of the world and continues to have the most difficulty in its pursuit of the MDGs and much more aid is required to reach the minimum targets.

It is these eight goals that broadly determine the direction of aid flow. The international community has agreed on these MDGs, and even though each multilateral and bilateral lender’s goals will differ, they will all fit into at least one of these categories, if not transcend them all. Therefore these are the sectors that donor agencies will concentrate on, in pursuit of the fulfilment of the MDGs. Mixed successes between varying sectors and regions mean that some of these areas will be given more focus over the coming years such as Sub-Saharan Africa or maternal health4.

2.3 Paris Declaration on Aid EffectivenessThe Paris Declaration on Aid Effectiveness (PDAE) was the result of the Paris HLF. Held in 2005, it was the second HLF5 to review the progress of the MDGs but the first to have any major implications on

3 Refer to Chapter 4 for more information4 For more information on the progress of the MDGs, please refer to the UN ‘The Millennium Development Goals Report 2012’.5 The First High Level Forum was held in Rome in 2003, however, no truly significant outcomes came from this HLF.

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development aid. The purpose of the PDAE was to try and increase the effectiveness of development aid. The Paris declaration is important as it changed the scope of development aiming to make it more efficient, more accountable and more relevant to individual developing countries. The declaration laid out a practical, action-oriented road map designed to improve the quality of aid and its impact on development. It identified five key aspects that could be followed to improve aid effectiveness and established a monitoring system to assess progress and ensure that donors and partner countries are held accountable for their commitments. The five core principles for creating more effective aid are described below.

2.3.1 OwnershipThe Paris HLF believed that the development climate was too supply driven with donors giving partner countries what they thought they needed. The PDAE decided that partner countries should exercise effective leadership over their own development policies and strategies as well as coordinating their development actions. Partner countries commit to exercise leadership in developing and implementing their national

development strategies through broad consultative processes. Translate these national development strategies into prioritised results-oriented operational

programmes as expressed in medium-term expenditure frameworks and annual budgets. Take the lead in coordinating aid at all levels in conjunction with other development resources in

dialogue with donors and encouraging the participation of civil society and the private sector. Donors commit to respect partner countries’ leadership and help strengthen their capacity to exercise

it.

In light of this call for country ownership there is a need to strengthen partner countries’ national development strategies and associated operational frameworks via planning and budgeting, improving their institutional capacities to develop and implement results-driven national development strategies.

2.3.2 AlignmentThe Paris HLF also expressed concern about the failure to provide more predictable, multi-year commitments on aid flows to partner countries. As a result, the PDAE stated that donors should base their overall support on the partner countries’ national development strategies, institutions and procedures. Donors should base their overall support on country strategies and in partnership with the partner countries should help to strengthen country development systems, capacity and procurement systems. Partner countries commit to integrate specific capacity strengthening objectives in national

development strategies and pursue implementation through country-led capacity development where needed.

Take leadership and implement the procurement reform process Donors commit to basing their overall support (country strategies, policy dialogues and development

co-operations programmes) on partners’ national development strategies and periodic reviews of progress in implementing these strategies.

Using country systems and procedures to the maximum extent possible. Where use of country systems is not feasible, establish additional safeguards and measures in ways that strengthen rather than undermine country systems and procedures.

Progressively rely on partner countries for procurement when the country has implemented mutually agreed standards and processes.

The alignment pillar calls for a greater untying of aid, as the untying of aid generally increases aid effectiveness as it reduces transaction costs for partner countries as well as improving country ownership.

2.3.3 HarmonisationOne of the core issues that the Paris HLF touched upon was the problem of the fragmentation of aid and the duplication of efforts. Excessive fragmentation of aid at a global, country or sector level impairs aid effectiveness. A pragmatic approach to the division of labour and burden sharing increases complementarity and can reduce transaction costs. They argued for greater rationalisation of donor

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activities to make their actions as cost-effective as possible. The PDEA therefore stated that donors’ actions had to become more harmonised, more transparent and collectively effective. Partner Countries commit to provide clear views on donors’ comparative advantages at achieving

donor complementarity at country or sector level. Donors commit to Implement, where feasible, common arrangements at country level for planning,

funding, disbursement, monitoring, evaluating and reporting to government on donor activities and aid flows. Increased use of programme-based aid modalities can contribute to this effort.

Work together to reduce the number of separate, duplicative missions to the field and diagnostic reviews and promote joint training to share lessons learnt and build a community of practice.

Work with partner countries to rely, as far as possible, on partner countries’ results-orientated reporting and monitoring and evaluation systems, with partner countries to the maximum extent possible on joint formats for periodic reporting.

2.3.4 Mutual AccountabilityA major priority of partner countries and donors is to enhance mutual accountability and transparency in the use of development resources. This also helps strengthen public support for national policies. The Paris declaration demanded defining measures and standards of performance and accountability of partner country systems in public financial management, procurement, fiduciary safeguards and environmental assessments, in line with broadly accepted good practices. Partner countries commit to strengthen as appropriate the parliamentary role in national development

strategies and/or budgets. Reinforce participatory approaches by systematically involving a broad range of development partners

when formulating and assessing progress in implementing national development strategies. Donors commit to provide timely, transparent and comprehensive information on aid flows so as to

enable partner authorities to present comprehensive budget reports to their legislatures and citizens.

2.3.5 Managing for ResultsManaging for results is a principle designed to increase the effectiveness of aid not only in current projects but also in future ones. It calls for managing of resources and improving decision-making for results. It requires a new approach to managing and implementing aid in a way that focuses on the desired results and uses new information to improve decision-making. Partner Countries commit to strengthen the linkages between national development strategies and

annual and multi-annual budget processes. Endeavour to establish results-oriented reporting and assessment frameworks that monitor progress

against key dimensions of the national and sector development strategies and ensure that these frameworks track a manageable number of indicators for which data are cost-effectively available.

Donors commit to link country programming and resources to results and align them with effective partner and country performance assessment frameworks, refraining from requesting the introduction of performance indicators that are not consistent with partners’ national development strategies.

2.4 Accra Agenda for ActionAccra was the third HLF on the MDGs, held in 2008. The purpose of the forum was to accelerate, strengthen and deepen the conclusions and implementation of the Paris Declaration. The PDAE had laid out the agreement of a genuine partnership between developing countries, clearly in charge of their own development processes, with donors operating within partner countries’ frameworks and strategies. They also agreed to hold each other accountable for achieving concrete development results and sticking to their development targets. However, this new process was developing too slowly and the Accra Agenda for Action (AAA) was designed to accelerate this process. It focused on three core aspects of the PDAE which it believed were being under-achieved. The agenda stated that:

2.4.1 OwnershipCountry ownership should be central to development cooperation. Developing country governments should take stronger leadership of their own development policies and will engage with their parliaments and

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citizens in shaping those policies. Donors will support them by respecting countries’ priorities, investing in their human resources and institutes, thus making greater use of their systems to deliver aid and increasing the predictability of aid flows. Countries will have more say over their development processes through wider participation in development policy formulation, stronger leadership on aid coordination and more use of country systems in aid delivery.

2.4.2 Inclusive partnershipsOverall the Paris Declaration tried to encourage better relationships between donors and partner countries by encouraging harmonisation and alignment to achieve partner countries’ MDGs. However, Accra called for more effective and inclusive partnerships. The development community had begun to change quite significantly between Paris and Accra. Middle Income Countries (MIC), global funds, the private sector and civil society organisations have been increasing their contributions and bringing valuable experience and knowledge to the table. However, this increase in players also creates management and coordination challenges. These challenges mean that all development actors must work in a more inclusive partnership so that all efforts can be better coordinated and therefore have greater impacts on reducing poverty.

2.4.3 Delivering ResultsThe slow progress of the realisation of the MDGs coupled with the global financial and economic crisis led to Accra putting increasing weight on the transparency of development procedures as well as the need for achieving quantifiable results. The AAA states that achieving development results and accounting for them must be at the heart of international development. Partially due to the financial difficulties countries faced at the time the AAA stated that the international development community had an obligation to its citizens to clearly demonstrate that donor and partner country actions are delivering tangible results that have a significant positive impact on people’s lives. Donor and partner countries not only have to be accountable to each other but also to their citizens.

2.5 Busan Partnership for Effective Development CooperationBusan was the final HLF on the Millennium Development Goals. Again the goal of the forum was to evaluate the progress of the MDGs as well as assess aid effectiveness and revitalise the global effort to achieve the MDGs after the 2008 financial crisis. The Busan forum primarily repeated the conclusions of Accra and Paris, however, it did contribute some new principles and ideals that will change the direction of aid. Again, Busan demands development effectiveness to be increasingly country driven. Development aid should be better aligned, and used to strengthen national priorities and strategies, delivering on internationally agreed goals, norms and standards. Busan applauds the increase in aid volume over the years before it but recognises that this needs to be coupled with sustainable and transparent results. The HLF agreed that there needed to be broader, deeper partnerships at all levels of development, not only in the traditional donor-partner country relationship. These principles were based on evidence that suggested the elimination of policies that made development results and the MDGs more difficult to reach.

2.5.1 Ownership of Development Priorities by Developing CountriesAgain the OECD and its members reiterated its stance on ownership of development strategies by the partner countries. The agreement states that partnerships can only succeed if they are led by developing countries and by implementing approaches that are tailored to country-specific situations and needs. There is a need in development to deepen, extend and operationalise the democratic ownership of development policies and processes.

2.5.2 Focus on ResultsThe deliverance of tangible, quantitative results is also another important aspect of development aid that the Busan forum said was not being achieved at a sufficient level. Investments and efforts must have a lasting impact on the eradication of poverty, reduction of inequality, achievement of development sustainability as well as enhancement of developing countries’ capacities. All of this should remain in-line with the priorities and policies set out by the developing countries themselves. To achieve concrete and

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sustainable results, there needs to be a focus on managing for results and on monitoring, evaluation and communication processes. This requires a scaling up of support to partner countries through strengthening of national capacities and leveraging diverse resources and initiatives.

2.5.3 Inclusive Development PartnershipsBusan wanted to expand the relationships within development aid from only donor-partner country co-operation to involve more of the emerging actors in development, fostering South-South and triangular co-operation and helping to tailor these horizontal partnerships to a greater diversity of country context and needs. Busan demanded more openness, trust and mutual respect and learning in partnerships, as these were the core principles that make partnerships effective.

2.5.4 Transparency and Accountability to Each OtherFinally Busan demanded further transparency and accountability in development aid, as these ideals are the foundations needed to make the other principles successful. Busan repeats that all participants in development are mutually accountable for results. Busan argues for greater support of developing countries in their efforts to facilitate, leverage and strengthen the impact of diverse forms of development activities and finance, ensuring that these diverse forms of co-operation have a catalytic effect on development.

These principles primarily repeat and reinforce the conclusions of the PDAE and AAA. However, Busan called for other efforts to be made and scaled up to achieve the MDGs.

2.5.5 Capacity DevelopmentCapacity development should be at the heart of development. For partner countries to fully take ownership of their development plans as well as easily achieve and demonstrate results, developing countries national capacity needs to be substantially developed for these principles to work at full efficiency. Developing country capacity is essential to the achievement of internationally agreed development goals.

2.5.6 Aid DeliveryIn light of the financial crisis and the subsequent constraints on the amount of aid that donor countries can deliver Busan wanted development aid to have greater value for money. The HLF in Busan agreed that aid needed to be targeted, focusing on core, or struggling regions and sectors. Aid needs to be allocated efficiently and equitably, in order to get the most out of development aid provided. Development aid should also be prioritised to those who need it most, in that more and better aid should be provided to countries affected by conflict and fragility. Aid also needs to become more predictable. The OECD wants donors to lay out short and medium term development plans, laying out the countries, regions and sectors that they wish to focus on.

2.5.7 Gender EqualityAlthough not a new provision, the HLF reaffirmed MDG3 and that the development community must accelerate its efforts to achieve gender equality and the empowerment of women. Busan believed that this needed to be achieved through development programmes grounded in country priorities, recognising that gender equality and women’s empowerment are critical to achieving all development results.

2.5.8 Fragile StatesTying in with the need to make aid more effective, and the need to balance out the unevenness of development progress, Busan called for a concentration on fragile states. Fragile states are those most in need of development aid. Fragile states suffer from an inefficient infrastructure and lack of resources compounded by weak institutions and socio-economic hindrances, and are for the large part off-track to meet the MDGs. These states require development aid most, and in the financial climate that has caused a reconsideration of the delivery of aid, to work towards the MDGs and ensure value for money on aid,

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Busan suggests that donor countries deliver more and better aid to countries affected by conflict and fragility.

2.5.9 Private SectorThe financial crisis in 2008 caused a constriction on the volume of aid delivered by many donor countries and until Busan, donor countries were still struggling to reach their targets on the percentage of GNI dedicated to aid. This, together with the rise of non-traditional players in the donor community, has prompted the OECD’s desire to increase private sector participation in development. The private sector can increase the overall volume of aid delivered to partner countries as well as bringing expertise to specific projects. The OECD wants to increase the number of Public Private Partnership (PPP) projects in the future. Development is driven by strong, sustainable and inclusive growth and the OECD wants to involve the success of private sector growth in development.

2.6 SummaryThese international goals and high level forums are significant when determining aid flows as they establish the conventions and standards expected in development aid. They are high level, multinational agreements and principles that are expected to be followed by donors and partner countries. These forums and agreements highlight the failings in international development and aim to alleviate them. The provisions and concessions set out by the conclusions of these meetings will be the foundations of the individual plans set out by donors as well as advice partner country development plans and therefore determine the overall trends of aid flow. By understanding these general trends we can better understand the reasoning behind individual donors’ actions and therefore make educated predictions on which countries, regions and sectors to focus our efforts, where we have an established portfolio, on which we can expand on and where our portfolios need to be developed to remain competitive for future projects. The MDGs and the results from Paris 2005, Accra 2008 and Busan 2011 have already changed aid flows. Aid programmes are now expected to ensure country ownership, produce tangible results and become more aligned with other actors’ efforts. This has changed the role of Technical Assistance (TA) in that it now needs to work much more with partner country systems and local actors, such as NGOs and consultancy firms in implementing projects. Consultations with stakeholders now are held to ensure that their needs and wants are addressed properly in the project, and that there is a greater focus on tangible results. Therefore, the use of Monitoring and Evaluation (M&E) has become much more prevalent in the implementation of projects, and will continue to do so, as donors and partner countries aim to develop best practices and beneficial results. MM already abides by these concessions but needs to ensure that it remains at the forefront of these tasks. Developing our knowledge and expertise in regard to M&E may be the best way to keep ahead and ensure we can provide accurate results and best practices while being accountable to MM’s clients and project stakeholders.

The MDGs remain the key priority for donors until 2015, and therefore will receive the most funding and concentration, particularly those MDGs that are struggling the most such as MDG3 on Gender Equality and the Empowerment of Women, and MDG5 on Maternal Health. These goals are still very relevant today, however, Busan highlighted some key changes in international development, and has called for greater focus on issues such as capacity development and aid delivery to ensure alignment, harmonisation and ownership, as well as calling for greater concentration on global cross-cutting areas such as gender, fragile states, and trying to incorporate the private sector into international development.

TA again will have to evolve to cater to these new wishes, as well as still being relevant to projects concerning the MDG goals. To keep up with these trends, and to demonstrate that it is a modern TA firm, MM needs to show that it has sufficient expertise and ability to cater to these increasingly important cross-cutting issues, ensuring that it is able to promote the empowerment of women and gender equality across all its projects, understands the unique contexts and positions of fragile and conflict-afflicted states and can adapt its programmes and expertise to this, as well as being a gateway and representative in regard to private sector involvement in the international development arena. MM has a good knowledge of capacity development which it needs to properly utilise in its projects to ensure country ownership through the

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evolution of various partner country organisations and institutions and the ‘hand-over’ of programmes and projects.

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3. Aid Architecture

3.1 IntroductionSince 2000, the international development architecture and the interactions and co-operations within it, have been evolving at an unprecedented pace. Now more than ever, there are a great number of donors and forms of aid modality, which of course means more options and opportunities. However, this proliferation of actors and methods has led to a phenomenon known as aid architecture fragmentation. Fragmentation has led to questions about aid effectiveness and therefore caused a shift in the aid architecture. No more does development aid involve strictly a vertical interaction between a north donor and a south recipient country, but a much greater amount of interactions and involvements. This causes fragmentation, meaning a lack of coordination and too much bureaucracy, decreasing the effectiveness of aid and slowing down development.

3.2 Aid ArchitectureThe international aid architecture can be defined as the systems of institutions, rules, norms, and practices that govern the fiscal resources for development. Since 2000, economic shifts have made way for new donors, new modalities and a new approach to distributing aid. Non-DAC, multilateral donors, and civil society organisations (including charities, NGOs and humanitarian aid) have gained a greater presence in the international aid architecture and are becoming increasingly involved in international discussions on aid. The 2008 financial and economic crisis, and shifts in development agreements and ideas, have led to changing attitudes towards harmonisation and ownership, and have also led to new modalities for the delivery of aid. However, this proliferation of new approaches has meant that the aid architecture has become increasingly fragmented leading to questions over aid effectiveness and the future of the aid architecture. The existing system is the product of changing fashions in concepts of development, the responses of donors to the challenge of redeploying their resources more effectively, and well-intentioned, and mostly unilateral, efforts to reform the system.

The emergence of significant global economic players that are still considered developing countries themselves, such as the BRICS (Brazil, Russia, India, China, South Africa) countries, as well as the increasing expansion of the international humanitarian community, has initiated a new aid alignment which is already making its impact on the international aid system. South-South, triangular and decentralised co-operation are growing in size as well as importance. The economic rise of India and China amongst others is making important contributions to the fulfilment of the MDGs and sustainable development. Civil society organisations, philanthropic foundations and the private sector are also making increased financial resources and knowledge available, becoming more involved in the development community and are exploring new aid modalities coupled with other sources of financing. New players and aid modalities can make a critical contribution to development, where their efforts contribute to national development priorities and when there is coherence among the many different types of assistance providers and aid modalities used. The increasing participation of these emerging players, the on-going reassessment of aid management approaches, the challenges facing donors in raising expected aid resources, and emerging development challenges, such as climate change and poverty in MICs, present both dilemmas and opportunities to those engaged in reshaping the global aid system.

However, despite the increase in the volume of aid, the increasing number of actors and modalities are causing questions over its effectiveness in contributing to sustainable development outcomes. In reaction

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to these issues in the recent HLF in Busan, the international development community agreed to try to reform the international aid architecture to make it more effective, transparent and inclusive in terms of involving and benefitting from the experiences of non-DAC assistance providers, both public and private, and various delivery modalities.

3.3 Non-DAC donorsTraditionally the Development Assistance Committee countries have been the primary providers of development aid contributing about 90% of the total volume of ODA flows. Although they continue to be the principle providers of aid, and will continue to be for the foreseeable future, there has been a substantial increase in outside providers in recent years. These new donors currently do not provide a large amount of aid, but their presence is becoming increasingly important in development. MM therefore needs to be open to the idea of possible collaboration with them, particularly with the private sector, humanitarian organisations and with aid programmes within these donor countries (such as India or China). The new donors represent new opportunities for MM to expand into new regions and develop relationships with more clients and seek a wider source of funding.

3.3.1 Bilateral Aid FlowsEven though non-DAC donors have been engaging in development for many years, over the past decade the number of donor governments who do not belong to the DAC has risen sharply to nearly 30 and they are increasing their role as donors. These donors are a diverse group and many of these are in what used to be called the economic ‘South’. These South countries are helping to fuel a wave of so-called South-South Cooperation (SSC) flows in areas like investment, trade and development assistance. Despite many non-DAC donors being providers of aid for many years, they have always been in the minority, in terms of volume, compared with the more established DAC donors. However, their role in development has been becoming more substantial in recent years and looks to continue to be more integral to development in the future.

Their development co-operation is different from the DAC as their aid does not differentiate between aid as defined by the DAC6 and other non-aid components such as export credits, debt relief and bank finance. This makes exact aid volumes for countries outside of the OECD difficult to determine along with the fact that many non-OECD countries’ aid budgets are intertwined with other ventures and projects. Their co-operation is based on a history of SSC and principles such as mutual interest and benefit as well as

6 OECD DAC ODA definitions state that all loans must contain a grant element of at least 25% amongst other conditions.

T3.1 From the ‘Position Paper: Partner Countries’ Vision and Priority Issues for HLF 4 (Final – 12 June 2011)Changes in the global development environment demand that we critically assess existing structures for managing aid and jointly develop a new international development co-operation architecture which would: Take over and address the unfinished aid agenda Become more inclusive by involving non-DAC co-operation providers to become active Build on experiences gained through existing mechanisms in order to evolve a set of universal

principles governing the future development of co-operation to incorporate the Paris principles and others in use.

Take due note of potential SSC and triangular co-operation in contributing through horizontal partnerships to supplement North-South co-operation and,

Identify other issues for development effectiveness such as aid for trade, easing tariff and non-tariff barriers, development financing and climate change which call for more coordinated actions which the new architecture would address by working closely with specialised institutions in their respective fields (such as the WTO for aid for trade, for example). A key objective would be to help apply the lessons learned from aid effectiveness efforts to these other areas of co-operation.

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respect of sovereignty, non-interference and non-conditionality and promotes objectives apart from development aid, such as diplomacy and trade. SSC has become a tangible source of development co-operation, with MICs building horizontal partnerships to share development experiences and knowledge. It plays a key role in the new co-operation architecture, but more needs to be learned about SSC modalities and practices. Around 90% of SSC comes in the form of project finance and TA. One of the primary catalysts for the rise of SSC has been the intensified regional integration, as the bulk of SSC is undertaken intra-regionally to support incorporation initiatives, forming regional partnerships whilst consolidating economic integration. SSC represents an important complement to ODA flows. Due to the financial and economic crisis in 2008 and the resulting recession, it is clear that global development co-operation in the coming years will operate under increasingly stringent aid budgets. However, SSC is expected to continue growing.

SSC not only provides additional flows, it also opens up to developing countries an effective avenue for capacity development. Developing-country skills and technical solutions have evolved in an environment of similar factor endowments, such as capital scarcity, labour abundance and poor infrastructure, while expertise of developing countries is likely to be at levels more appropriate to the size of markets in other developing countries. With these comparative advantages, Southern contributors are regarded as competitive providers of more appropriate and cost-effective responses to the needs of their fellow developing countries.

Many contributors to SSC have programmes that have been co-financed by triangular co-operation, whereby DAC donors finance projects executed by institutions of the South. There has also been gradual increase in triangular co-operation that has reinforced this trend, allowing ‘Northern’ countries to support horizontal partnerships and enabling SSC to expand its scope and meet greater demands from more partner countries. As developing countries offering SSC programmes are seen as having expertise relevant to meeting developing-country needs, the focus of triangular development co-operation is primarily technical. The leadership shown by the MICs in sharing their experience represents a valuable source of aid that complements the more traditional North-South co-operation. The OECD supports the increase in development co-operation delivered through SSC and triangular co-operation modalities as a relevant and cost-effective approach to complement North-South co-operation.

However, some DAC countries have expressed fears that the aid provided by the non-DAC donors (in which many do not report their aid figures and are not bound by the Paris Declaration and subsequent agreements) may undermine the efforts of the DAC, by pursuing contradictory goals. Yet, some SSC partners have also expressed their own concern that the ‘aid effectiveness’ is driven too much by the OECD, and that project aid, the preferred modality of SSC, could become a casualty of the preference for programme aid as governed by the principles set out in the Paris Declaration.

Recently a number of non-DAC and non-OECD countries, including emerging developing countries such as China, Brazil and India, have increased their roles as donors. Several oil exporting countries, such as Saudi Arabia, Kuwait and the United Arab Emirates (UAE), have substantially increased their ODA over the past decade in the wake of higher world oil prices, as they did in the 1970s and 1960s. The Graphic 3-1 shows the recent acceleration of aid flows coming from non-DAC countries in the 2000s, however, it is far below the SSC of the 1970s and 80s.

The major oil powers of Saudi Arabia, UAE and Venezuela, along with the BRICS countries and the OECD members that are not part of the DAC are the most active non-DAC donors. The oil powers represent around 40% of all non-DAC flows. Many other non-DAC members are also on the rise such as Israel, Thailand, South Africa, Slovenia and the Czech Republic. Many of these donors have actually surpassed the ODA volumes provided by some of the DAC members such as Greece, Luxembourg, New Zealand and Portugal. The increasing influence and commitment by these emerging donors is demonstrated in the graphs below.

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Graphic 3-3 ODA provided by non-DAC countries, 1970-2007, OECD, 2010

Graphic 3-4 ODA and Foreign Assistance from non-DAC Donors 2005-2009, Smith, 2011

Graphic 3-5 Estimated Foreign Assistance Contributions from BRICS, 2005-2009, Smith, 2011

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Graphic 3-6 Arab Countries ODA Disbursements, 2005-2009, Smith, 2011

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Graphic 3-7 ODA from all other Non-DAC Donors reporting to the OECD DAC, 2005-2009, Smith, 2011

Multilateral Aid FlowsAid delivery agencies have also proliferated, multilaterally and bilaterally, in recent years. These include many different donors such as NGOs, philanthropic organisations and charities, with varying priorities, objectives and experience, bringing diverse points of view into policy dialogue and foster innovation through pilot projects and approaches by drawing on specific experience. With the increase in global actors, financial flows to developing countries have, of course, also increased. Foreign aid from government donors accounts for roughly 20% of the estimated USD 575 billion in total financial flows between OECD countries and developing countries; the bulk of this is made up by private capital flows, remittances and philanthropy. However, it must be stressed that the data of private flows is difficult to accurately gauge.

Multilateral delivery of aid has also expanded steadily over the previous decades and represents a significant proportion of total development aid. In 2011 multilateral aid almost totalled USD 55 billion, the equivalent to 40% of the gross ODA from the OECD DAC. The overall average share of multilateral aid for the 21 non-DAC members who report to the OECD was 22% of their total development financing. Many emerging donors also contribute to multilateral aid. Multilateral aid is generally viewed as the appropriate model for combating global issues. This is due, in part, to its political legitimacy, but also because multilateral donors have a broader technical base than individual bilateral donors, allowing for economies of scale. Yet the increasing complexity of multilateral aid contributes to aid fragmentation. Multilateral aid has also come under scrutiny from legislative bodies and civil society because of the lack of control and knowledge of what, where and how their contributions are used. The decision making processes are out of donor countries hands, and it is difficult to track where donors’ specific contributions are being spent. This makes justifying aid difficult, when tangible results for funds can not be displayed particularly during the current financial recession and the constriction of donor governments’ budgets.

In the interests of harmonisation, transparency and making aid more effective the OECD argues that donors should enhance and develop existing joint assessments and programmes rather than establishing and promoting new bilateral ones. In this way, donors can ensure that organisations are assessed against

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collective objects, enabling their commitments to carry more weight. It is this attitude that has spurred the increasing use of different aid modalities such as the pooling of funds.

Graphic 3-8 Gross ODA provided by DAC member countries, 2001-2011, in constant 2010 prices, OECD, 2012

This expansion has not only meant that there has been an increase in aid volume, but has also caused more competition and greater specialisation. However, despite these positives there are also negatives that have come with the mushrooming of aid agencies, because owing to the higher number of aid providers, aid management, on behalf of the client countries, has become more complex and costly.

Countries in Africa and Asia are the main recipients of DAC and non-DAC South-South aid flow, and the proportion of aid directed at low-income countries is the same as that which comes from DAC members. Despite there being greater uncertainty regarding the contribution of aid by private foundations and international non-governmental organisations, these have become prominent in the area of development assistance, particularly within specific fields such as health services.

3.3.2 Non-DAC Donor SummaryNon-DAC aid providers have increased their role in recent years, in terms of providing greater aid volume and delivery modalities. However, due to their position outside the DAC, and in many cases outside the OECD, they are liberated from the major OECD commitments and agreements and many have yet to officially endorse the Paris Process. They therefore tend to follow their own rules and where they do not have an in-country presence or office, add to transaction costs, as well as complicating processes. Their increasing role and influence within the aid architecture has prompted concern over fragmentation and has raised questions over coherence and harmonisation and the need for greater coordination among traditional and emerging actors. Some studies have noticed that the economic, political and regional power of many of these emerging donors is on the rise and therefore could challenge the priorities and agenda setting success of the industrialised countries, and undermine the credibility of their advice and message. Some non-DAC donors, such as China and Brazil, have engaged with the OECD led aid effectiveness

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process while other, such as the Gulf Donors, have not. With a multiplicity of donors, there is a need to establish mechanisms of coordination and the OECD sees shared principles and greater inclusion as part of the solution. The Paris process and the PDAE was largely dominated by members of the DAC, however, Accra and Busan have moved towards greater inclusivity, by allowing greater participation from civil society, parliamentarians and providers of SSC. As a result of this, before the ‘Busan Partnership for Effective Development Co-operation’ 111 non-DAC countries had subscribed to all the OECD agreements.

These non-traditional donors represent several new markets that MM can apply its expertise to and therefore the company should think about the possibility of developing relationships with non-traditional donors based in regions that it has a strong presence in, such as India for South Asia, South Africa for Southern Africa, and Arab states for new markets in the MENA region that the company has begun to explore. It could also explore the possibility of harnessing its regional presence and combining it with its traditional donor relations in the use of triangular development opportunities. Capacity development is also a key aspect of SSC and MM can use best practice knowledge in certain countries that it has particular experience in, and expand that further across those regions as part of SSC aims. These donors could provide new sources of funding to allow MM to further develop regional presence. Multilateral aid can also provide access to large projects and funds, with the potential for large income. However, there are some problems with dealing with accountability and client relations.

3.4 Aid FragmentationThe proliferation of new donors and the shifting of aid objectives and mechanisms have benefitted international development in many ways, bringing not only greater volumes of aid to development but also skills, expertise, knowledge and experience that makes aid more productive and successful, as well as the competition that makes aid more accountable and affordable. However, these trends have caused the aid architecture to become more fragmented, with a largely uncoordinated proliferation of destinations, donors and modalities. Fragmentation creates a big problem as it erases much of the efficiency that greater expertise and specialisation is meant to bring. For partner countries who wish to own their development strategies, this multiplicity of donors complicates the challenge. Some estimations of the waste due to fragmentation have been calculated at 30-40% of the resources expended. This is due to the result of unnecessary transaction costs, duplicated efforts or missed opportunities for effective partnerships. The greater number of aid providers has now made the process more complex, with many different providers trying to implement the same projects with the same goals, and transaction costs becoming more costly as resource flows become more volatile, which complicates budget processes and development project implementation. The presence of additional donor channels in an already crowded field increases the risk of duplication of activities and could create a setback for DAC donors who have the intention to reduce transaction costs for aid recipients by rationalising reporting and accountability obligations. Policy conditionality has also undermined country ownership and effective use of resources.

Over time, the aid architecture has become increasingly fragmented and its components increasingly dispersed; this has substantially affected the effectiveness of development assistance. Harmonisation between many donors has not been formalised, despite the rhetoric of the UN and OECD, as many donors such as Southern donors and multilateral agencies operate outside these organisations. The development co-operation system is highly disjointed, involving a range of state and non-state actors that work alone or in concert through informal channels. The mushrooming of aid agencies with diverse objectives, as well as inconsistencies between donors and aid recipients in terms of goals and actions, has contributed to aid volatility and loss of ownership, thereby weakening efforts to reduce poverty and promote development. This fragmentation creates challenges for developing countries as they attempt to manage and coordinate various sources of development financing as well as being problematic for aid donors who wish to measure their individual impact. Donors tend to undertake missions, negotiate the terms of the project to be funded, maintain their own accounting methods, set their own conditions and prefer to carry out their own monitoring and evaluation; all this costs money – money that could be spent on funding development projects. The greater the fragmentation, the greater the amount of aid lost to these procedures.

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The OECD sees aid fragmentation as one of the major problems of the aid architecture today, as iterated in Paris, Accra and Busan there needs to be better consultation and coordination between donors with development partners, and amongst themselves. This is needed to alleviate sector congestion and minimise the overlap between ODA-funded initiatives, creating better, smoother aid. The OECD believes that the principle and pursuit of alignment are necessary to reduce waste in resources and in transaction costs, and also to avoid the confusion resulting from having too many development partners adopting different approaches and tools to deal with any given issue. In this vein, the OECD/DAC is liaising with bilateral Southern contributors with the aim of reaching the stage of agreement on, and/or endorsement of, good development practices, as formulated by the DAC, which includes soliciting stronger participation of those contributors in the policy formulation process as well as in co-shaping the outcomes.

There are a number of proposed solutions to aid fragmentation that could have great impact on the modalities and flows of aid. Some ideas proposed by the OECD have been to reduce the number of development partners in a sector, to pool their resources under one coordinating umbrella and the leadership of developing countries concerned, or by other means. However, resolving fragmentation issues should not lead to the reduction of assistance to development partners, but to reallocating it in a manner that would improve its effectiveness.

3.5 Aid ModalitiesThe increase in the amount of aid providers, the fragmentation of aid, along with restriction of the provision of aid caused by the 2008 financial crisis, and the need to make aid more effective and achieve more tangible results, has led to a rethinking of the way that aid is delivered. This reaction to these challenges and changes of the aid architecture has led to the creation of new aid modalities (new ways of delivering aid), such as pooled funds and PPPs. These new modalities will become increasingly prevalent as donors aim to make aid more effective.

3.5.1 Project AidAside from the challenges and changes in the aid architecture, changing modalities are also designed to make aid more accountable and effective. The traditional and most common aid modality is ‘project aid’. This involves donors recruiting and funding specific projects in line with partner country development goals, as well as the donors own priorities. This is the modality that the majority of MM international development projects are funded through as they often require a TA element. Project aid is a rather frequently adopted approach in both developed and developing countries for delivering TA to complement major public investments. However, it has come under scrutiny for fuelling inefficiency in some sectors, particularly within poor developing countries with weak institutions. There are multiple incentives for both partner countries and donors that fuel this inefficiency. With recipient governments, project modalities with parallel funding and management mechanisms generate multiple material and non-material benefits for the ministers and civil servants in whose sectors they are located, including salary top-ups, allowances, prestige etc. Donor agencies on the other hand have the advantage of visibility being associated with separately managed and branded projects, which make it easier to defend budgets. These drawbacks of traditional project aid have spurred some donors to seek new, different aid modalities to improve transparency and ‘value for money’.

These flaws of project aid have led to a movement of ‘Programme-Based Approaches’ (PBA), a broad, general term which denotes different degrees of acceptance and interaction with partner country systems and policy frameworks, with General Budget Support, requiring strong involvement at one extreme and pooled funds or Sector-Wide Approach Programmes at the other. Both donors and partner countries believe that there is an advantage to using varying modalities as a means of spreading risks, and of enhancing transparency and results.

Not only has a need to make aid more efficient and effective spurred the idea of new aid modalities apart from project aid, but it has also led to a reconsideration of the way that the modality of project aid itself should be carried out. Donors are now seeking a common, yet differentiated, approach rather than a one-

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size-fits-all. Differentiation is necessary between fragile states, middle income countries and lower-income countries (which require significant development assistance if they are to graduate to MICs), small island developing states and so on in order to apply development assistance approaches consistent with their respective individual contexts, goals and needs. For example, in case of fragile situations, the adoption of a mainly short-term horizon in designing and delivering assistance has caused serious planning and continuity difficulties, as it is widely recognised that these situations require a coordinated package of short and longer term assistance.

3.5.2 Sector ApproachAn increasingly favoured and important mode of EU aid delivery is the sector approach. The sector approach is a modality that, instead of focusing on one activity, like project aid, focuses on an entire sector, facilitating either the development of the sector as a whole, or being one project that focuses on many activities within that sector. By nature sector programmes tend to be medium-term to long-term, financially large projects. The sector approach is designed to give partner countries’ governments greater ownership of development policy, strategy, and financing, than the project approach. The sector approach offers increased coherence between national policies, sector policies, resource allocation and spending practices. The development of the sector approach was a reaction to the Paris Declaration on Aid Effectiveness, as it acts to minimise transaction costs between partner governments and increases ownership, harmonisation and alignment. The sector approach works with other donors, partner countries and stakeholders to provide greater coherence between the allocation of external and internal resources, spending and expected results.

3.5.3 General Budget SupportIn recent years, many European donors have come to believe that General Budget Support (GBS) is the preferable aid modality to project funding aid. GBS is the direct transfer of financial resources into the treasury of the recipient country. These financial resources supplement the total revenues for meeting development objectives that are decided through the annual and medium-term budget planning processes of the country. The donors also take an active approach and engage in the country debate about how best to structure the joint effort, and they provide technical assistance to give it a solid basis, but they do not specifically distort the process by marking donor funds for specific projects and purposes.

GBS is not limited to enabling a particular set of macroeconomic adjustments, but is usually presented as support to a poverty reduction strategy. The donors will establish quite rigorous preconditions to ensure transparency, the correct allocation of funds and results, as well as monitoring whether these conditions are adhered to. They do not micro-manage, deciding where the funds will be allocated, rather they assist the country’s authorities to make the national budget the centrepiece of a results-oriented national policy system and enforce accountability.

However, despite gaining momentum, GBS is still to become a consensus view, with as yet few donors fully allocating their aid to GBS programmes.

3.5.4 Pooling of FundsOver the past 20 years there has been a proliferation of special purpose funds for specific aid objectives. Pooled funds (also known as Sector-Wide Approach (SWAp)) represent an approach whereby multiple donors contribute into a single account which is kept separate from the workings of partner country government budgets. Pooled funds are set up to support the implementation of a sector specific policy or strategy in line with government development strategies and are therefore ring-fenced from other objectives. ‘Sector-Wide Approach Programmes’ is an aid modality much less tied to partner-country systems than GBS. SWAps more or less suppress the separate identities of previous project activities and adopt common procedures based on those of the country. Pooling has some major advantages in regard to tackling some of the current problems of the aid architecture. Firstly, pooled funds create a united large volume of aid, which allows for larger, long-term, projects than if the aid had remained divided. Secondly pooled funds reduce the fragmentation of aid, as the very nature of the pooled fund means that donors

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must coordinate policies and targets with themselves and their development partners. By pooling aid into a joint account with the same goal, donors do not duplicate projects and it means that this aid is much more effective. Pooled funds are viewed as a transitional modality, with the long term objective of enhancing country policy ownership and management systems wherever the conditions for fully fledged sector or general budget support are judged to be missing.

Among the major funding pools are the Global Environment Facility (GEF) which provides support for a set of multilateral environmental agreements, and the Global Fund to Fight AIDS, Tuberculosis and Malaria. Aid for Trade is a donor facility launched during the Doha Round (2001 – present) of the World Trade Organisation (WTO) to help developing countries exploit the market access that they have obtained through trade negotiations. This pooling of funds is reflecting the increasing co-operation between donors. In 2006 only 15% of donor missions were undertaken jointly with other donors, by 2011 this number was up to 24%. Pooled funds are not exclusive to DAC donors: in 2011 a trilateral agreement between India, Brazil and South Africa set up the ‘Poverty and Hunger Alleviation Fund’, offering alternative financing to development partners.

3.5.5 Public Private Partnerships (PPPs)Public Private Partnerships in development aid have become increasingly prevalent in discussions of aid modalities in recent years, but many aid donors have been engaging in PPPs for decades. Governments have increasingly stringent aid budgets and PPPs allow for greater flexibility and cost savings, whilst the government maintains full control of development policy and programmes. PPPs have become common because both private and public entities believe PPPs achieve shared goals more effectively than entities acting alone.

PPPs in the context of international development is a partnership in which a development agency, such as a donor, works together with a private sector entity, whether it is a corporation, or a foundation or other non-profit entity, with each contributing resources to achieve a shared development objective. PPPs are not only conducted between donor agencies and private entities, but can be any public entity. Some PPPs may be conducted between the national governments or ministries of the countries themselves, in order to bolster trade or natural resource production. PPPs are also not exclusively a bilateral phenomenon, but many multilateral development institutions have increasingly engaged with PPPs in recent years, such as the UNDP and the World Bank. A common aspect of these partnerships that makes them distinct from the usual donor relations with private companies is that the private partner is not a supplier, contractor, grantee or government-funded implementer, but rather an equal partner investing in the activity and its outcomes. As mentioned, the private partner must supply resources throughout the project but will also benefit from its completion, either commercially or for their reputation. There are many benefits to PPPs such as shared risks and resources, access to markets and networks for developing countries, as well as technological and intellectual property transfers. However, there are also concerns over creating more costly processes as partner countries must deal with more than one representative from the donor side, a distortion of development priorities and putting LDCs at a disadvantage as they have less to offer to attract private investment.

The UK’s Department for International Development (DFID) uses PPPs in ‘challenge funds’. Through challenge funds, private businesses apply for grants to help establish new business ventures, or improve the development impact of existing ventures, in developing countries. For example, the African Enterprise Fund awards competitive grants to private sector companies to support new and innovative business models in Africa, while the Food Retail Industry Challenge Fund provides grants to partnerships that bring UK grocery retailers together with African farmers to establish ‘fair trade’ supply chains.

3.5.6 LoansAnother shifting modality is the tendency of many developing MICs to seek loans over grants. Loans are external borrowing of aid where the recipient must pay back the funds received. Loans are often provided directly to the partner country under favourable payment plans, often at low interest rates and long

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repayment plans. TA plays a similar role to project aid. The recent decline in ODA as a result of the global recession and the subsequent development partners’ exit from some middle income countries is forcing some developing countries to seek more bilateral and multilateral debt in order to bridge the gap in development financing. Continuation of this trend is expected to lead to higher indebtedness to a level which might cause the countries in question to reach a position of debt distress. This underlines the point that external borrowing should be considered as a supplement but not a substitute to ODA, until countries reach the stage where they can exit from aid. The increase in loans over grants is not likely to affect technical assistance provision on specific project consultation but may make budgets tighter. It could also be the case that MICs and donors may request an increase in banking capacity building and institutional strengthening projects to make sure that the loans are paid back and the money used correctly.

3.5.7 New Modalities SummaryMany of these new modalities require a slightly adjusted form of TA but are also definitely worth being explored by MM, and as such the company needs to make sure that it can adapt to the new requirements that come with some of these new modalities, to ensure that it is not excluded from being competitive in applying for projects involving them.

Project and sector aid, and loans use TA in very similar ways, only on differing scales, often in a project management and/or technical expertise role. As such, the role of TA will be very similar in these modalities. The vast majority of the projects that MM engages in are provided through project aid, so it is well prepared to adapt slightly to loans and sector modalities.

GBS will not dramatically affect the use of technical assistance as mentioned, but could change the role of TA. Technical assistance will still continue to play a part in the implementation of the projects when they have been decided upon through this process, but may also begin to play an advisory role on deciding how best to spend the GBS (drawing on experience from grant and fund management) and conducting research into the development needs where the fund will be best allocated. In these instances it may change the way in which TA firms are chosen. As this is budget and grant management support, TA firms which have a strong country presence and overall experience and which understand the needs and culture of the recipient country are more likely to be granted contracts, even if they fall short of specific project and sector experience. This could allow MM to establish a foothold and presence in particular ‘target countries’ and possibly expand within the region.

The pooling of funds also represents a role for technical assistance different from that of GBS. Again TA is needed to administer the projects that the pooled fund grants, and a possible manager of the pooled fund itself is needed. However, TA firms will be selected on criteria different from those of GBS. Whereas GBS TA requires candidates with an intimate knowledge of the specific country, pooled funds require a wide array of knowledge, experience and expertise within a specific sector. These types of contract may be more valuable to MM, as country experience, though still important, is not as large of a requirement or determining factor as with GBS. It therefore means, that sector knowledge and skills may be transferred between a greater variety of funds, allowing MM to expand or adapt with the aid trends, than with GBS which focuses on particular countries.

PPPs can use TA in several different ways. TA can be used in the traditional sense as a project manager/technical advisor role, advising public institutions on how best to work in tandem with the private sector but could also be used as a facilitator, or advisor on how the private sector can best become involved in development. With the increase of private sector interest in development, along with potential for profit through PPPs, MM would do well to seriously consider developing itself to provide its services as a facilitator or advisor to private companies willing to get involved in development, advising them on issues such as potential projects, country contexts and possibly on corporate social responsibility schemes, as well as providing the project management role on these programmes.

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3.6 New Aid PackagesThe shift towards new aid modalities as well as the need to make aid more effective has led to a new approach to aid packages. Donors are increasingly trying to reduce transaction costs and achieve more through their projects by changing not just the modalities through which they deliver aid but the packages that aid arrives in. There is an increasing shift towards larger, longer projects, with multiple goals, opposed to the traditional method of creating many tenders for all the individual goals. One of the ways in which this ideal is being implemented is through Grant Fund Management (GFM) projects. Grant Fund Management projects effectively hand over control of a specified budget to an interim facilitator (usually a TA firm) to manage funds in order to achieve specific goals. Usually the facilitator will divide the grant to decide, procure, establish and implement projects using the funds they have been granted by the participating donor agencies. Aid packages will start to involve: Larger packages, longer implementation period – requiring a different kind of TA; Combined packages / diversity of packages; Grant Fund Management.

3.7 Changes in Aid NeedsAlong with the shifting actors, modalities and the overall architecture of aid, there is a shift in the pressing issues of where aid is needed: One of the key issues is the swiftly developing problem that the largest number of the world’s poor live

in MICs and that despite this, many donors are beginning to withdraw assistance from these countries. Between 2005 and 2009, developing and emerging countries contributed nearly three-quarters of global growth and their economic size is predicted to surpass that of developed countries by 2015. Despite this overall progress, living standards in emerging economies remain a long way behind those in the OECD. For example, India has more people in poverty than all of sub-Saharan Africa. Despite the withdrawal of aid to these countries by many donors, they will still require substantial assistance, partially via TA, to help them develop and manage their own strategies and capacities to tackle these problems using their own resources.

Despite this issue, the delivery gap (difference between aid needed and aid received) in respect to fulfilling the commitments to support the MDG development agenda has been made all the more glaring by the poignant calls for additional assistance to the poorest countries as they are struggling to address food security problems and climate change. These delivery gaps are largest in aid commitments to countries in Africa and they reflect continued unevenness in the distribution of aid flows, which does not strongly favour populations in low-income countries. Overall bilateral aid from DAC countries is not strongly concentrated among the poorest countries. In contrast, multilateral aid, which accounts for 1/5 of ODA flows generated by the DAC, shows a stronger bias towards the poorest countries.

Another issue is the problem of how to successfully integrate the ‘the bottom billion’, the population living in the world’s worst off countries. Some scholars have argued that these people are being left behind due to struggling development programmes and as this phenomenon becomes worse and the gap widens, they warn that the bottom billion diverges from an increasingly sophisticated world economy, and that development and economic integration will become harder to achieve for them.

Capacity building is also a core issue being increasingly stressed in the international development agenda, particularly after HLF4 in Busan. Capacity building within states is an integral goal, needed to make aid more effective in the countries that development programmes are implemented in. Whilst capacity building is a cross-cutting theme across all development sectors, it has an additional goal of state-building in fragile states. Capacity development for MICs refers not only to managing incoming aid but also to the capacity to manage co-operation delivery through SSC and triangular co-operation modalities, as these countries become increasingly influential in the aid arena.

The vulnerability of SIDS is a separate issue from the general capacity building agenda. Sparse populations, geographical distances and economies of scale factors increase the cost of development of these countries. There are calls for building regional capacities to manage their aid more effectively, supplementing national capacities. Although SIDS are afflicted by economic difficulties and confronted by developing imperatives similar to those of developing countries generally, they also have their own

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peculiar vulnerabilities and structural characteristics, so that the difficulties they face in pursuit of sustainable development are particularly severe and complex.

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4. Current Trends in Aid Flow and Future Commitments

4.1 IntroductionThis chapter assesses the recent trends in development aid by analysing recent statistics and future commitments to provide an insight into the future direction of aid flow. It aims to use these statistics to evaluate the sectors, countries and regions that aid is being donated to and how this affects technical co-operation. The chapter will also look at future financial commitments by the OECD and some of its member countries and how they will affect the direction of aid in the future. By drawing upon these recent statistics and commitments, we can make an educated projection of the direction of aid flow over the coming years, i.e. which sectors, regions and countries that aid will be flowing into, and assess how technical assistance provision fits in with this.

The chapter analyses the overall flow of aid in statistical terms, including the amount of aid delivered in nominal and real terms, and looks at global ODA and CPA. The chapter then looks at the statistical trends of the donors that MM frequently works with. It investigates the rise of flows coming from non-DAC donors as well as the increasing activity of these donors. Perhaps the most important section of the chapter is ‘Developing Trends in Aid Flows’: this section looks at the country, regional, sectoral and general technical assistance trends, and analyses the flows of aid and the commitments to assess priority areas in the near future. The chapter concludes with studying future commitments in aid.

This chapter predominantly will draw upon statistics from 2011 and 20107 to give the most relevant, up-to-date statistics for projecting future trends8.

4.2 Recent Trends in Aid FlowIn 2011 the net ODA of the OECD Development Assistance Committee (DAC), a consortium of the world’s major bilateral donors, provided its highest volume ever, in real terms, at USD 133.5 billion. This represented a 3.7% increase on the total ODA of 2010 which totalled at USD 128.7 billion and was the highest ever volume of aid in real terms before 2011. This figure represented 0.32% of the DAC’s combined GNI, still a long way off the UN goal of 0.7%, and only a minor increase from 2010. Despite this seemingly promising statistic, when adjusted for 2010 prices and exchange rates, the total is actually only USD 125 billion, a decrease of 2.3%. This is the first time that ODA has fallen in nominal terms since 1997. The OECD believes that the economic recession and the sovereign debt crisis played a large role in this. Despite record-breaking aid in terms of volume, the amount was still less than targeted because of the recession. The increases in aid over recent years were partially an effort to sustain the economies of developing countries during the financial crisis. ODA in this situation helped these emerging and fragile economies by reducing their shortfall. However, the OECD is worried that some donors may have used this crisis as a justification for reducing aid. OECD Secretary-General Angel Gurría warned that ‘ the crisis should not be used as an excuse to reduce development co-operation contributions ’. Yet, governments are under increasing pressure to reduce the amount of aid they provide in line with other cuts. The OECD-DAC Survey on Donors’ Forward Spending Plans for 2012 to 2015 suggests that global country programmable

7 Some figures that are provided for 2011 were provisional at the time of writing. However, this should not be viewed as a problem as

the figures are primarily to demonstrate overall trends, rather than provide hard data.8 For statistics and figures regarding previous years please view the ‘Market Trends in International Development’ (April 2012)

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aid (CPA) may rise by 6% in real terms in 2012. However, this is mainly because of expected increases in soft loans from multilateral agencies funded from capital replenishments during 2009-2011. Despite these ominous predictions it must be reasserted that aid flows are at an all-time high, considering that before the MDGs were agreed upon, ODA oscillated around the USD 50 billion mark for many years and that there will still be many development projects in the coming years, particularly with the deadline for the MDGs in 2015.

Table 4-1 Net ODA from the DAC and other OECD members in 2011, OECD, 2012

4.3 ODA In 2011 nearly all of the largest donors by volume recorded a reduction, in nominal terms, of official

development assistance. They were the United States (USD 30.7 billion, a fall of 0.9%), United Kingdom (USD 13.7 billion, -0.8%), France (USD 13 billion -5.9%) and Japan (USD 10.6 billion -10.8%)9.

However, many important donors recorded an increase in nominal terms, Germany, the world’s second largest donor in terms of aid volume after the USA achieved USD 14.5 billion, an increase of 5.9%. Sweden achieved USD 5.6 billion (10.5% increase) and Australia USD 4.8 billion (5.7% increase).10.

In 2011 Denmark, Luxembourg, the Netherlands, Norway and Sweden remained the only DAC members that had achieved the UN target of dedicating 0.7% of their Gross National Income to development assistance. The global average was 0.46%, down 0.03% from 2010.

In real terms the biggest increase in ODA was from Italy at 33%, from just under USD 3 billion to USD 4.2 billion. The biggest decrease was seen from the fiscally struggling Greece with a sharp drop of 39%, from USD 508 million to USD 331 million.

On a positive note, the share of ODA provided by DAC member countries fell to 54%, down 3% from 2009, demonstrating that an increasing share of ODA is coming from non-OECD members and that

9 Net ODA in 2011. Percentages display rise/fall in nominal terms.10 Net ODA in 2011. Percentages display rise/fall in nominal terms.

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increasingly more actors are becoming involved in international development. These include developing countries, multilateral organisations and the private sector.

Graphic 4-9 ODA flows since 2000, OECD, 2012

In 2010 86% of global ODA was untied. Whether aid is tied or untied is an important aspect of ODA. Untied aid is defined by the DAC as loans or grants that are fully and freely available to finance procurement from all OECD countries and all developing countries. All other loans are classified as tied aid, whether they are tied formally or informally. The purpose of pointing out tied aid is to demonstrate how much of members’ aid is open to procurement through international competition. Internationally competitive procurement promotes cost-effective sourcing of aid inputs and promotes free and open trade.

Within total net ODA, aid for core bilateral projects and programmes (in other words, excluding debt relief grants and humanitarian aid) fell by 4.5% in real terms and by 8.9% for flows to the Least Developed Countries.

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Table 4-2 Net disbursements of ODA since 2004 at 2011 prices and exchange rates, OECD, 2012

4.4 CPACountry Programmable Aid (CPA) is a core subset of ODA over which recipient countries could have significant say, and is another, more accurate measurement of OECD aid flows. CPA tracks the portion of aid on which recipient countries have, or could have, a significant say and for which donors should be accountable for delivering ‘as programmed’. CPA reflects the amount of aid that is subjected to multi-year planning at country/regional level, and is defined through exclusions, by subtracting from total gross ODA that is: Unpredictable by nature (humanitarian aid and debt relief) Entails no cross-border flows (administrative costs, imputed student costs, promotion of development

awareness, and research and refugees in donor countries) Does not form part of co-operation agreements between governments (food aid and aid from local

governments) Does not form part of co-operation agreements between governments (food aid and aid from local

governments, core funding to NGOs, aid through secondary agencies, and aid which is not allocable by country).

CPA does not net out loan repayments, as these are not usually factored into aid allocation decisions. CPA is likely to see a slower growth of around 2% per year between 2011 and 2013, compared with a growth rate of 8% between 2008 and 2010, as a result of the financial and economic crisis in 2008. From 2013,

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global CPA is expected to stagnate, and could confirm earlier findings that it takes several years from the onset of a recession for the full impact to be felt on aid flows. CPA will naturally fluctuate with ODA, which is also set to slow down. In 2011 CPA was estimated at around USD 93.1 billion, a decline on 2010 of 2.4% (around USD 2.3 billion) that reflects the reduction in ODA. In 2012, it seems to increase by 6%. CPA to Latin America, Central Asia and Eastern Europe seems to decrease, whilst CPA going into Africa and Asia will increase over the coming years. This reflects the concentration of donor priorities on the struggling regions of sub-Saharan Africa and South Asia.

Graphic 4-10 CPA volume and annual change 2005-2015, OECD, 2012

Graphic 4-11 Regional allocation of CPA, OECD, 2012 (in USD billion)

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CPA will become an increasingly significant measure of development aid, as donors become more transparent over their future development plans and objectives. By tracking CPA, the proportion of aid that countries have could have significant aid over, gaps in forward aid allocation and opportunities for improving them. This is significant to the International Development Division (IDD) as this will allow IDD to track trends in the market for future years as well as identifying the gaps into which aid may go later on.

4.5 Recent Trends of specific DAC countries11

This section looks at some of the recent trends in development aid of some of the major donor countries as well as assessing all the countries whose donors MM has regular contact with. It should be stressed that this section analyses the recent aid flows of different countries but not their respective donor agencies12 13.

4.5.1 European UnionThe European Union (EU) institutions funded through both the European Development Fund and other ODA-eligible budgetary contributions account for around 18% of EU members’ ODA. In 2011 ODA, dependent on the ODA of its individual member states, fell slightly by around 0.4% from USD 12.679 billion in 2010 to USD 12.627 billion. This represents the second reduction in ODA from the EU in consecutive years since 2009. This suggests that the financial crisis of 2008 has had a negative effect on the EU by constraining the contributions of its members. This has caused EU ODA to stagnate over the past few years. The EU ODA/GNI ratio remained constant at 0.42% but the EU is still confident of ascertaining the 2015 goal of 0.7%. In 2010 Turkey was the largest recipient of EU aid funds receiving USD 611 million, closely followed by the Palestinian Administered Areas receiving USD 601 million. However, the primary regional focus of the EU was Sub-Saharan Africa which receives 37% of EU aid. The majority of EU funds was allocated to social projects outside health, education and population, programme assistance and economic infrastructure projects.

4.5.2 The NetherlandsThe Netherlands remains the world’s sixth largest donor contributing USD 6.32 billion dollars, a slight decrease from 2010, in which the Netherlands contributed USD 6.35 billion. As well as being one of the largest donors in terms of volume, it is also one of the most generous, with an ODA/GNI ratio of 0.75%, and continues to meet the UN target. However, this ODA/GNI ratio is a significant drop of 0.06% from 0.81% in 2010. This is due to the Dutch government reducing its previous personal ODA/GNI goal from 0.8% to 0.7%. The Dutch ODA is increasingly being focused on a small number of countries and sectors. Indonesia was the largest recipient of Dutch aid, receiving USD 165 million. However, the vast majority of regional Dutch aid (USD 2.7 billion) was unspecified in 2010. Dutch aid was primarily focused on education, health, population and other social infrastructure as well as multi-sector programmes. 86% of Dutch aid was untied.

4.5.3 United KingdomThe United Kingdom (UK) remains one of the principal donors of international aid. In 2011 the UK donated USD 13.7 billion, a small increase of 0.5% in real terms from 2010, when USD 13 billion was delivered. However, when adjusted in nominal terms to 2010 numbers, it actually represents a decrease of 0.8%. This can be attributed to the on-going financial recession. The UK’s GNI/ODA percentage remained at 0.56% from 2010 into 2011 and 2012. The vast majority of the UK’s aid is sent to sub-Saharan Africa which receives 32.9% of UK aid, followed by South and Central Asia which gains 29%. The biggest recipient of UK aid is India which received USD 708 billion in 2010. The UK firmly concentrates on the least developed countries (LDCs), but will increasingly focus on fragile states, which struggle most with achieving the MDGs. As a result, the majority of the UK’s ODA was dedicated to education, health, population and other social sectors, while 100% of UK aid was untied.

11 Specific donors are analysed in greater detail in Chapter 5.12 Unfortunately there are limited statistics for all countries for 2011, so these are provided only where possible and for some analysis

2010 numbers are mentioned. Figures are also displayed in real terms for their respective years.13 To see the overall aid volumes and ODA/GNI ratios for all DAC members please refer to Table T4-1.

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4.6 Non-DAC DonorsAs mentioned above, the number of non-DAC donors is significantly increasing. This includes OECD members that are not DAC members, multi-lateral donors, charitable organisations and, most significantly, developing country donors.

Net deliveries by OECD countries that are not DAC members have continued to rise from around USD 2.0 billion in 2007 to USD 2.6 billion in 2011. Turkey was by far the biggest donor of the non-DAC OECD donors, contributing half of this figure at USD 1.32 billion, a dramatic increase of 26.7%, in real terms, on 2010, when Turkey donated slightly under USD 1 billion. Poland was the next largest donor at USD 413 million (Increase of 10.3% on 2010) and the Czech Republic donated USD 256 million (increase of 12.2%).

There is an increasing number of new providers of development assistance emerging outside the OECD: as many as 30 donors. Countries such as Brazil, China, India, Indonesia, Russia and South Africa are increasingly becoming more involved in development assistance. In March 2013, the BRICS countries (Brazil, Russia, India, China and South Africa) agreed to the formulation of a BRICS development bank, the details of which are yet to be finalised. With some of the world’s fastest growing economies backing it, it could prove to become a very lucrative client for MM, rivalling other large donors such as the WB and the European Union. The bank is set to finance infrastructure and sustainable development projects in BRICS countries, other emerging economies and developing countries. Some of these countries also remain major trading partners for many developing countries, particularly in Africa. The OECD has recognised the advantages these new donors bring to development and is increasingly aiming to engage with them and use their resources and expertise in achieving the MDGs. The OECD hopes to reach an agreement with these emerging donors to achieve shared goals.

Non-OECD members have begun to become increasingly engaged in aid development. ‘South-South’ development partnerships are on the rise and are becoming far more prominent in the development community, a relationship that the UN and OECD are very keen to encourage. SSC development aid totalled USD 15.3 billion in 2008, the equivalent of 9.5% ODA in that year, the biggest donors being China, Saudi Arabia, Venezuela and India. This is a market that definitely indicates growth. South-South aid is evolving from being a primarily intra-regionally focused to a more global market with China promising to deliver USD 10 billion to Africa between 2010 and 2012. With the growing presence of these new donors, the future may bring new markets and projects that IDD can build portfolios with.

The number of new donors, including South-South partnerships, are on a sharp upwards trajectory, not only in aid volume but also in the amount of players that are becoming incorporated into the development aid agenda. There are two ways that this proliferation of donors can be viewed. Firstly, more donors mean more resources available and also greater competition. This provides increasing opportunities for MM to provide technical assistance, through new clients to work with and opening up new markets, particularly with donors focusing on regions that MM have great experience in such as South Asia and Sub-Saharan Africa. However, having so many donors also may lead to the fragmentation of aid and greater burdens on the administration on recipient countries, which may constrain technical assistance.

4.7 Developing Trends in Aid Flow14

4.7.1 Country Income Allocation TrendsThere is an increasing trend in aid allocation towards the world’s poorest countries. The proportion of ODA delivered to the world’s poorest, defined as least developed countries and other low income countries (OLIC), has increased over the past decade from around 37% in 2000 to 46% in 2010. This is in part due to the desire of DAC members to focus on fragile states as laid out by the HLFs, but also due to the increasing graduation of countries from low- to middle-income status. Eleven formerly low-income

14 Regional trends are explored in Chapter 6, and sector trends are explored in Chapter 7.

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countries (LIC) including India and Indonesia graduated to middle-income country (MIC) status between 2005 and 2008, following China’s transition in 2003. However, despite the evolution of these countries’ economies, three-quarters of the world’s poorest people live in middle-income countries and will continue to be a challenge as these countries are likely to have a population boom. Although aid to some of the most notable among these has never been large in relation to their domestic resources, there may be increased aid to these regions if population increase outpaces development.

Graphic 4-12 ODA allocation by country income, OECD, 2011

4.7.2 General Technical Assistance TrendsOECD statistics suggest that around one quarter of all ODA is spent on technical assistance, although the amount spent on TA varies between donors. This expenditure has represented around USD 25 billion a year in recent years. With the Paris Declaration on Aid Effectiveness, the Accra Agenda for Action and the Busan Partnership for Effective Development Co-operation, furthering the desire for partner country ownership of development projects and with an emphasis on results; there is an emerging global consensus on TC to create more joint approaches by: Using TA more selectively in support of locally adapted partner country development processes; Progressively shifting management of experts to partner countries, wherever possible; Putting continuing emphasis on the use of country systems and local procurement methods; Escalating the use of local and regional technical assistance expertise; Improving technical co-operation action by using a capacity development perspective; Jointly managing technical co-operation and innovation actions flexibly but with a focus on achieving

results; Using evidence based learning as a longer term, central feature of future policy and action; Making greater use of South-South operations.

It is likely that the role of TA in development projects will subsequently change to a more country-oriented, smaller, more efficient role, with a strong training capacity. However, in the desire to obtain tangible results and achieve the short-term MDG goals, the UN has called for proven successful methods, which likely includes the use of TA. Therefore this change is likely to be more gradual. Yet there are also increasing opportunities for technical assistance growth: Generally ODA has been ring-fenced against public expenditure cuts, and in fact as displayed are often

actually growing. Private donors and charities are also substantially adding to overall development budgets. This means that there are likely to be more projects and more TA opportunities.

The modalities for channelling ODA continue to change. There is a decrease in budget support and an increase in multilateral aid, most notably coming from the World Bank, and more co-financing

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arrangements (donor coordination), but these new modalities come with increasing levels of technical assistance.

There also seems to be a likely increase in framework contracts and grant management projects, as well as a growing emphasis of Public Private Partnership enterprises to inject private sector funds into the development budget, along with establishing private sector ventures to boost the economy.

This graph demonstrates the use of technical co-operation over different sectors throughout 2010. As this graph demonstrates, technical co-operation is only a limited expenditure of aid throughout most sectors. However, agricultural production and business industry and employment sectors account for a considerable amount of aid to the sector.

Graphic 4-13 Percentage of ODA spent on Technical Assistance by sector, OECD, 2010

4.8 SummaryConsistent with the expectations and agreements of the global development community and the HLFs, the current vision for reform of modern technical co-operation is no longer about skills transfer alone. The international community now agrees that development is first and foremost about partner countries asserting leadership and investing resources to make it work. It is about enabling donors to play their support role more efficiently and effectively. Context is at the core of any capacity action. The specific approach used in any given context will vary according to local circumstances, even though many of the basic operational principles may be fairly similar whether discussing post-conflict situations or middle income states. These specific, individual circumstances will continue to require detailed and intimate knowledge of a wide array of subjects, sectors, countries and regions, meaning that technical co-operation will remain relevant in the future.

These new consensus will have a significant effect on the use of technical assistance, however, MM is currently adapting well to this change, increasingly using local and regional experts, consultancy firms, and local organisations as viable partners in their projects. This must continue to broaden to ensure country ownership of programmes, as this will become an increasingly important criteria for assessing and awarding tenders. Mott MacDonald can further its position by establishing more regional and local offices to act as a hub for the area, incorporate local expertise, and develop a large network of domestic consultants and organisations.

Mott MacDonald should also seek to develop certain non-sector specific expertise, with a particular focus on capacity building and development, and M&E. As mentioned, global consensus is converging on

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increasingly using TA in a support role, developing the capacity of partner countries’ institutions, organisations and experts, to develop country ownership and ensure better results. The need for better results has also led to increase in the need, use and desire for M&E. Donors and partner countries are increasingly seeking to use M&E as a core feature of policy and action, and as such projects need to have a substantial M&E component. M&E specialists are quickly becoming a key position in projects, and by developing in-house expertise Mott MacDonald can ensure its competitiveness, range of expertise, as well as increase its profit, by not having to lease out M&E positions and tasks to partner organisations.

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5. Donor Trends

5.1 IntroductionThis chapter aims to analyse the trends of the International Development Lending Agency (IDLA) that IDD has regular contact with. The chapter will analyse trends and donor plans to assess key priorities and opportunities for IDD. The specific donors that will be assessed will be the Department for International Development, the European Commission, Nuffic (Netherlands Universities Foundation for International Cooperation) and the World Bank (WB). These are the donors that IDD co-operate with most and therefore are the most relevant to IDD plans.

5.2 Department for International DevelopmentThe Department for International Development (DFID) is the donor agency that acts on behalf of the British Government. It is one of the world’s primary donors and one which Mott MacDonald works with extensively. It provided USD 13.7 billion in ODA in 2011, making it the world’s third largest donor. The UK is keen to remain dedicated to its aid commitments despite the financial and economic crisis, and targets a GNI to aid ratio of 0.7% as early as the end of 2013. This means that DFID will continue to be a major player in the international development community and that its role will become even more significant.

DFID is a huge commissioner of technical co-operation. In 2010-2011, DFID spent £468 million (around USD 750 million) of its total aid budget on technical co-operation, £412 million of which was spent on DFID’s bilateral aid projects. This figure represents around 10% of DFID’s total bilateral spending. DFID views itself as essentially a commissioning organisation, procuring out contracts to technical co-operation service providers for implementation and management of projects15. These factors are some of the reasons that DFID is one of the main donors that Mott MacDonald works with, and consequently Mott MacDonald has a long-standing, positive relationship with the donor. The commitment by DFID to uphold its development promises as well as increase its spending, along with the size and quantity of its projects, means that future DFID projects present some great opportunities for Mott MacDonald.

5.2.1 Current trends, commitments, attitudes and goalsDFID’s primary objectives in its approach to development aid are the reduction of poverty by focusing on the poorest and most fragile states as well as the realisation of the Millennium Development Goals. These objectives guide the direction of DFID’s funding. However, within these guidelines DFID has many other objectives, responsibilities and policies that have an impact on the delivery of its aid.

In light of the financial and economic crisis, and facing heavy scrutiny from the public due to development aid being ring-fenced against government spending cuts, DFID launched its ‘Value for Money’ (VfM) initiative. The VfM concept is designed to ensure that DFID’s aid is well spent, highly effective and shows tangible results. This ideal underpins all of DFID’s development aid decisions and policies, including, most importantly, who wins contracts. If potential technical consultants cannot adequately demonstrate how they will provide VfM in their projects, they will fail to be awarded any contracts. The purpose of the VfM scheme is to develop a better understanding (and better articulation) of costs and results to make more informed, evidence-based decisions. VfM does not necessarily mean that DFID will only aim to undertake the cheapest projects, but rather gain a better understanding of the factors that are driving costs and ensure

15 Opposed to other development organisations such as the German Technical Co-operation Foundation (Deutsche Gesellschaft für Technische Zusammenarbeit, GTZ), which implement projects with substantial input by its own in-house expertise.

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the desired quality and the lowest price. However, this ideal is not necessarily applied in practice, where some DFID staff has actually interpreted VfM to mean ‘cheapest’, particularly since Justine Greening has assumed the role as Secretary of State for DFID. VfM is now the keyword for the DFID organisation: all projects and potential technical co-operation providers must demonstrate their own VfM, as well as how they are going to provide it in their projects. As part of its VfM mantra, DFID will increasingly work in fragile and low income countries to maximise the impact and effect of its aid.

With the election of the Conservative/Liberal Democrat coalition government in 2010, DFID outlined six structural reform priorities and responsibilities that will guide its decisions until the deadline of the MDGs in 2015:1 Honour international commitments: honour the UK’s international commitments and support actions

to achieve the Millennium Development Goals;2 Drive transparency, VfM and open government: make British aid more effective by improving

transparency, openness and VfM;3 Boost wealth creation: make British international development policy more focused on boosting

economic growth and wealth creation;4 Strengthen governance and security in fragile and conflict-affected countries: improve the

coherence of and performance of British international development policy in fragile and conflict affected states;

5 Lead international action to improve the lives of girls and women: work to empower girls and women through better education and to prevent violence against women. Recognise the role of women in development, provide greater choice in family planning and ensure healthy mothers and children;

6 Combat climate change: drive urgent action to tackle climate change and support adaptation and low carbon growth in developing countries.

Other major responsibilities include: Respond to humanitarian disasters; Deliver on obligations to the Overseas Territories; Influence the global development system.

These priorities are designed to clearly set out DFID’s direction, its sectors and focuses, as well as the results it plans to deliver.

DFID strongly adheres to the MDGs and these form the basis of DFIDs overall objectives. Currently, DFID’s development programme is based upon working towards the MDG deadline and it has given itself statistical targets. DFID hopes that by 2015 UK aid will have provided secure schooling for 11 million children, saved the lives of 50,000 women and children in pregnancy and childbirth, prevented the death of 250,000 babies, helped to vaccinate over 50 million children against preventable diseases, provided 50 million people with the means to help work their way out of poverty, supported freer and fairer elections in 13 countries with more than 30 million voters, and helped millions of poor protect their livelihoods from climate change, amongst other targets.

5.2.2 Modalities16

DFID has been increasingly trying to showcase and develop the role that business can play in development. DFID has been supporting Public Private Partnerships in projects that have helped to alleviate poverty, whilst improving food security, nutrition and health. DFID hopes to continue this support as it believes that greater private investment in developing countries will lead to greater economic growth, and an increase in jobs, trade and overall standard of living.

Grant Fund Management (GFM)17 has also become a staple of the DFID development agenda, procuring themed funds such as Challenge Funds and Innovation Funds that focus on a range of sectoral activities

16 Project aid will not be mentioned in modalities as this is the standard in the delivery of aid.17 For more information on Grant Fund Management please refer to Chapter 3.

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based around a central theme. DFID is increasing the amount of GFM projects it procures in an effort to give greater impact to its aid by focusing a wide array of tasks under one programme, aiming to create harmonisation, ownership and also reducing administration costs. GFM contracts are very lucrative as they often involve large sums of money, and can be incorporated with a decent TA component. Mott MacDonald has already begun to develop its expertise in this area and ideally will seek to specialise further.

5.2.3 Target Regions/CountriesIn line with global trends, the majority of Britain’s aid is focused on Sub-Saharan Africa and South Asia. In recent years, in conjunction with its VfM ideal and its determination to focus on the world’s most fragile and poorest states18, DFID has decided to consolidate its aid by closing its programmes in some countries (particularly emerging MICs and economically rising countries), and instead to concentrate its resources on certain ‘priority countries’, where DFID felt its aid would have the greatest impact. DFID hopes that by concentrating its aid on the neediest countries, it can secure the utmost impact and the swiftest achievement of the MDGs, and therefore achieve optimum VfM. Britain now focuses its bilateral aid on 28 priority countries in Africa and Asia, including the Middle East.

Map 5-1 Map of DFID partner countries, DFID, 2012

Priority Countries: Afghanistan, Bangladesh, Burma (Myanmar)19, Democratic Republic of the Congo (DRC), Ethiopia, Ghana, India, Kenya, Kyrgyzstan, Liberia, Malawi, Mozambique, Nepal, Nigeria,

18 This need is measured by a model based on determining a country’s score on the UN Human Development Index (HDI), the

number of people in that country living on less than USD 2 a day, and a measure of the country’s fragility.19 The UK government does not recognise the state name of Myanmar, and as such DFID refers to the country as ‘Burma’ in all of its

documents.

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Occupied Palestinian Territories, Pakistan, Rwanda, Sierra Leone, Somalia, South Africa, South Sudan20, Sudan, Tajikistan, Tanzania, Uganda, Yemen, Zambia and Zimbabwe.

On top of these ‘priority countries’, the UK also has ‘significant relations’ with 14 other countries; this means that the UK provides to 36 countries more than its global share of CPA and/or is among the top donors that cumulatively provide 90% of CPA to those countries. The UK also has ‘non-significant relations’ with 50 other countries, and provides aid to three of its overseas territories. In 2011, DFID also announced the ‘graduation’ of 16 countries from its aid programme; these are countries that have made great progress towards achieving the MDGs, have become economically stable, or countries that DFID believes other donors are better placed to assist and it is not cost-effective to retain 21. These countries are no longer to receive aid from the UK, but all current contracts will be honoured. DFID will have exited these countries by 2016 and no new contracts will be procured. As well as these focus countries DFID will run three regional programmes in Africa, Asia and the Caribbean.

The vast majority of the UK’s aid is sent to sub-Saharan Africa which receives 32.9% of UK aid (USD 2.7 billion in 2011), followed by South and Central Asia which gains 29% (USD 1.6 billion in 2011). The biggest recipient of UK aid is traditionally India which received USD 657 million in 2010. However, Ethiopia became the largest recipient in 2011, receiving USD 523 million, as India is graduating from DFID’s aid programme. DFID has outlined a plan to focus on providing development aid to the world’s poorest people and as such, Britain remains firmly focused on concentrating on the least developed countries (LDCs) with USD 2.6 billion delivered to LDCs in 2011.

Country-specific aid makes up around 80% of DFID’s total spending, with the top five countries in 2010 – India, Ethiopia, Afghanistan, Pakistan and Nigeria – receiving up to over half of DFID’s total spending. In 2010/2011, DFID had three countries in which technical co-operation made up over a quarter of the programme’s budget: Afghanistan (31%), Sierra Leone (29%), and Nepal (27%).

Table 5-3 DFID’s top 10 recipients of gross ODA (USD million) in 2010, OECD, 2011

Each of DFID’s priority countries have certain main goals that DFID hopes to achieve by 2015. These goals aim to tackle the country’s most pressing development needs, address the MDGs and/or help countries graduate from DFID’s aid programme. DFID has focus areas for each of its priority countries to try and achieve these objectives by tackling each country’s biggest needs and ensuring the greatest VfM. This does not mean that DFID will only focus on certain issues in certain countries; rather these will be the main goals DFID hopes to achieve before 201522.

20 Not shown on map.21 These countries DFID will increase its multilateral aid to and /or incorporate into its regional plans22 For countries’ individual targets please refer to Annex i.

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DFID plans to make a major contribution towards global progress on infant mortality, malaria, education and water and sanitation in large conflict-affected and fragile states such as Nigeria, Ethiopia, DRC and Bangladesh.

DFID plans to support improved peace and security, government transparency and accountability, access to basic services, wealth creation and employment opportunities in other fragile and conflict-affected states such as Burma (Myanmar), Kenya, Mozambique, Nepal, Rwanda, Sierra Leone, Uganda and Zimbabwe.

DFID plans to focus its efforts on essential services and peace, security and stability in Afghanistan and Pakistan, reduce the risk of state failure in Yemen, and provide humanitarian aid, support essential services and target the underlying causes of instability in Somalia.

DFID plans to support countries such as Ghana, Zambia and South Africa to graduate from DFID’s aid programme by helping them to effectively manage revenues, leverage private sector development and address outstanding MDG challenges. Focus on private sector support and addressing outstanding MDG challenges is also DFID’s goal in Malawi and Tanzania, as an engine to facilitate and encourage economic growth.

DFID believes that targeting individual countries alone will not facilitate development on its own. Regional programmes are needed to tackle wider problems that are a burden on the entire region. In this vein, DFID plans to increase its regional programmes in an effort to complement country programmes through targeted strategic interventions focused on cross-border issues including trade, climate change and the management of natural resources, as well as maximising the opportunities at the regional level to deliver results on governance, health and hunger.

One of DFIDs priority regions, where six out of its top 10 recipients are based, is Sub-Saharan Africa, the region that receives the largest proportion of DFID aid (USD 2.9 billion in 2011). The region is a global target area. Even though Sub-Saharan Africa is home to only 12% of the world’s population, it has 1/3 of the world’s poor. It is also the region that is struggling most in many development sectors: MDG5 is far off track in this region, the region has the highest number of cases of AIDS/HIV, food insecurity and malnutrition remain a potent issue, while conflict in some parts of the region is also a pressing issue. DFID’s top priority in Sub-Saharan Africa is attempting to increase trade within the region and integrate it into the global market. To facilitate this, DFID aims to assist in developing the region’s infrastructure and agricultural practices.

To reduce the poverty that undercuts many of Africa’s problems, economic growth and job creation through private investment need to be key factors. 29% of the Sub-Saharan population live in landlocked countries and are therefore reliant on their neighbours for access into regional and global markets and the growth opportunities that come with them. DFID has set itself regional targets to be achieved by the end of 2015: Helping 3 million people benefit directly from improved national and cross-border trade; 300,000 people with improved access to low carbon energy; Averting 6,000 maternal deaths; Reaching 1 million people with emergency food assistance; Cutting waiting times at nine additional border crossings at least by 30%, boosting trade; Investing in infrastructure along regional transport corridors, including the upgrade of 1,300km of roads.

However, for this to work successfully, it needs regional co-operation, not just the backing of individual countries. DFID’s regional programme is designed to run alongside its bilateral spending plans, to aid coordination on issues such as health, climate change, water and natural resources.

Another of DFID’s priority regions, where the other four of the top ten recipients are situated, is Asia – the second biggest recipient of DFID’s financial aid, receiving USD 1.9 billion in the 2011/2012 financial year.

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Asia is another global target area despite the highly successful economic growth of many of Asia’s countries over the past years. 40% (600 million) of Asians still live on less than USD 1.25 a day, and 74% (1.1 billion) live on less than USD 2 a day. Given the population boom that is expected in Asia, particularly South Asia, this could lead to South Asia housing more people in poverty than the entirety of Sub-Saharan Africa. DFID’s primary focus in South Asia is on poverty alleviation, mitigating climate risks, such as floods and tsunamis, and promoting gender equality and reducing social exclusion. Within DFID’s regional Asia programme, the focus is on South Asia and there is less concentration on Burma and Central Asia. South Asia contains some of DFID’s largest country programmes. These receive a high concentration of DFID funds and contain many of DFID’s long-term flagship programmes.

DFID hopes to solve these problems through well-targeted, strategic investments, by opening up economic growth and trade and by attracting larger investments from the private sector. DFID’s priority focus in the region is MDG1: Hunger and Poverty Alleviation and MDG5: Maternal Health, as these are the most off-track MDGs in the region. DFID’s regional goals for Asia by 2015 are: To prevent 7,400 maternal deaths; Develop eight national programmes which integrate a multi-sectoral approach to food security and

nutrition, and reduce malnutrition; Prevent the trafficking of 60,000 women and girls into garment and domestic work within Asia, and to

the Gulf States and the Middle East; Help 500 million people benefit from better resource management and reduce climate change

vulnerability in regional river basins; Enable 40% time and cost savings through improvements at six key regional border crossings.

5.2.4 Target SectorsOf the £412 million that DFID spent on technical co-operation on bilateral projects in 2010-2011, 60% was focused on three sectors: government and state building (30%), health (19%) and education (11%). Other main spending areas include social services, infrastructure and humanitarian assistance. However, DFID is now planning to change its focus towards wealth creation and infrastructure, believing that these focus areas can be used to help countries build their own way out of poverty, and that they will have a run-off effect on other sectors. Not only DFID is shifting in this direction, but many other key international development policy makers are becoming more focused on boosting economic growth and wealth creation.

DFID believes that economic growth is the most effective way of raising incomes and therefore lifting people out of poverty. By facilitating and incubating the right conditions for growth and investment, DFID believes that it can help to create jobs, markets and opportunities for people so that developing countries no longer have to rely on international help. This means that DFID will continue to have a strong focus on wealth creation. Projects and goals look to be highly ambitious and contain a strong focus on facilitation and creation of job and economic opportunities as sustainable ways to reduce poverty. DFID will therefore seek to procure projects that focus on wealth creation, such as increasing access to financial services and investment climate reform, promotion of trade agreements that should benefit the poor, including support for increased agricultural productivity through better access to inputs and making markets work better.

In the pursuit of wealth creation, DFID therefore views agriculture, trade and infrastructure projects as the key sectors on which to focus on in the near future to help countries facilitate economic development. Building infrastructure is extremely important, especially in landlocked countries. Increased infrastructure allows for safer, easier and more efficient access within and between countries; this in turn leads to increased trade and therefore private investment. An increase in private investment leads onto the creation of jobs and economic growth. Employment-intensive growth is central to reducing poverty.

In the pursuit of wealth creation and economic growth, DFID also plans to sponsor more agricultural projects. By supporting sustainable agriculture and rural development through equitable provision of agricultural inputs, including subsidiary programmes, DFID hopes that it can contribute to higher food production. Countries can generate employment, increase trade potential and economic growth, as well as

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have the run-off advantages of combating hunger, malnutrition and other health issues. Agriculture and land management contracts in Sub-Saharan Africa and South Asia will continue to be prominent and even increase over the next few years to try and combat the increase in absolute poor in these regions. These projects provide the links and foundations for developing nations to begin to build themselves a road out of poverty.

Governance and security also remain a core focus of DFID in order to address conflict and insecurity, strengthen local democratic institutions, including the media, improve accountability, and give poor people more power over how aid is spent. Desired activities include reinforcing citizens’ demand for good governance and oversight of basic service provision, supporting the development of local democratic institutions (including more representative parliaments), civil society groups, the media and enterprise, and giving women a stronger role in decision making, increasing access to security and justice for poor people and piloting new approaches to reduce violence against women.

Education also remains a key DFID priority. DFID’s focus is now on countries with large out-of-school populations and fragile states. Hoping to gain the greatest impact from its aid. DFID plans to conduct projects which work towards access to, and quality of, education, gender equality and completion rates, a significant increase in girl’s education and improved learning outcomes, addressing of teacher absenteeism, improvement in performance management, and support to incentives for teachers to work in challenging environments.

DFID also has projects designed to reduce poverty, hunger and vulnerability through support for cash transfers, direct nutrition interventions and efforts to support household food security. Water and sanitation remain important goals. Important innovative goals include reducing the burden of waterborne diseases and gender, including increased access to clean water and sanitation through using community-led approaches and hygiene awareness to generate demand for sanitation. Desired activities in regard to health include promotion of women’s choice over whether and when to have children, increased focus on child mortality, malaria and infectious diseases and supporting health system strengthening.

Climate change is a new strategic priority for the United Kingdom, which now has a strong legal and institutional framework covering the issue. ODA commitments have increased significantly in recent years with almost USD 1.5 billion dedicated to biodiversity and climate change mitigation in 2010, and with concentration on enhancing low carbon private sector led growth, climate adaptation, forestry and institutional strengthening to implement ambitious climate change strategies. Planned activities include new programmes to improve forest management and tackle illegal logging to reduce deforestation, supporting developing countries’ resilience and adaptation to climate change, increasing access to clean energy services and support to help poor countries develop in a low carbon way.

5.2.5 Recent Developments The Independent Commission for Aid Impact (ICAI), an independent body responsible for scrutinising

UK aid is currently undertaking a review into DFID to evaluate if the extensive use of technical co-operation is justified and represents VfM. This report may also evaluate the feasibility of DFID developing and/or expanding its in-house staff to become an organisation similar to GTZ. If this becomes the case, it could have a detrimental effect on DFID’s use of technical consultants, with DFID reducing the number of contracts its procures and instead developing and managing them in-house. The report is due to be published in early 2013.

On 9 November 2012, DFID announced that it would stop providing aid to India. Financial support worth USD 319 million will be phased out by 2015, after which the UK will concentrate on providing technical assistance to the country. India is currently one of the largest recipients of UK aid, and DFID’s decision reflects the economic development of the country. The decision does not reflect a complete pull-out of a programme, such as DFID has done in China, but rather a shift from direct financial aid to technical assistance. All current aid contracts with India will be honoured, but no new contracts will be procured. After 2015, DFID will focus on providing support in trade and skills development and on assisting

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private sector anti-poverty projects that can generate a return on investment. DFID will work alongside other development agencies sharing advice on poverty reduction, private sector projects and global and regional partnerships in food security, climate change and disease prevention, however, the estimated financial contribution to these projects will only be around 10% of the current amount delivered.

On 16 November 2012, DFID announced that it would be cutting all aid to Uganda after an investigation into corruption. This cut resulted in the suspension of USD 18 million, with immediate effect. On 30 November, DGID announced that it would suspend all new projects in Rwanda, owing to allegations that the country was backing the M23 rebel group in the DRC.

5.2.6 Implications for Mott MacDonaldDFID is one of the key donors for MM, and many of our projects are funded by DFID. Cambridge Education (MCD) was DFID’s fifth top recipient in 2011. This is a relationship that MM should continue to build upon, as not only is DFID one of the world’s largest donors but it is also one of the few donors which is not making cut-backs but actually increasing the amount of aid it provide.

DFID is increasingly seeking to showcase and develop the role that business can play in development through PPP initiatives. Therefore, MM would do well to increase its relationship with the private sector in development and build its portfolio of working with PPP. PPP is an increasingly common theme, not only with DFID, but with donor agencies as a whole, as donors struggle to increase their funds. GFM is also an increasingly popular modality for aid in DFID projects, as well as in those of other donors, MM already has a fairly impressive portfolio when it comes to GFM. It needs to continue to develop this to insure it is a leader in this field, as DFID increasingly procures projects using this modality.

DFID’s key focus regions are Sub-Saharan Africa and South Asia, which should coincide with MM’s key focus regions as argued elsewhere in this report. DFID is a key spender in two of IDD’s priority countries: Bangladesh and South Sudan (both in the DFID top ten), and spending in these countries is likely to increase with the reduction of partner countries that DFID will be working with. However, these two countries are the only two in DFID’s top ten that IDD has many on-going projects in, which means that IDD is missing out on many opportunities. For example, Ethiopia alone receives over USD 0.5 million in bilateral aid but only IDC has a couple of small projects there. As already mentioned, DFID’s top five recipients receive over half of DFID’s aid budget and IDD has very few projects in these countries. MM could combine its relationship with DFID with regional presence and sectoral expertise to expand its operations into some of these countries. IDD would do well to focus on expanding into countries such as Ethiopia, Pakistan, Nigeria, DRC, Ghana and Tanzania, where DFID already has large aid programmes, but where IDD has very few or no current projects . These countries present lucrative opportunities for MM, not only now but also in the future, as these countries are likely to continue to receive large amounts of aid from DFID in the mid-term future, whilst also allowing MM to develop its regional presence and visibility.

Due to pressures to save money and greater understanding of ‘multiplier’ and ‘run-off’23 effects of aid, DFID is now beginning to change its sectoral focus to focus primarily on activities, programmes, and sectors that facilitate wealth creation, with the idea that this will help to assist countries to build their own way out of development, as the link between wealth creation and development is being increasingly understood. Therefore, MM increasingly needs to develop its expertise and knowledge of the sectors that contribute towards this. These sectors include areas that MM is well established and has a large portfolio in, such as economic development, education, private sector development, governance, and social protection. Here, MM is already conducting large programmes, and is well placed to win more. The wealth creation agenda also includes sectors that the International Development Divisions do not have expertise in, but the expertise is located elsewhere within the group, f. ex. in those divisions handling infrastructure projects. Infrastructure (which includes transport and power) is one of the key sectors that will begin to see greater amounts of funding not only from DFID but also from other donors, as their run-off effects are being better understood. MM is a world leader in transport and power and greater synergies (which are already being applied) between these units and the development divisions could allow MM to ‘hit the ground running’ in

23 Explained in Chapter 7

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this field, and become a dominant player. Agriculture is another sector that will see increasing support from DFID. MM has some experience in this field but should seek to develop this further if it wishes to expand within this market.

5.3 European UnionThe European Union24 is a supranational donor agency and is the only OECD DAC member that is a multilateral donor. The large size, geographical reach and partnership dimension of the EU and its aid programme mean that it is a formidable and influential player in global development and one of the world’s major donors in terms of the financial aid it provides. In 2011, the EU donated USD 12.6 billion, which makes it the world’s fourth largest donor. The EU is a unique donor in that it plays a dual role. In contrast to multilateral organisations whose funds exclusively come from its members, the EU is also a bilateral donor in its own right, not only receiving direct funding from its members, in the form of the European Development Fund, but also through its own institutional resources, in the form of the general EU budget. In this sense it is similar to a bilateral organisation. Not only does the EU act itself as a donor, but it also plays a role in the coordination of the 27 individual states’ aid programmes by setting guidelines to make for more effective aid, while also monitoring these programmes. As an individual donor the EU co-operates with and contributes funding to multilateral organisations.

However, the EU has suffered under the financial and economic crisis in that many of its members have been unable to meet its aid targets and commitments. This has led to a reduction in the funds that the EU has been able to provide, which suffered a 0.4% decrease from 2010 in real terms and a 6.4% decrease in nominal terms. However, despite this setback the EU remains the world’s fourth largest donor, has a wide range of programmes across many regions, and also has one of the highest bilateral budgets of any donor at 97% of net ODA. Due to the large size of the EU’s development programme, and the range of countries and sectors that it is involved in, the EU is a large commissioner of technical co-operation. As the size of the EU programme makes it impossible to administer it centrally, the vast majority of EU projects are contracted out to TA firms. The size of the EU aid programme and its substantial involvement of TC mean that it provides lucrative opportunities for MM, particularly in regard to entering new regions and countries.

5.3.1 Current commitments, attitudes and goalsThe EU’s primary goal is the eradication of poverty, in the context of sustainable development including the achievement of the Millennium Development Goals. The EU plans to achieve this goal whilst also promoting democracy, good governance, sustainable and inclusive economic growth, and delivering aid where it is needed most and where it will have the greatest impact.

At the heart of the EU’s development agenda is the ‘European Consensus on Development’, 2005, which lays out the EU’s core development aims. The agenda maintains that through its development programme the EU seeks to reduce poverty by concentrating on the Millennium Development Goals, to facilitate development based on Europe’s democratic views and to ensure that partner countries are responsible for their own development.

Recently the EU released its ‘Agenda for Change’. This document was a policy reform designed on modernising EU development policy and approaches. There are two primary foundations for the ‘Agenda for Change’, the first is the promotion of human rights, good governance and democracy, and the other being support to encourage sustainable and inclusive growth.

24 The EU aid programme is administered, and its policy dictated, by EuropeAid, however, the funding comes from the European

Commission, through different sources of income. Due to the bureaucratic institutional nature of the programme, the donor is

referred to by many names, such as EuropeAid, the EC and the European Union Institutions. However, to reduce confusion and

ensure consistency, the report will refer to the donor as the EU.

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The EU primarily wishes to promote sustainable and inclusive growth to help facilitate countries to build their own way out of development. Economic growth can lead to the creation of jobs, the expansion and development of industries, and create various run-offs that assist in the development of other sectors such as food and nutrition, health and education. The EU plans to promote sustainable and inclusive growth through promoting social inclusion and human development, job creation, business and private sector development and integration, regional integration, sustainable agriculture, and sustainable energy supply and access.

The EU helps to facilitate sustainable growth by targeting particular areas of: social protection, health, education and job creation; business environment, regional integration and world markets; Sustainable agriculture and energy.

Part of the ‘Agenda for Change’ is a differentiated approach to supporting some developing countries, particularly economic powers and MICs such as China, Russia and Brazil. Under the upcoming Multiannual Financial Framework (MFF) 2014 – 2020, some countries, primarily MICs, will receive less aid or discontinue receiving aid from the EU. Instead, alternative forms of co-operation will be pursued. This new approach will allow the EU to better pursue its core values and provide the greatest impact of its aid by focusing on the poorest and most fragile states. At the same time, it will assist its neighbours, particularly those hoping to join the EU, whilst still honouring partnerships with other more developed countries.

The EU believes that the revised policy outlined in the ‘Agenda for Change’ will lead to: An increased share of EU country and regional co-operation programmes dedicated to the policy

priorities; The concentration of EU activities in each country on a maximum of three sectors; An increased volume and share of EU aid to countries most in need and where the EU can have real

impact, including fragile states; Enhanced importance of human rights, democracy and good governance trends in determining the mix

of instruments and aid modalities at country level; Continued support for social inclusion and human development through a budget of at least 20% of EU

aid; A greater focus on investing in drivers for inclusive and sustainable economic growth, providing the

backbone efforts to reduce poverty; A higher share of EU aid through innovative financial instruments, including under facilities for blending

grants and loans; A focus on helping reduce developing countries’ exposure to global shocks such as climate change,

ecosystem and resource degradation, and volatile and escalating energy and agricultural prices, by concentrating investment in sustainable agriculture and energy;

Tackling the challenges of security, fragility and transition; Joint EU member states response strategies, with a sectoral division of labour; A common EU results framework; Improved policy coherence for development, including through new thematic programmes that build

synergies between global interests and poverty eradication.

The ‘Agenda for Change’ also calls for greater coordination between the EU and its member states, so that they may jointly prepare their strategies and programmes and divide labour amongst themselves.

Development strategies led by the partner country will continue to frame EU development co-operation in line with the principles of ownership and partnership. The EU is seeking greater reciprocal engagement with its partner countries, including mutual accountability for results. Dialogue at country level within a coordinated donor framework should determine exactly where and how the EU intervenes. More effective collaboration within the multilateral system will also be pursued.

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Currently the EU is assessing how it uses technical co-operation and therefore has launched new guidelines on how to make TC more effective. The new guidelines contain two key elements, the first is to ensure that the EU provides quality technical co-operation that supports country-led programmes, based on strong partner demand and which focuses on achieving sustainable development results, and the second is to provide support through partner-owned implementation arrangements, with a substantial reduction in the use of parallel Project Implementation Units.

5.3.2 ModalitiesThe EU believes that the mode of aid delivery is integral to determining the impact of aid and that close analysis is needed to ensure that aid is delivered in the most efficient and effective way if it is to have the greatest impact. Due to this philosophy the EU is one of the most innovative donors in the delivery of aid, constantly using a variety of aid modalities and a willingness to experiment with new ones. The EU primarily deals with financially large aid packages, making their contracts very lucrative.

The European Union is an important advocate and provider of General Budget Support. The EU donated USD 1.55 billion in GBS in 2010 which represented 12.4% of the EU’s gross bilateral ODA. General Budget Support involves the direct transfer of funds into the treasury of the partner country to achieve a set of pre-agreed tasks and objectives, and involves policy advice and performance assessment from the EU. GBS is not an end in itself, but a means of delivering better aid and achieving sustainable development objectives by fostering partner countries' ownership of development policies and reforms, allowing for targeted larger projects. The EU views its GBS as a ‘Vector of Change’ designed to achieve five key development challenges and objectives:1 To promote human rights and democratic values;2 To improve macroeconomic stability, financial management, inclusive growth and combat fraud and

corruption;3 Promote sector reforms and improve sector service delivery;4 State building in fragile states and addressing the specific challenges of SIDs, and overseas countries

and territories;5 Improve domestic revenue mobilisation and reduce dependency on aid.

However, within its GBS programme the EU has defined three different categories of GBS: Good governance and development contracts to replace GBS and to be provided when there is trust

and confidence that aid will be spent pursuing the fundamental values of human rights, democracy and the rule of law;

Sector reform contracts, to provide sector budget support, to address sector reforms and service delivery;

State building contracts to provide budget support in fragile situations.

The EU believes that GBS allows for greater ownership and harmonisation of development policies by partner countries and that it ensures that partner countries are able to tackle their countries’ most pressing needs, allowing them to target specific areas and determine the size and breadth of their programmes. GBS will continue to be a key modality used in aid financing and the EU hopes to achieve development results by strengthening the contractual partnerships with developing countries.

An increasingly favoured and important mode of EU aid delivery is the sector approach. The sector approach is a modality that, instead of focusing on one activity, like project aid, the programme focuses on an entire sector, facilitating either the development of the sector as a whole, or being one project that focuses on many activities within that sector. By nature sector programmes tend to be medium-term to long-term, financially large projects. The primary form in which the EU delivers sector approach aid is through Sector Policy Support Programmes (SPSP). SPSPs can come in two forms: firstly provided as sector budget support, similar to GBS, but obviously only focused on one sector. This is the modality of choice for EU SPSPs and involves the direct transfer of funds into the national treasury of the partner

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government in the pursuit of a set of pre-agreed outcomes and outputs within a particular sector. Another form of an EU SPSP, though slightly less common in the EU, is the pooling of funds. This involves the EU pooling funds together with other donors using one agreed set of procedures in pursuit of a specific set of sector activities.

The second form of sector approach that the EU uses is the Programme Based Approach (PBA), but used at sector level. PBA is defined in the DAC guidelines as a way of engaging in development co-operation based on the principle of coordinated support for a locally owned programme of development. It should involve leadership by the host country, a single comprehensive programme and budget framework, as well as a formalised process of donor coordination and harmonisation of donor procedures for reporting, budgeting, financial management and procurement. Another important feature are efforts to increase the use of local systems for programme design and implementation, financial management, monitoring and evaluation. However, the PBA is an extremely flexible approach and can cover many types of programmes and be involved at the sub-sector level.

The EU also provides development assistance through extended loans and equities. In 2010, loans provided to developing countries totalled USD 8.3 billion. The EU is also experimenting with innovative tools, such as the blending of grants and loans, as part of the updated policy.

The EU believes that crucial to developing countries’ success is attracting and retaining substantial private domestic and foreign investment and improving infrastructure. The EU therefore is planning to develop new ways of engaging with the private sector, notably with a view to leveraging private sector activity and resources for delivering public goods. It plans to become more involved with up-front grant funding and risk-sharing mechanisms to catalyse PPPs and private investments. PPPs seem to be especially important to poorer countries where over-extended governments do not have the human resources and fiscal space to fulfil the requirements of their growing economy. The EU aims to promote foreign and domestic investments, especially for SMEs, through its support for private sector development in developing countries.

5.3.3 Target Regions/CountriesThe EU has numerous relationships with developing countries, providing aid to around 150 countries across six continents. The majority of EU aid goes to Africa, Caribbean and the Pacific (ACP) 25, which are the donor’s priority, with Sub-Saharan Africa being the core focus. However, the EU is very much concerned with developing its own region and a significant proportion of its aid is donated to development programmes in Eastern Europe and the MENA region through the European Neighbourhood Policy (ENP). Even though in 2010, 38% of the EU’s total bilateral spending went to its top 20 recipients, the financial size of the majority of EU programmes means that the EU is amongst the top five donors in 121 countries and the top three in 75. In fact, the EU has ‘significant relations’ with 84% of its recipients, implying that it provides these countries with more than its global share of CPA and/or is among the largest donors that cumulatively provide 90% of CPA. This means that despite its wide focus of concentration, the EU remains a key influence in many developing countries, which subsequently makes its contracts very desirable to MM. Due to the EU’s large development programme and the number of countries it donates to, only the target regions will be highlighted here.

Map 5-2 Map displaying the countries that the EU donates to26

25 The majority of which is channelled into Sub-Saharan Africa.26 Shade indicates region.

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In 2010 the EU donated USD 4.8 billion to projects in Sub-Saharan Africa, as part of the EU’s Africa, Caribbean and Pacific Programme (ACP)27. This made this region by far the donor’s largest recipient, and it received over twice as much aid as the EU’s second key region, Eastern Europe and MENA, which received USD 2.1 billion as part of the ENP. Despite the large variety of EU projects world-wide, Sub-Saharan Africa and the ENP countries are the EU’s key focus, with nine of the EU’s top ten recipients based in these regions. The EU reaffirmed ACP as its priority focus when it granted the ACP an additional €1 billion as part of the EU’s 2010 MDG initiative, an initiative designed to accelerate the progress of the MDGs in these struggling regions. This initiative set a precedent for the EU, which outlined in its MFF 2014 – 2020 that it was to focus on targeting its resources where they are most needed and will have the greatest impact. As such it plans to consolidate its support to development to its own neighbourhood and in Sub-Saharan Africa and in all regions, and allocate more funds to the countries most in need, including fragile states.

Table 5-4 EU’s top ten recipients of gross ODA (USD million) in 2010, OECD, 2011

The EU, consistent with its policy to assist the world’s poorest, focuses the majority of its aid projects on Least Developed Countries and Other Low-income countries, with these countries allocated just over

27 A programme that focuses on the world’s poorest and most fragile states

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USD 5 billion in 2010, making up 40% of the EU’s bilateral aid spending. These top countries are unlikely to change as the EU is looking for long-term partnerships with developing countries, based on mutual accountability.

The ENP is one of the EU’s primary development concerns. The programme was established in 2004 and is designed to improve prosperity, stability and security between the EU and its neighbouring states. The programme focuses on the EU’s 16 closest neighbours: Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, Occupied Palestinian Territories, Syria, Tunisia and Ukraine. Through the ENP, the EU hopes to build relationships and implement development projects on the basis of common values, such as human rights, democracy and market economic values. Depending on how closely these values are shared, the ENP goes beyond existing relationships to offer political association and capacity development, deeper economic integration, wealth creation and increased regional mobility and integration. However, it must be stressed that this process is separate from EU enlargement. As the EU is scaling down the number of countries it is involved in, this region will continue to see more development funding coming from the EU.

Map 5-3 The European Neighbourhood Policy countries (green) in relation to the EU and pending EU members (blue), EU, 2011

5.3.4 Target SectorsWith the due date for the completion of the MDGs now very close, the EU plans to prioritise sectors with a high impact on poverty reduction, such as governance, social protection, health, education, employment, agriculture and energy. The EU is redoubling its efforts to achieve the MDGs by 2015 and as such, it is currently implementing their €1 billion MDG Initiative. This initiative focuses on delivering extra aid to countries that are most off-track with their MDG targets. The EU has also decided that bilateral aid to countries will go to no more than three sectors per country, with the aim of maximising the impact of EU aid by focusing on countries’ weakest sectors.

The ‘European Consensus on Development’ outlines the nine key priority sectors that the EU will work in: Trade and Regional integration; Environment and the sustainable management of natural resources; Infrastructure; Energy;

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Rural planning, including agriculture, food security and territorial planning; Governance, democracy and human rights; Peace and security; Human development; Social cohesion and employment.

The EU also focuses on four cross-cutting issues in line with the MDGs: Democracy and human rights, including the rights of children and indigenous peoples; Gender equality; Environmental sustainability; HIV/AIDS.

However, the recent ‘Agenda for Change’ that re-evaluates the EU’s development policy aims to consolidate the EU’s sector involvement. With the current financial strains on funds and the advancing MDG achievement date, the EU wants to focus on those sectors that will have the greatest impact on poverty and that have the greatest run-off effects on other development goals. As such, the ‘Agenda for Change’ places sustainable agriculture, food security and nutrition high on the EU’s development co-operation agenda. By supporting sustainable agriculture and rural development, countries can increase food production. Not only will this alleviate poverty by creating jobs, but it will also alleviate hunger, malnutrition and other health problems, and could possibly be used to increase food-based exports. Sustainability has to be a core part of agricultural development. Development is not sustainable if it damages the environment, biodiversity and natural resources or it will increase exposure and vulnerability to natural disasters. EU development policy plans to promote ‘green economies’ that can generate growth, create jobs, and help reduce poverty by valuing and investing in natural capital. As such, the EU will support sustainable practices, including the safeguarding of ecosystem services, giving priority to locally developed practices and focusing on smallholder agriculture, rural livelihoods, the formation of producer groups, the supply and marketing chain, and government efforts to facilitate responsible private investment. The EU will continue working on strengthening nutritional standards, food security governance and the reduction of food price volatility at international level. The EU plans to use its support in agriculture and energy to help insulate developing countries from shocks and thus help provide better foundations for sustainable growth and for tackling inequalities.

Sustainable agriculture ties in with the second priority area of the ‘Agenda for Change’: supporting and encouraging sustainable and inclusive economic growth. Inclusive and sustainable economic growth is crucial to long-term poverty reduction. To this end, the EU plans to encourage more inclusive and sustainable growth schemes, such as agriculture, SME development, and wealth and job creation. However, for economic growth to thrive, it needs a favourable business environment to support it. The EU therefore plans to support the development of competitive local private sectors, including by building local institutional and business capacity, promoting SMEs and co-operatives, supporting legislative and regulatory framework reforms and their enforcement (including for the use of electronic communications as a tool to support growth across all sectors), facilitating access to business and financial services and promoting agricultural, industrial and innovation policies. This will allow developing countries, with a special focus on the poorest, to become more integrated with, and harness the opportunities of, global markets.

As part of the target of fostering economic growth and development, the EU hopes to implement more regional integration programmes. Regional development and integration can spur trade and investment as well as foster peace and stability. Therefore, the EU will support regional and continental integration efforts (including South-South Cooperation) through partners’ policies in areas such as economic markets, infrastructure and cross-border co-operation issues such as on water, energy and security. Support will be offered to tackle competitiveness gaps and to develop economic partnership agreements and other free trade agreements with developing regions.

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Trade and investment policies may be used to foster inclusive growth and sustainable development in developing countries. Many developing countries have deepened their integration into the world economy and have become increasingly important players in multilateral and international trade. In contrast to the rise of emerging economies, many developing countries, especially in Sub-Saharan Africa, are still struggling to reap the benefits of increasingly integrated world markets. The EU has plans to try and rectify this problem.

The EU views energy as a core sector for future focus. Energy is important for poverty reduction, partially to meet basic human needs, but it is also essential as an income-generator and for providing economic growth. Energy is needed to help create business opportunities and jobs and for developing communication which can lead to increased trade. The EU is one of the major leaders in regard to energy development and plans to drive the sector over the next few years by offering technology and expertise as well as development funding, and by focusing on three main challenges: price volatility and energy security, climate change, including access to low carbon technologies, and access to secure, affordable, clean and sustainable energy services. The EU hopes to help develop the energy sector by incorporating private sector investment and expertise.

The EU also plans to focus on developing good governance, in political, economic, social and environmental terms, as it is vital for inclusive and sustainable development. EU support to governance will feature more prominently in all partnerships, primarily through incentives for results-oriented reform and a focus on partners’ commitments to the central EU values of human rights, democracy and the rule of law, and to meeting their people’s demands and needs. Support for governance may take the form of programmes or project-based interventions to support actors and processes at local, national and sectoral level. The EU plans to refine its GBS requirements and they will now be linked and based upon the governance situation and political dialogue with the partner country.

The vast majority of the EU’s budget goes into social infrastructures: education, health, water, government and civil society, and the EU is dedicated to maintaining these commitments. The EU aims to develop and strengthen health systems, reduce inequalities in access to health systems, promote policy coherence and increase protection to improve health outcomes for all. With regard to education, the EU plans to enhance its support for quality education to give young people the knowledge and skills to be active members of an evolving society. Through capacity-building and exchange of knowledge, the EU needs to support vocational training for employability. Job creation and facilitation is also integral to economic growth and development and as such the EU plans to support decent work agendas, social protection schemes and encourages policies to facilitate regional labour mobility. The EU will support targeted efforts to fully exploit the interrelationship between migration, mobility and employment.

5.3.5 Recent Developments2014 will see the launch of the next EU Multiannual Financial Framework which will govern the EU budget for the next seven years28. Importantly, the MFF 2014-2020 will increase the EU’s aid budget to €70 billion to be spent over the next seven years. The EU plans through this MFF to concentrate its resources on where they are most needed and on where they will have the greatest impact and be flexible enough to adjust to unforeseen events. The new MFF will be used to support the ‘Agenda for Change’ by focusing on fewer sectors supporting good governance and human rights, and on sustainable and inclusive growth.

Under the new MFF, the EU plans to launch a process of ‘differentiation’, in which the EU will allocate a greater portion of funds to where they will have the most impact: to the regions and countries that are most in need, including fragile states. The new MFF will also consolidate the number of countries that it delivers aid to. Countries that are now deemed to be at a stage where they can generate enough resources for their own development will no longer receive bilateral aid; instead the EU plans to employ other forms of development assistance. The EU seeks to provide this assistance through innovative modalities and fiscal

28 At the time of writing the MFF 2014-2020 is still being finalised.

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instruments such as the blending of grants and loans, equities, guarantees and risk sharing. These modalities are aimed at catalysing private sector investment.

One of the major innovations and a key external policy tool is the new Partnership Instrument. It will aim to advance and promote EU interests and to address major global challenges. It will also allow the EU to pursue agendas beyond development co-operation with industrialised countries, emerging economies, and countries where the EU has significant interests. In line with the ENP, the EU will support the strengthening of relations with partner countries and aim to bring tangible results in areas such as democracy and human rights, the rule of law, good governance, sustainable economic and social development and progressive economic integration in the EU single market.

The EU will continue its support to enlargement countries through a renewed Instrument for Pre-accession Assistance, building on the positive experience from the current instrument. The Instrument for Pre-accession Assistance will help these countries implement the comprehensive reform strategies needed to prepare for future membership, with emphasis on regional co-operation, implementation of EU laws and standards, capacity to manage the Union's internal policies upon accession, and delivery of tangible socio-economic benefits in the beneficiary countries. More use will be made of innovative financing arrangements set up with international financial institutions (IFIs), with EU funds acting as a catalyst for leveraging investment in infrastructure.

5.3.6 Implications for Mott MacDonaldThe EU is an important donor for MM, with many MM projects commissioned by it. However, it is slightly more difficult to plan how MM needs to adapt to the EU. At the time of writing, the EU is yet to release the MFF 2014-2020, which is likely to introduce substantial changes to the EU’s aid programme, including the reduction of sectors, countries and regions the EU plans to focus on. The EU is coming under increasing pressure to reduce its budget due to the financial and economic crisis of 2008. As such, the EU is also continually increasing its requirements and criteria for eligibility and selection of TA providers, and it therefore would be difficult for MM to break into new markets through EU contracts if leading.

The EU is probably the donor most willing to experiment and utilise new modalities for the delivery of aid. As the EU continues to procure projects through various modalities, MM needs to ensure it can demonstrate its experience and knowledge of working with modalities apart from project aid, such as Sector-wide Approaches and Programme Based Approaches.

Currently, unlike many donors, the EU provides aid to a wide variety of countries, however, it is still quite clear to see where MM needs to prioritise and focus its resources geographically. For the EU and for the majority of donors, the key region is Sub-Saharan Africa, where the EU provides aid to nearly every single country as part of the donor’s ACP agenda. This aid amounted to USD 4.8 billion in 2010. Despite not knowing how the EU will structure its aid programme in the upcoming MFF, it is clear to see that Sub-Saharan Africa will remain a priority for all donors including the EU. Two of the four Sub-Saharan African countries in the EU’s top ten recipients in 2010 are countries which MM has significant presence in, i.e. Sudan (and South Sudan) and Mozambique. However, only a few of MM’s projects in these countries are funded by the EU and the company would do well to attempt to use its local presence and expertise to win more EU contracts in these countries. The other two Sub-Saharan African countries that feature in the EU’s top ten recipients are DRC and Ethiopia. Combined, these two countries receive over half a billion dollars’ worth of aid from the EU. They are also high priorities on other donors’ lists and MM needs to increase its presence in DRC and Ethiopia to access some lucrative opportunities. On the whole, due to the EU’s large involvement in the region, MM could seek to utilise EU financing to complement its already existing presence in Sub-Saharan Africa. There is no need for MM to expend resources looking into projects in the Caribbean and the Pacific, because although they belong to the ACP programme they receive little funding compared with Sub-Saharan Africa and are likely not to be involved in long-term EU objectives.

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MM could also look to the EU to increase its presence in the MENA region. This region is one of the key priority areas for the EU as part of its Neighbourhood Policy, and as such receives a substantial portion of the EU’s aid. The region is of growing importance to the international donor community, and will be receiving increasing amounts of aid, particularly in wealth creating sectors, such as skills development and job creation, along with governance programmes following the Arab Spring. MM needs to increase its presence in the region through the EU which is likely to increase spending on MENA projects. MM would also do well to seriously consider establishing a considerable presence in the Palestinian Territories which received nearly USD 0.5 billion from the EU in 2011, and have been the overall largest recipient of EU aid since 2008. The ENP not only concentrates on the MENA region but also on Eastern Europe, however, there is no need for MM to expand its presence in Eastern Europe since many donors continue to pull out of the region as countries develop MIC status and as there is pressure to concentrate on the most needy states.

The EUs priority is to focus on sectors that have an effect on poverty reduction and that have the greatest run-off effects on other poverty goals. The core sector that the EU plans to concentrate on is agriculture and food security in an attempt to alleviate poverty by creating jobs, but also because it alleviates hunger, malnutrition and other health problems. Equally, it could possibly be used to increase food-based exports. MM has some experience in agriculture and rural development but should look to increase its experience and expertise further in order to be eligible for greater EU funding. The EU is also heavily focused on those sectors that contribute to economic growth and wealth creation. MM has substantial experience in these sectors and can utilise this to be at the forefront of winning EU work. Governance and basic services is also high on the EU agenda and again is an area where MM can capitalise. Energy and infrastructure are also becoming increasingly important on the EU agenda, and as mentioned elsewhere, MM needs to create linkages between its transport and power units, with international development divisions capitalising on these opportunities. The EU has also decided that bilateral aid to countries will go to no more than three sectors per country in an attempt to maximise the impact of EU aid by focusing on countries’ weakest sectors. This could again limit MM’s involvement with the EU in certain countries, and the company will have to carefully consider its chances before bidding for EU contracts.

5.4 The Netherlands Ministry of Foreign Affairs and Nuffic29

The Netherlands Ministry of Foreign Affairs30 and Nuffic are the primary donor agencies that operate, coordinate and implement Dutch development aid. The Netherlands Ministry of Foreign Affairs is the primary aid agency of the Netherlands, formulating the country’s development policy and financing projects across a range of sectors. Nuffic manages various programmes, specifically to strengthen the performance of individuals, organisations and institutions in developing countries in order to help them develop their expertise by extending their know-how and skills, with a core focus on higher education. The Netherlands is the world’s sixth largest donor providing around 5% of all DAC members’ total ODA, supplying USD 6.32 billion in net ODA in 2011. The Netherlands is one of only five DAC members to have exceeded the UN target of spending 0.7% of GNI on aid. The Netherlands had previously maintained a rate of 0.8%, but has decided to reduce this to a fixed rate, in line with UN, EU and OECD regulations at 0.7%, in an effort to save €1.9 billion in the wake of the economic recession. The contribution of the Netherlands to technical assistance has been reduced in the last years. In general, developing countries are asked to indicate their preferred form of technical assistance. Having an office in the Netherlands, MM is well placed to win Nuffic contracts.

5.4.1 Current commitments, attitudes and goalsThe Netherlands redefined its approach to development assistance in 2011 to better cope with the economic crisis and to respond better to a rapidly changing developmental context, whilst staying

29 Unfortunately the Netherlands donor agencies are slightly notorious for not being very transparent with their spending and project

plans. This makes it more difficult to accurately gauge the direction of Dutch aid outside an educated guess.30 Referred to as ‘the Netherlands’.

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committed to the MDGs. The focus of Dutch aid has shifted away from social development towards economic sectors, supporting the self-reliance of developing countries and promoting the relationships among development objectives, public goods and Dutch national interests. And as such, the Netherlands has made some bold choices including reducing the number of countries to which it provides bilateral aid to just 15 and reducing its sectoral focus to just four sectors where the Netherlands judges that it can add unique value in an effort to make Dutch aid more efficient and effective. Dutch policy is based upon pursuing the economic interests of the Netherlands, and this policy has been incorporated into Dutch development policy. This policy will be applied across all Dutch development assistance channels. The Dutch primary development target is poverty reduction through the mobilisation of local physical and human resources.

The development policy of the Netherlands aims to increase its effectiveness and efficiency by making clear choices: shifting from social to economic sectors, from aid to investment; emphasising self-reliance rather than creating unwanted dependence; promoting public-private partnerships instead of market distortion; reducing fragmentation: fewer themes and fewer partner countries; creating a better alignment with Dutch expertise and interests; aiming for less dependence on government financing of NGOs active in development co-operation.

As part of the consolidation of its aid programme the Dutch government plans to be more selective when providing development assistance through international organisations such as the WB and UN. However, the government is keen to stress the importance of international organisations for the Netherlands, not only because they carry out Dutch development policy but also because they form the basis of the international legal order. The Netherlands’ contributions strengthen Dutch influence on decision-making in these organisations and on global governance. Owing partly to reductions in the budget for development co-operation, the government has made a critical assessment of the value added by these organisations and has scored their effectiveness and relevance to Dutch foreign policy according to a points system. Their scores will affect the size of the contribution they receive.

The Netherlands intends to revise all of its main programmatic areas in the light of its new policy directions, particularly its focus on global public goods and its objective of making a more concentrated, effective and professional contribution to development. The vast majority of Dutch funding goes through Dutch organisations and is focused on service delivery as opposed to advocacy or activities aimed at holding governments accountable. The Dutch government wants to create increasing opportunities for the Dutch private sector to engage in development co-operation.

5.4.1.1 NufficThe Netherlands Universities Foundation for International Cooperation is a donor agency that operates on behalf of the Netherlands and Dutch Higher Education. It receives most of its funding from the Netherlands’ Ministry of Foreign Affairs and the European Union, however, it is a separate entity from the Ministry of Foreign Affairs. Nuffic primarily concerns itself with capacity building programmes within the education sector, in particular regarding higher education and technical and vocational training. The actual knowledge and skills transfer and capacity building are achieved by providing courses, training and education to individuals, and through specific projects with partner organisations in participating countries. Programmes include the NFP Tailor-Made Training programme (TMT), which specifically aims to improve the overall functioning of organisations by training selected groups of employees, and NICHE, which aims to strengthen institutional capacity in 22 developing countries for institutions and organisations providing post-secondary education and training. These programmes pay special attention to Sub-Saharan Africa, gender and the needs of the labour market.

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5.4.2 ModalitiesThe Netherlands plans to reduce the amount it provides for project aid. Project aid will be granted in cases where organisational and system capacities are not sufficiently present to realise programme aid. Instead the Netherlands plans to use other modalities to transfer its aid including General Budget Support (GBS) and sector support.

GBS is one of the modalities that the Netherlands increasingly wants to use but only grants the funds for under certain conditions. The amount granted for budget support is dependent on the following factors: the public financial gap of the target country, the Netherlands' aid volume as provided in the past , the amount granted by other donors, and the recipient country's economic resources. These four factors decide if funds are allocated to the partner country via GBS, and how much.

The Netherlands also wishes to increase its use of sector approaches and also here applies certain conditions to determine the suitability of this modality. It is defined by a long-term support to a sector policy framework prepared by the recipient country, where two or more donors are providing sector budget support in that framework. The recipient government should favour the sector policy and implementation plan over other modalities, as the Netherlands believes that country ownership needs to be a key factor for the sector approach to work. The Netherlands encourages a combination of sector and general budget support, because this helps to realise the national ownership of the programme.

Co-operation between the government, the private sector and civil society organisations is becoming increasingly important in Dutch development policy. The Netherlands wants to increase the use of PPPs in international development, as it recognises the private sector is becoming an increasingly important partner in global poverty reduction and is boosting economic development. PPPs can ensure that the public and private sector work together to achieve joint development goals and to improve aid effectiveness in innovative ways by combining resources, knowledge and expertise.

The Netherlands is heavily invested in multilateral organisations as a modality to deliver its aid. More than a quarter of Dutch aid is currently delivered via multinational channels in an effort to tackle difficult trans-regional and global issues such as food security, gender equality and population growth. The Netherlands believes that its money is better spent when pooled with other funds, relying on a greater extent of resources and also preventing the money being spent due to the donor’s wishes. One of the most prominent multilateral recipients of Dutch aid is the European Union. However, the Netherlands is planning to become more selective in its choice of multinational donors that it works with. There is no indication that this means that a smaller portion of aid will be delivered to multilateral organisations, only that fewer organisations will be involved.

5.4.3 Target Regions/CountriesThe Netherlands recently reduced the number of countries it provides bilateral aid to from 33 to 15 in an effort to make co-operation more effective. There are 14 target countries of the ‘structural bilateral aid’ group which receive long-term support from the Netherlands: Afghanistan, Bangladesh, Benin, Burundi, Ethiopia, Ghana, Kenya, Mali, Mozambique, the Palestine Territories, Rwanda, South Sudan, Uganda, Yemen. One other country that receives short term support is Indonesia. However, bilateral aid to these partner countries only represents around a quarter of the Netherlands’ total aid budget. The Netherlands plans to double its aid to the 15 partner countries with the help of the funds it is removing from other countries. The government’s rationale is that Dutch bilateral resources are spread too thinly and should concentrate on those countries where the Netherlands can have the most impact on the lives of poor people.

The Netherlands categorises these recipient countries into two groups: those that receive ‘structural bilateral aid’ through comprehensive long- or short-term support, and those that receive ‘theme-based aid’, i.e. they are eligible to receive aid in five categories: environment, human rights, peace keeping, good governance, and private sector development.

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Table 5-5 The Netherlands’s top ten recipients in 2010, OECD, 2011

Dutch aid is heavily focused on Sub-Saharan Africa, with roughly half of all Dutch aid being spent in the region. The Netherlands donated USD 1.2 billion dollars there in 2010 which eclipsed the next largest recipient region – South and Central Asia – which received USD 254 million. Sub-Saharan Africa is the region that is struggling most with achieving the MDGs, as well as being home to some of the world’s poorest and most fragile countries. As such it is the Netherlands’ primary regional target with ten of the Netherlands’ 15 partner countries based in the region.

Similar figures are shown when allocating the income groups that the Netherlands focuses on with LDCs and OLICs combining to account for USD 1.3 billion of Dutch aid. This reflects the Dutch goal of concentrating on poorer countries, and the Netherlands plans to continue to upscale its efforts in the amount of aid delivered to LDCs and OLICs. Dutch aid is also evenly spread out across the countries that the Netherlands donates to with the top five only receiving 13% of aid and the top 20 receiving only 31%. However, unlike the aid of most other IDLAs, the majority of Dutch aid is classed as ‘unspecified’, which makes it difficult to gauge accurate statistics. Part of the reason for this is that a significant amount of Dutch aid is allocated to multilateral causes. The Netherlands was the largest contributor to multilateral aid in terms of percentage of ODA (34%, equating to USD 2.31 billion).

5.4.4 Target SectorsIn 2011, the Netherlands adopted a new development co-operation policy, which shifted Dutch aid away from social sectors towards economic sectors and aims to involve the private sector further, whilst projects remain in-line with Dutch national interest. As such, the Netherlands has decided to focus on four ‘spearhead areas’ in which it feels it can add special value and which are in the greatest need of financial assistance and international backing, including those MDGs that are struggling the most. The Netherlands believes that these are areas where Dutch businesses, civil society organisations and knowledge institutions can add significant value, knowledge, experience and expertise.

The four spearhead areas are: Security and the legal order; Water and the environment; Food security; Sexual and reproductive health.

The Netherlands aims to concentrate on sectors related to these ‘spearhead areas’ such as education, agriculture, water and sanitation, and governance.

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The best way for the Netherlands to develop these focus areas and achieve the MDGs is through economic development. The Netherlands believes that economic growth is at the heart of international development and co-operation, and therefore wants to invest in economic development and incorporate Dutch business and expertise. The Netherlands wants to utilise PPPs, business instruments and economic diplomacy to alleviate poverty, whilst increasing commercial profit. As such a larger proportion of the development budget will be spent on promoting these economic instruments. The Netherlands places extra emphasis on economic areas in which it excels, such as water and food production, with €500 million a year earmarked from the development budget to promote economic co-operation with developing countries. Aid to the health and education sector has declined in recent years and there is a general trend to transfer aid from social sectors towards stimulating economic growth. A stronger private sector can support the sustainability and inclusiveness of economic growth, but it remains an instrument of development co-operation, not a goal. Therefore, the government’s development budget aimed at private sector development in developing countries should primarily support an enabling environment and make sure businesses are acting in a socially responsible way.

The Dutch government actively demonstrated the importance it places on trade as a tool for development with the creation of the post of the Minister for Foreign Trade and Development Cooperation. Future measures will enlarge the scope for small and medium-sized enterprises to invest in developing countries, and the forging of new coalitions between companies, NGOs and individuals, such as the coalition combating HIV/AIDS in Africa. A revolving fund of €750 million financed in the years 2014-2016 from the development co-operation budget also reflects the closer connection between foreign trade and development co-operation. Established in collaboration with the business community, this fund will support investments in developing countries, especially by small and medium-sized enterprises.

5.4.5 Recent DevelopmentsIn July 2012, the Netherlands decided to suspend all aid that had not been committed to Rwanda in the wake of the alleged backing of rebels in the Democratic Republic of Congo. The Netherlands said that it would suspend USD 6.15 million (€5 million) dedicated to the Rwandan judiciary system until it had received reassurances from Kigali that these allegations are false. However, Dutch support to NGOs is to continue as normal.

The conservative Dutch Christian Democratic government and the Freedom Party agreed to slash development aid by €1 billion in 2012 on reducing the 2013 budget deficit to within EU limits. Each year, the Dutch spend €4.6 billion on development aid. The €1 billion cutback amounts to more than 20% of the total budget, reducing the Dutch contribution to less than 0.6% of the country’s gross domestic product. The United Nations norm is 0.7%.

5.4.6 Implications for Mott MacDonaldMott MacDonald works much less with the Dutch government and Nuffic than with the other donors mentioned in this chapter. It is primarily the International Development Division (IDD) which wins work with these agencies. It is likely that due to the constriction of the Dutch aid programme through the downsizing of its sectoral focus and number of partner countries contracts with the Dutch government may become less frequent and less in line with MM’s expertise. A significant problem could be the promotion of private sector development and involvement which would favour Dutch commercial interest, and the risk that this would phase out non-Dutch competition. MM needs to consider whether it wishes to continue to prioritise working with these agencies.

Co-operation between the government, the private sector and civil society organisations is becoming increasingly important in Dutch development policy. The Netherlands wants to increase the use of PPPs in international development, as it recognises that the private sector is becoming an increasingly important partner in global poverty reduction and boosts economic development. Therefore, MM would do well to increase its relationship with the private sector in development, and build its portfolio of working with PPP. PPP seems to be an increasingly common theme, not only with DFID, but with other donor agencies as

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well, as donors struggle to increase their funds. MM also needs to continue to demonstrate its ability to implement SWAps as the Netherlands is increasingly in favour of using this modality over project aid.

MM is well placed to work with the Netherlands and Nuffic in many of its priority countries, as it already has substantial presence in Bangladesh, Mozambique, Rwanda, and South Sudan, and on-going projects in Indonesia, Kenya and Yemen. As such it is already well placed and has in-country expertise and experience for Dutch funded projects. However, MM should seek to advance its presence, expertise and knowledge in Ethiopia, Ghana, and the Palestine Territories. As mentioned, with the reduction of partner countries, those that the Netherlands will continue to work with will see an increase in aid. These countries are also a high priority of other donors, and therefore MM will benefit much from increasing its presence in these new countries.

As the Netherlands has decided to narrow down its assistance to working in four ‘spearhead areas’, it restricts the opportunities for MM. MM is well established, with significant leading experience and expertise in water and environment, and decent experience in security and the legal order, but much less experience with food security and sexual and reproductive health. MM needs to continue to develop its expertise in governance to fit in with security and the legal order, and in agriculture to fit in with food security, as these are important priorities of multiple donors. However, MM should consider how much it wishes to develop its expertise in these specific spearhead areas considering the reduction of the Dutch aid programme, and the wish of the Netherlands to increasingly involve the private sector.

5.5 World BankThe World Bank (WB) is one of the largest multilateral donors in the world. In 2012 it provided USD 52.6 billion in aid through 303 new projects. The WB is currently involved in more than 1800 projects in almost every developing country and sector, meaning it has an extremely broad range of projects. The development and aid portion of the World Bank Group is formed of two sections, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), and is supported by 188 member states. The IBRD aims to reduce poverty in MICs and credit-worthy LICs, whilst the IDA focuses exclusively on the world’s poorest countries.

The WB is different from other donors because, as the name suggests, it behaves more like a bank than most donor agencies. It offers aid through loans, bonds and credits, to a far greater extent than other donors, particularly when working with MICs. The WB argues that through using loans over grants, it will earn enough income to ensure its financial strength and to sustain its development activities.

The IBRD works alongside its member states to achieve equitable and sustainable economic growth in their national economies and to find solutions to pressing regional and global problems, not only in economic development but also in other important areas such as environmental sustainability. The IBRD’s overriding goal, however, is to overcome poverty and improve standards of living. All WB member states are eligible for assistance from the IBRD. New lending commitments by the IBRD were USD 20.6 billion in 2012; this included 93 new projects. However, despite this high number, IBRD aid was down by 54% from 2010 (USD 44.2 billion) and 22% from 2011 (USD 26.7 billion), in the wake of the global economic and financial crisis.

The WB’s fund for the poorest countries is the IDA. Its key aims are to support countries’ efforts to boost economic growth, reduce poverty and improve the living conditions for the world’s poorest countries. Currently 81 countries are eligible for IDA assistance31. IDA commitments amount to USD 14.8 billion in 2012, including USD 12.1 billion in credit and USD 2.2 billion in grants. The IDA is largely financed by contributions from donor governments. Additional financing comes from transfers from IBRD’s net income,

31 Eligibility is defined by a country’s relative poverty, which is defined as GNI per capita below an established threshold and updated

annually. The IDA also supports countries which are above the operational cut-off but lack the credit-worthiness needed to borrow

from IBRD.

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grants from the International Finance Corporation (IFC), and borrowers’ repayments of earlier IDA credits, whilst the IBRD raises most of its funds on the world’s financial markets.

5.5.1 Current Commitments, Attitudes and GoalsThe WB offers support to developing countries through policy advice, research and analysis, and technical assistance. This research and analytical portion underpins its own financing as well as informing developing countries’ own investments. Like the majority of donors the fulfilment of the MDGs is at the core of the WB’s development policy and goals. Six strategic themes encompass its main priorities and goals: The Poorest Countries: The WB aims to combat the hunger and malnutrition which afflict the world’s

poorest countries through agricultural productivity. The WB also supports regional integration, private sector investment and the development of infrastructure to help facilitate business and trade and to bring economic development and stability to poor countries, particularly in Sub-Saharan Africa.

Post-Conflict and Fragile States: There is a correlation between conflict and fragility on the one hand and poverty on the other, with 80% of the 20 poorest countries having suffered a major war in the last 15 years, not only bringing suffering and strife to their own people but also affecting the larger region. Fragile countries emerging from conflict face a 44% chance of relapsing into conflict. Therefore, the WB places priority on providing assistance to conflict affected and fragile states.

Middle Income Countries: Despite the recent economic success of MICs such as China, India and Vietnam, these countries are still home to the majority of the world’s poor people. These countries often have difficulties turning their economic success into development results. MICs often need assistance mobilising their funds into infrastructure and essential services, and improving political policies and institutions. The World Bank Group is working to meet MICs’ specific needs with tailored assistance that draws on an array of competitive financial products and knowledge and learning services. These countries are also increasingly important partners in addressing critical cross-border and global issues, such as clean energy, trade integration, environmental protection, international financial stability and the fight against infectious diseases.

Global Public Goods: Global Public Goods are development aspects that transcend borders such as environmental issues, trade, global finance and global health. In these cases, the actions needed are often more than individual countries can provide on their own. The WB aims to help spur multilateral action and global partnerships with public, private and civil organisations. WB work concentrates on the environment and climate change, controlling communicable diseases, such as HIV/AIDS and malaria, preventing and mitigating crises in international financial systems, and promoting an open, multilateral trade system.

The Arab World: The WB believes that the Arab World has a strong potential for growth but remains poorly integrated into the world economy and is struggling with regard to some key developmental factors. It has the highest unemployment among developing regions, as well as the lowest economic participation by women. The region’s poor and rich countries alike suffer from such problems as water scarcity, lack of economic diversity, weak public accountability and conflict. The World Bank Group, in close co-operation with the League of Arab States, has established the Arab World Initiative (AWI), a partnership to foster effective collaboration in the interests of economic integration and knowledge sharing among the countries of the Arab World. The initiative focuses on three key pillars: human development and improving the quality of education, infrastructure projects, and micro, small and medium enterprise development.

Knowledge and Learning: The WB wants to help developing countries not only through financial assistance but also by sharing knowledge and expertise, and therefore it aims to be the premier research institute with regard to development. The IDA carries out analytical studies to build the knowledge base that allows intelligent design of policies to reduce poverty. The IDA advises governments on ways to broaden the base of economic growth and protect the poor from economic shocks.

The IDA also emphasises broad-based growth across social, economic and political lines, to ensure a basic standard of living for all people and to ensure fulfilment of the MDGs including: sound economic policies, rural development, private business, and sustainable environmental practices;

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investment in people, in education and health, especially in the struggle against HIV/AIDS, malaria, and TB;

expansion of borrower capacity to provide basic services and ensure accountability for public resources;

recovery from civil strife, armed conflict, and natural disasters; promotion of trade and regional integration.

The IDA also plays an important role in coordinating donor assistance to provide relief for poor countries that cannot manage their debt-service burden. The IDA has developed a system for allocating grants based on countries’ risk of debt distress, designed to help countries ensure debt obligations are met (debt sustainability).

5.5.2 ModalitiesThe WB employs a large array of modalities to provide aid to developing countries. Not only does the IDA provide aid in the form of grants, but also both the IDA and IBRD provide aid through interest-free credits and low-interest loans. The IBRD exclusively deals with loans and issues bonds in international capital markets and provides long-term loans to MICs. Loans are negotiated between the Bank and the borrower on the basis of development objective, components, results, performance, and project implementation plan. They are governed by a set of operational policies and approved by the Bank’s Board of Directors, made up of donor and borrower member countries. These support a wide array of investments in such areas as education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. The IDA, which deals with the world’s poorest, most fragile, and least developed countries, operates slightly differently from the IBRD and lends money on concessional terms. This means that IDA credits have a zero or very low interest charge and repayments are stretched over 25 to 40 years, including a 5 to 10 year grace period. The WB’s approach to financing projects varies from country to country based on the ability to pay back, and the effect that debt could have on the recipient’s economy. Recipients with a high risk of debt distress receive 100% of their financial assistance in the form of grants and those with a medium risk of debt distress receive 50% in the form of grants. Other recipients receive IDA credits on regular or blend and hard terms with 40-year and 25-year maturities respectively. However, the IDA present grants to countries at risk of debt distress. This means, however, that project funds are delivered straight to the partner country and are then paid out to the project partners. This method therefore has been notorious for bad payments. The WB often seeks to co-finance its projects with governments, other multilateral institutions, commercial banks, export credit agencies and private sector investors. For example, the WB provides and facilitates financing through trust fund partnerships with bilateral and multilateral donors. It channels a wide range of resources into projects aimed at reducing poverty. These resources not only take the form of loans and credits, but also advisory services and technical and capacity-building assistance.

Within the funding of grants and loans for the recipient countries, there are strategies for the key areas of work which reflect other modalities, the thematic and sector strategies which guide the WB’s work to reduce poverty in specific sectors or aspects of development, and country assistance strategies which identify the key areas in which the WB can best support a country in reducing poverty and achieving sustainable development.

5.5.3 Target Regions/CountriesDue to the large number of recipients of WB funds, it is difficult to target specific countries.

Regionally: Europe and Central Asia (USD 6.2 billion) and Latin America and the Caribbean (USD 6.2 billion) received the largest shares of IBRD’s new lending in 2012, followed by East Asia and the Pacific (USD 5.4 billion), followed by the MENA region (USD 1.4 billion), South Asia (USD 1.2 billion) and Africa (USD 147 million). The reason that these payments seem to go against the development grain is that they are made in loans rather than grants. In other words, a country’s ability to repay the loan is taken into account here, while also more MICs are being focused on the top recipient regions.

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More centred on grants, and focusing on LICs and LDCs, IDA commitments follow a more expected path. Africa was the largest recipient, receiving USD 7.4 billion. This is due to the fact that of the 81 eligible recipient countries of IDA loans and grants, 39 are in Africa. Africa is followed by South Asia (USD 5.3 billion), and then East Asia and the Pacific (USD 1.2 billion). Small commitments were also received by Latin America and the Caribbean and Europe and Central Asia, both receiving USD 40 million and MENA receiving USD 10 million. The largest recipients of IDA funding were India (USD 2.7 billion) and Nigeria (1.3 billion).

Graphic 5-14 IBRD-IDA Lending by Region Fiscal 2012, World Bank, 2012

Table 5-6 Top 10 World Bank Borrowers Fiscal 2012, World Bank, 2012

Overall, Sub-Saharan Africa is the largest region receiving WB aid. Africa received a total of USD 7.5 billion in 2012 and the WB plans to increase that number by 5.2% in 2013 and 5.6% in 2014. The WB has two main themes that govern its policies and programmes in Sub-Saharan Africa: competitiveness and employment, and vulnerability and resilience. The first pillar, competitiveness and employment, focuses on economic development in the region, with part of this focus on improving agriculture in the region. The WB works closely with partner countries and the ‘Comprehensive Africa Agriculture Programme’ in an attempt to increase agricultural productivity, subsequently creating jobs and creating products for trade. In 2012 the WB provided almost USD 1 billion in development financing for agriculture. Infrastructure development is also a key aspect of this pillar, especially transport corridors, to enhance trade facilitation, information and communication technologies, and energy. Infrastructure not only

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facilitates economic growth but also provides greater access to basic services. The second pillar, reducing vulnerability and increasing resilience, primarily concerns the mitigation of natural disasters and economic shocks, but also focuses on strengthening public sector capacity and improving governance.

The Middle East and North Africa is one of the target regions for the WB. In the wake of the Arab Spring in 2011, the WB aims to respond to the region’s calls for better governance, more jobs and better socioeconomic opportunities and more inclusive growth. The WB also feels that it needs to operate slightly differently in this region, focusing on deeper consultations with a wider group of stakeholders, with a particular focus on civil society. In its opinion, consultations in the region are particularly crucial to development to prevent the corruption and cronyism that affected the previous regimes. Economic development outside the oil sector is also critical to the region’s overall development, with a particular focus on job creation for the region’s young. The WB may have donated only USD 1.5 billion to the region in 2012, significantly less than to Africa and South Asia, however, the difference between MENA and Africa and South Asia is that MENA received its aid entirely in grants. The WB also allocated USD 63 million in special financing for the West Bank and Gaza. WB assistance to the region is based upon four pillars: strengthening governance, increasing social and economic inclusion, creating jobs with a focus on youth and women, and accelerating sustainable growth, with a focus on the energy sector. These are underpinned by the crosscutting themes of gender, regional integration and private sector development.

South Asia is another major region for the WB, particularly as regards the IDA, which provided USD 5.3 million of the total USD 6.6 million in 2012. The WB’s priorities in South Asia are to reverse the economic slowdown that has occurred in recent years and to alleviate poverty, as there are 571 million people living in extreme poverty. In the pursuit of alleviating poverty and reversing the region’s economic slowdown, the WB plans to focus on creating more and better jobs, as well as loosen constraints to growth by building skills, improving health and nutrition, promoting regional co-operation and strengthening governance.

Eastern Europe and Central Asia, East Asia and the Pacific, and Latin America and the Caribbean primarily receive aid from the WB, in the form of loans from the IBRD. In Eastern Europe and Central Asia, the WB focused on increasing economic competitiveness, social sector reforms and climate change. East Asia and the Pacific receive aid to assist in the reduction of poverty and disaster relief and mitigation. Latin America and the Caribbean receive aid to help alleviate poverty, create jobs and to increase citizen security.

5.5.4 Target SectorsThe WB supports a wide array of investments in such areas as education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. The IDA-financed operations focus on the primary problems of the Least-Developed Countries and facilitate projects with a focus on primary education, basic health services, clean water and sanitation, environmental safeguards, business climate improvements, infrastructure and institutional reforms. These projects pave the way toward economic growth, job creation, higher incomes and better living conditions.

Graphic 5-15 IBRD-IDA Lending by Sector Fiscal 2012, World Bank, 2012

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Table 5-7 IDA Lending by Sector, World Bank, 2012

The amounts by sector donated by the IBRD in 2012 were USD 5.4 billion (public administration justice and law), followed by USD 3.4 billion (transportation, including infrastructure), USD 2.8 billion (energy and mining), and USD 2.5 billion (health, education and other social services). Again, the seemingly strange prioritisation of sectors is due to the partners that the IBRD works with and the goals they are trying to achieve. The IBRD focuses more on economic development and institutional strengthening in MICs, rather than on basic services in the world’s poorest countries, which is handled more by the IDA.

Infrastructure, which includes energy and mining, transport, water and sanitation, flood protection, and information and communications, was the largest sector focus of IDA funds, and will continue to be in the near future, receiving USD 5.1 billion in

2012. Significant support was also committed to education, health and other social services (USD 3.4 billion), public administration, law and justice (USD 3.3 billion) and agriculture (USD 2 billion). The IDA is the largest source of donor funds for basic social services in these countries. It focuses on strategic areas of engagement where support is urgently needed such as climate, gender, fragile and conflict-affected states, response to natural disasters and the food, financial and other crises. These frontier issues were chosen due to their importance for helping countries achieve the MDGs.

Gender equality and female empowerment are high on the WB’s agenda as a cross-cutting issue. The WB believes that gender equality and the empowerment of women and girls are among the most effective ways to combat poverty, hunger and disease and to stimulate development that is truly sustainable. Gender equality requires the integration of work across multiple sectors and sustained efforts over long periods. The IDA has therefore been working to expand girls’ access to education and to create other opportunities for empowerment. It plays a critical role in investing in women’s health and education and ensuring their equal access to economic opportunities. The IDA believes that progress on key gender indicators, such as girls’ enrolment and completion rates, maternal mortality, labour force participation and asset ownership also depends on investments in water, sanitation, transport, productive assets and access to financial services. Infrastructure, agriculture and private sector development are all essential to expanding women’s economic opportunities.

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Another cross-cutting issue that the WB views as being a core sector is climate change, not only because of its importance towards the fulfilment of MDG 8, but also because of the effects climate change may have on sustainable development. Developing countries are particularly sensitive to climate change, as they are more dependent on agriculture and other climate sensitive natural resources for income and well-being, while they also lack the necessary financial and technical capabilities to manage increasing climate risk.

IDA-eligible countries are subject, and particularly prone, to a variety of crises and emergencies that can undermine their economic and social development efforts. These include economic shocks such as food, fuel and financial crises, as well as natural disasters. IDA-eligible countries have limited capacity to address the impact of such crises given their limited resources, infrastructure gaps, limited economic diversification, environmental vulnerabilities, widespread poverty and often poorly developed formal safety nets. The IDA hopes to link short-term crisis mitigation with long-term development objectives, and will subsequently focus on sectors that aim to mitigate and prevent these risks including economic development, governance, infrastructure, agriculture, and energy.

5.5.5 Recent DevelopmentsWhat the WB terms the ‘infrastructure deficit’, i.e. the lack of all-weather roads and a reliable and safe source of energy for many people in developing countries, particularly rural areas, is a major priority for the WB. To address this infrastructure deficit, it has launched the ‘Transformation through Infrastructure’ strategy, which will govern its engagement in infrastructure through to 2015. It will maintain support to infrastructure to meet basic needs; it will also enhance its focus on transformational projects and mobilise private sector financing. This support will account for around 40% of its overall lending, for example in 2012, the programme included USD 5.2 billion for energy and mining, USD 4.5 billion for transportation, USD 3.9 billion for water, sanitation and food protection, and USD 0.2 billion for information and communications.

Education is another sector that the WB views as a priority area, with focus on achieving MDGs 2 and 3: achieving universal primary education and the promotion of gender equality and the empowerment of women. In 2012, the WB invested over USD 3 billion in education and currently manages an education portfolio of USD 9 billion across 73 countries. As such, it recently released a major new initiative, the ‘Systems Approach for Better Education Results’ (SABER). This programme aims to collect data on the policies and institutions of education systems around the world and strengthens the knowledge foundation for evidenced-based policy making. The key priorities of this initiative and the education goals include helping countries through knowledge-transfer and financing to achieve the MDGs, improve student learning and promote skills development by linking education to labour markets.

5.5.6 Implications for Mott MacDonaldAs the WB is one of the world’s largest donors, it is naturally a primary client for MM, although in recent years the number of WB projects being implemented by MM has been decreasing. The reason for that is that in order to ensure local ownership, the WB provides most of its funds through loans or credits, with the result that project implementation parties are reimbursed directly by the partner country and not the WB itself. This type of funding mechanism can a risky for the project implementation partner because of institutional weaknesses of some partner countries, which can lead to bad payments. MM has had its efforts undermined on a couple of occasions due to a lack of timely payments, as the WB refuses to intervene. This has led to MM seriously considering the worth of bidding for WB projects. However, as mentioned before, the Bank provides many rewarding opportunities for MM and should not be excluded altogether, rather MM should avoid partner country institutions that are notorious for bad payments.

As mentioned above, the WB primarily provides its funds through loans and low-interest credit. However, apart from the problems already mentioned, implementing TA through these modalities is very similar. The IDA branch of the WB does, however, provide funding through grants in which there are strategies for the key areas of work which reflect other modalities, the thematic and sector strategies which guide the WB’s work to reduce poverty in specific sectors or aspects of development, and country assistance strategies

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which identify the key areas in which the WB can best support a country in reducing poverty and achieving sustainable development. Therefore, MM would have to demonstrate its experience in SWAps and in working with GBS to be seriously considered for these.

The WB has a wide range of partner countries that it works with (188 in total), of which 81 qualify for assistance from the IDA. Despite this large number, the WB has a very clear agenda in regard to the regions that it wishes to focus on. One of the key regions for the WB is MENA. ‘The Arab World’ is listed as one of the WB’s six strategic themes. The WB believes that the Arab World has a strong potential for growth but remains poorly integrated into the world economy and is struggling in regard to some key developmental factors. The initiative focuses on three key pillars: human development and improving the quality of education, infrastructure projects, and micro, small and medium enterprise development. WB projects in the region are more likely to be funded by loans instead of grants. This is a region that is seeing increasing interest from not only the WB but other major donors, with increasing funds being promised. Therefore, MM needs to develop its presence in the region. MM has significant experience also in the three key sectors that the WB wishes to develop in this region: education, private sector development, and infrastructure (within the larger Mott MacDonald Group). MM needs to utilise its substantial expertise in these fields to break into the MENA market.

Sub-Saharan Africa is a key region for the IDA as here lie 39 of the 81 IDA partner countries, including six of the top ten WB recipients. In 2012, the extremely large amount of USD 7.5 billion was spent on projects in this region. The WB has two main themes that govern its policies and programmes in Sub-Saharan Africa: competitiveness and employment, and vulnerability and resilience. The first pillar, competitiveness and employment, focuses on economic development in the region, partly through improving agriculture and infrastructure. The second pillar, reducing vulnerability and increasing resilience, primarily concerns the mitigation of natural disasters and economic shocks, but also focuses on strengthening public sector capacity and improving governance. MM needs to further build its portfolio in these sectors to ensure that it can compete for WB tenders would do well to develop its presence in Nigeria, Ethiopia, Kenya, Ghana, Tanzania and Cote d’Ivoire, as these are key countries for the WB, as well as for many other donors.

The WB supports a wide array of investments in such areas as education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. MM is well placed to win many projects within these sectors, however, its needs to further its portfolios in regard to development infrastructure and agriculture as its international development divisions are currently lacking in capacity in these sectors, which are becoming increasingly high on donors’ priority lists, not only on the WB’s. Infrastructure in particular is a sector that MM has the potential to successfully break into to become a major player. By utilising MM knowledge and expertise within other parts of the Group and bringing them to the international development divisions, MM can become well placed to win many large projects, as increasing funding flows into this sector.

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6. Regions

6.1 Sub-Saharan AfricaSub-Saharan Africa is by far the largest recipient of aid. It is at the top of most donors’ priorities and is home to the majority of the world’s least-developed countries, low-income countries, and the countries struggling most to meet the Millennium Development Goals. Poverty and instability are rife in the region and many countries are lagging behind in MDG achievement across all sectors, particularly when compared with other developing regions such as South Asia. The region remains poorly integrated within itself and within the global economy.

Map 6-4 Map of Sub-Saharan Africa, EU, 2012

Sub-Saharan Africa is by far the biggest regional recipient of global ODA receiving 34%, i.e. around USD 45 billion. The amount of ODA is set to continue to rise to combat the poor performance of development and the domestic finance gap in the region, and to reflect the growing consensus that donors need to focus on the poorest and least-developed countries. Africa remains poorly integrated in the global economy, and to boost growth, infrastructure projects and private sector involvement will be encouraged. This will help to reintegrate the region within the global economy and to bring Africa up to par with the rest of the world. Not only is traditional donor involvement increasing in the region, but emerging donors, particularly the BRICS

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countries, are also increasing their involvement and assistance in the region. China in particular has been an increasingly important player in regard to African development, as it has provided substantial foreign assistance, with a key focus on the financing of infrastructure projects.

Graphic 6-16 Net ODA to Africa by donor (constant USD 2009 billion), OECD, 2011

Sub-Saharan Africa seems to continue to be the priority focus of development aid for the future, and will increasingly receive greater financial and technical assistance to combat the wide and significant difficulties facing this region. This in turn presents many opportunities for MM which would do well to further consolidate its position in the region by moving into new countries, along with consolidating its position in existing companies, as there are many markets that MM is yet to utilise and involve itself in. With the increase of aid to the region, failure to act will mean many missed opportunities. It is recommended that MM gives particular attention and investigates further involvement and expansion into Democratic Republic of the Congo, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Rwanda, South Sudan, Tanzania, and Uganda. Due to the wide array of development problems in the region, a wide diversity of sectoral knowledge is needed to combat these problems. MM’s current expertise in sectors such as education, water and sanitation, and economic and private sector development will be a great modality for MM to position itself in new countries. However, to ensure that it remains competitive in the region, it will have to begin to develop its expertise in infrastructure, including power and agriculture, as the consensus is that these sectors are becoming increasingly important to the development of Africa.

6.1.1 The State of Development in the RegionSub-Saharan Africa is the global target area for development assistance. It is one of the world’s poorest regions and is the region that is most off-track to meet the MDGs. The region as a whole is in a poor state of development. The bottom 35 countries of the UN’s Global Human Development Index are all in Sub-Saharan Africa, and even though Sub-Saharan Africa is home to only 12% of the world’s population it houses 1/3 of the world’s poor. It is the region that is struggling most in many significant development sectors. It has the highest number of cases of AIDS/HIV, food insecurity and malnutrition remain a potent issue, it lacks access to basic services, and has slow and underutilised economic growth, as well as many countries that suffer from conflict, instability and insecurity. Africa represents a special challenge to development. Africa today has between 800 and 900 million people. By 2050, its population will approach two billion, representing nearly 20% of the world’s population. Today, Africa has less that 2% of global GDP and the projections for substantial per capita growth, precluding significant interventions, are not promising. Certain countries may reach 3-4% of global GDP and per capita income may rise from USD 600-700 per year to USD 3,000-4,000 per year. This will happen, however, in a changed world: by

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that date, people in China and India are projected to have more than USD 30,000 dollars per capita per year and citizens of many European countries and the United States will have more than USD 80,000.

To reduce the poverty that underlies many of Africa’s problems, economic growth and job creation through private investment need to be key factors. 29% of the Sub-Saharan population live in landlocked countries and are therefore reliant on their neighbours for access into regional and global markets and the growth opportunities that come with this. However, Africa’s fragmented political geography means that many countries have small markets which limit the benefits of competition and make efficient infrastructure provision, trade and regional mobility difficult. The issues deriving from these problems are exacerbated by the high population density of many of these landlocked countries. Sub-Saharan Africa accounts for just 2% of world trade. Costly trade policies, poor power, road, rail and port infrastructure, inefficient border procedures and low labour productivity have discouraged trade, private investment and private sector growth. Trade among African countries remains relatively low and represents just 12% of the continent’s overall imports and exports. Owing to the landlocked and fragmented nature of these countries the costs and benefits of investments to enable access to markets and efficient infrastructure are not evenly distributed between them. Infrastructure therefore needs to be a key sector of focus in the future, to boost trade and regional integration and help to alleviate poverty and create wealth. Africa has to look beyond external finance to meet its development needs. It is understood that improving the investment climate, infrastructure and integration is good for domestic as well as foreign investors. More must be done to deepen the financial markets in Africa.

There is a particular focus on the region’s struggle to fulfil the MDGs. Africa has some of the worst indicators for health, food security and education which are exacerbated where women and girls are concerned. MDG 5, improvement of maternal health, is most off-track in Sub-Saharan Africa. The fulfilment of MDG 6, combating disease, is also off-track in the region, with Sub-Saharan Africa responsible for 88% of all global malaria deaths. 40% of the population in Southern Africa is living with HIV/AIDS. The epidemic disproportionately affects women who on average are twice as likely to become infected as men. Many of the MDGs are unlikely to be met: these include reducing child mortality, improving maternal health, slowing down the loss of biodiversity and achieving full and productive employment. Other targets, such as access to safe drinking water and reducing hunger, will only be partially met if assistance is not increased.

Many countries in Sub-Saharan Africa are also plagued by weak governance and undiversified, poorly managed natural resource economies, when coupled with a high density of small countries. This makes Africa more vulnerable to conflict and to external shocks, such as commodity price volatility and climate variability and change. Climate change in particular is becoming an increasing problem, threatening African development if more frequent floods and droughts reduce agricultural yields and potentially change patterns of disease.

However, the state of development is not all negative in the region: poverty rates are falling, there are less deaths resulting from HIV/AIDS, and six of the world’s ten fastest growing economies of the last ten years were Sub-Saharan African economies. Over the last ten years, the region as a whole has shown strong levels of economic growth. Having weathered the global economic crisis, it is estimated that Sub-Saharan African economies grew by more than 5% in 2011. Projections show that the continent as a whole is expected to grow by 4.5% in 2012 and 4.8% in 2013.

Despite the region being the most off-track with regard to the MDGs, there has been steady improvement in the region. Primary school enrolment rates have increased, literacy rates have increased from 28% in 1970 to almost 60% today, there are more women in parliament and in non-agricultural wage employment and HIV/AIDS prevalence rates have dropped. It has sustained progress towards several MDGs and is on track to achieve the following targets by 2015: universal primary education, gender parity at all levels of education, reduction of HIV/AIDS prevalence among 15-24 year olds, increasing the proportion of people with access to antiretroviral drugs, and enhancing the proportion of women in national parliaments.

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Much of Africa’s success comes from the strengthening of governance and the improvement of macroeconomic conditions. Over the past decade, Sub-Saharan Africa’s improved economic performance has resulted in marginal poverty reduction, with the proportion of people living on less than USD 1.25 a day decreasing from 56.5% in 1990 to 47.5% in 2008. However, for real development and poverty reduction, Sub-Saharan Africa needs to advance and integrate its economies into the global and regional markets by encouraging intraregional and global trade, improving access to these markets, creating jobs through private investment and developing transport infrastructure and power.

6.1.2 The Nature of Aid in the RegionAid is central to African development and many African countries are still heavily aid dependent. Sub-Saharan Africa receives a higher proportion of aid than any other region. It is the region that is most off-track from the MDGs and subsequently is the top priority region for almost all of the major donors and, significantly, for all of the donors that MM frequently works with, such as DFID, EU, Nuffic and the WB.

Of DFID’s 28 priority countries, 18 are based in Sub-Saharan Africa, including six of DFID’s top ten recipients of aid in 2010. Sub-Saharan Africa was the largest regional recipient of UK aid, receiving USD 2.9 billion in 2011; Ethiopia was not only the largest recipient of British aid in the region but also globally received USD 523 billion in 2011. DFID’s top priority in Sub-Saharan Africa is attempting to increase trade within the region and to integrate it further into the global market. To facilitate this, DFID aims to assist in developing the region’s infrastructure and agricultural practices. Alongside this, DFID has set itself regional targets to be achieved by the end of 2015, to help to ensure a minimum state of development in the region: 3 million people benefit directly from improved national and cross-border trade; 300,000 people with improved access to low carbon energy; avert 6,000 maternal deaths; 1 million people reached with emergency food assistance; cut waiting times at nine additional border crossings at least by 30%, boosting trade; invest in infrastructure along regional transport corridors including the upgrade of 1,300km of roads.

T6.1 Sub-Saharan Africa’s Progress towards the MDGs, UN, 2012 Goal 1: The proportion of Sub-Saharan Africans living on less than USD 1.25 a day marginally

decreased from 56.5% in 1990 to 47.5% in 2008. Vulnerable employment accounts for 70% of employment growth.

Goal 2: Net primary enrolment in most African countries shows tremendous gains, with ratios exceeding 90% in several countries. Completion rates, however, have seen little progress and are as low as 33% in some countries.

Goal 3: The ratio of girls to boys enrolled in primary school continues to improve in many African countries. Of 42 countries between 1990/91 and 2009, 29 scored higher than 0.9 (90 girls to 100 boys).

Goal 4: Africa doubled its average rate of reduction in child mortality from 1.2% between 1990 and 2000 to a reduction of 2.4% in 2000-2010.

Goal 5: Many African countries recorded large declines in maternal mortality during 1990-2008 but significant disparities remain on a case-by-case basis.

Goal 6: In Africa, the number of people dying of AIDS-related causes fell from 1.9 million in 2010, down from 2.2 million in the mid-2000s. Annual new HIV infections fell by 21% between 1997 and 2010.

Goal 7: Africa is suffering from environmental degradation and the effects of climate change. At the same time, there have been increased efforts to protect biodiversity. It is unlikely that the target on access to safe drinking water will be met in spite of the progress being made.

Goal 8: Bilateral ODA from DAC countries reached USD 29.3 billion in 2010, a real term increase of 3.6% from the previous year. Net ODA from all donors reached USD 47.9 billion in 2010.

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The EU also views Sub-Saharan Africa as one of its priority regions, with four of the EU’s top ten recipients being based in this region. Sub-Saharan Africa is the key region of the EU’s ACP 32 scope, which aims to provide aid and assistance to the world’s poorest countries, and those countries struggling most in their pursuit of the MDGs. The ACP programme receives the vast majority of the EU’s funds. With USD 30.4 billion donated to these regions between 2008 and 2013, Sub-Saharan Africa was by far the largest recipient of EU funds, receiving USD 4.8 billion in 2011 alone. The EU reaffirmed ACP as its priority focus when it granted The ACP an additional €1 billion as part of the EU’s 2010 MDG initiative, an initiative designed to accelerate the progress of the MDGs in these struggling regions, with the vast majority of the funds going towards Sub-Saharan Africa. This initiative set a precedent for the EU, which outlined in its MFF 2014 – 2020 that it was to focus on targeting its resources where they are most needed and will have the greatest impact. Therefore, it plans to consolidate its support to development to Sub-Saharan Africa, along with the EU’s ‘Neighbourhood’ region, and to allocate more funds to those countries most in need, including fragile states.

The Netherlands recently greatly condensed its aid choosing to focus on only four sectors and 15 partner countries, in the effort to make its aid more effective. Sub-Saharan Africa was by far the most favoured region with this new policy. The vast majority of Dutch aid is concentrated on Sub-Saharan Africa, with around half of all Dutch aid being directed there to tackle the acute poverty in the region and the flagging MDGs. Ten of the 15 Dutch partner countries are based in the region Benin, Burundi, Ethiopia, Ghana, Kenya, Mali, Mozambique, Rwanda, South Sudan, Uganda, and seven of the top ten recipients of Dutch aid are Sub-Saharan Africa states, though Dutch aid is spent relatively evenly. The Netherlands donated USD 1.2 billion in aid in 2010, eclipsing its next biggest regional recipient, South Asia, by around USD 1 billion.

The IDA is the branch of the WB that focuses on the world’s poorest countries and as such provides much of its aid to the many LDCs in Africa. Africa was the largest recipient of IDA assistance in 2012, receiving

32 Africa, the Caribbean and the Pacific States.

T6.2 DFID’s Goals for Development in Sub-Saharan Africa, DFID, 2011DFID aims to:Reduce the costs of trade and production through: trade policy and regulatory reform (including at crucial border crossing points); leveraging investment in regional transport and energy infrastructure; improving agricultural markets, financial services and cross border trade.Strengthen governance, accountability and conflict prevention through: improving election monitoring and feedback of citizens’ views on country governance to their policy

makers across Africa; improving budgetary and financial management; supporting conflict prevention and African Union (AU) peace keeping and stability interventions.Improve health and education services, particularly for girls and women through: improved access to affordable medicines at lower cost through regionally negotiated price

reductions, regional procurement and market development, and regional harmonised drug registration;

scaling up provision of comprehensive services to prevent death and complications through unwanted pregnancies;

improving education.Support adaptation and mitigation of climate change through: developing adaptation responses, particularly through regional cooperation on water and forests; trailing and scaling up low carbon development opportunities for poor communities; supporting African negotiations to get a better deal for the region during global climate talks; improving the evidence for, and understanding of, climate change.

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USD 7.4 billion and again is the largest regional recipient of the donor. The WB plans to increase its substantial investment over the next few years by 5.2% in 2013 and 5.6% in 2014. It has two main themes that govern its policies and programmes in Sub-Saharan Africa: competitiveness and employment, and vulnerability and resilience. The first pillar, competitiveness and employment, focuses on economic development in the region, mostly through improving agriculture. The WB works closely with partner countries and the ‘Comprehensive Africa Agriculture Programme’ in an attempt to increase agricultural productivity, subsequently creating jobs and products for trade. In 2012 the WB provided almost USD 1 billion in development financing for agriculture. Infrastructure development is also a key aspect of this pillar, especially transport corridors, and enhances trade facilitation, information and communication technologies, and energy. Infrastructure not only facilitates economic growth but also provides greater access to basic services. The second pillar, reducing vulnerability and increasing resilience, primarily concerns the mitigation of natural disasters and economic shocks, but also focuses on strengthening public sector capacity and improving governance.

UNDP supports Africa so that it can achieve growth that centres on people by helping countries to strengthen the private sector, expand social protection, create jobs for the poorest and bolster food security for all. UNDP focuses on women’s empowerment not only from a human rights perspective, but also because empowering women is a pathway to achieving the Millennium Development Goals (MDGs).

6.1.3 Opportunities for Mott MacDonaldMM has significant presence in certain countries in the region, primarily South Sudan, Rwanda and Mozambique, and across a number of sectors, including education, water and sanitation, and economic and private sector development. However, MM could do more to exploit the opportunities in the region. As mentioned, Sub-Saharan Africa is the key focus region of the majority of donors, with many donors’ priority countries lying there. It is also the region that receives the highest amount of global aid, not only from traditional bilateral donors, but also from multilateral and new donors, such as China. Attention on, and aid to, this region, are bound to increase, as donors target their aid on fewer countries and focus on those that are least-developed and have low-incomes.

Currently, IDD has on-going projects in only 633 of the 2334 African countries (see Map 6.2 below) that are deemed as ‘priority countries’ or ’key recipients’ by DFID, the EU, the Netherlands and the WB. With the growing consensus emerging within the global development community that donors need to focus on the poorest and least-developed states and to ‘target’ their aid, there will be a substantial increase in the amount of aid that will be donated to the region. Therefore, it is strongly recommended that MM begins to position itself in a greater variety of countries across this region and seriously investigates further involvement in these key countries.

33 Kenya, Mali, Mozambique, Rwanda, South Sudan, Zambia34 Benin, Burkina Faso, Burundi, Cameroon, Côte d’Ivoire, Democratic Republic of the Congo, Ethiopia, Ghana, Kenya, Liberia,

Malawi, Mali, Mozambique, Nigeria, Rwanda, Sierra Leone, Somalia, South Africa, South Sudan, Tanzania, Uganda, Zambia and

Zimbabwe

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Map 6-5 Map Depicting Donors’ ‘Priority Countries’ and Key Recipients in Sub-Saharan Africa

Of the 24 key countries in the above map, it is recommended that MM focuses on trying to enter or to consolidate its presence in the Democratic Republic of the Congo, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Rwanda, South Sudan, Tanzania and Uganda. These are countries that are priority countries or key recipients for more than one of the donors MM primarily works with or countries that receive a substantial amount of aid (Ethiopia, for example, received USD 523 million in 2012 from DFID alone). MM already has significant presence in some of these countries, but needs to continue to consolidate its position. Fortunately, MM is well positioned to move into most of the remaining countries, owing to its strong presence in neighbouring countries and its sub-regional presence in East and Southern Africa. Resources have already been mobilised in an attempt to enter into many of these countries. West Africa would be a much more difficult sub-region to enter into, owing to the very limited IDD experience in the region.

Key sectoral focuses that MM would do well to concentrate on in the region are based around combating Africa’s key development problems, reducing poverty, achieving the MDGs and developing the region’s economy. These are a broad array of issues that reflect the diversity and depth of Africa’s development problems, and obviously vary from country to country, but subsequently can allow MM to enter new countries by playing to its strengths: basic services including education and water and sanitation, wealth creation, private sector development and economic development. However, MM should also develop its capacity in regard to infrastructure, power, and agriculture to ensure that it remains a major player in the region, as these, along with wealth creation and economic development, will become the dominant sectoral focuses in the region to assist Africa in building its own way out of development.

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6.2 South AsiaSouth Asia is likely to be the next core focus region in international development, after Sub-Saharan Africa. Despite the recent economic growth in the region, particularly in India, and countries in the region beginning to graduate from LIC to MICs, high levels of poverty remain by far the primary development problem in the region. Tied into poverty alleviation is the need to maintain the region’s economic development and job and wealth creation is a key part of this. The region’s vulnerability to climate change and natural disasters is also a great concern to the international development community. Equally, gender inequality and social exclusion present huge challenges.

Map 6-6 Map of South Asia

South Asia will continue to remain a global core region in terms of development for the future, and as such will continue to receive large amounts of technical and financial development assistance from global donors. As with Sub-Saharan Africa, MM would do well to seek to advance its position in the region, outside Bangladesh. As population continues to rise in the region and the need for economic development and wealth and job creation increases, the region will draw more aid to address these issues. MM currently has on-going projects in the four key countries in the region: Afghanistan, Bangladesh, India and Pakistan, but has a substantial presence only in Bangladesh. It is recommended that MM seeks to further position itself as experienced development consultants in the other countries to maximise its access to opportunities which are likely to increase in the future. Regarding sector choice, the key needs in the region are economic development, through wealth and job creation, and those sectors that facilitate these (including private sector development, skills development and education) along with environmental projects and climate change mitigation. IDD has this expertise and experience within its current capacity, and should strengthen it further to ensure competitiveness within the region and to allow it to consolidate its position in Afghanistan, India and Pakistan.

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6.2.1 State of Development in the Region40% (600 million) of Asians still live on less than USD 1.25 a day, and 74% (1.1 billion) live on less than USD 2. When this already daunting statistic is coupled with a predicted population boom in the region, including India due to overtake China as the world’s most populous country, South Asia, and indeed India on its own, might be home to more people in poverty than the entirety of Sub-Saharan Africa.

India, Bangladesh and Sri Lanka in particular will require and are likely see significant increases in development assistance to combat poverty. The substantial population means that despite successful economic growth in recent years, hunger is still a major concern for many countries in the region. Given the on-going global economic crisis riding on the back of the food and fuel price shocks, the prospects for poverty reduction have deteriorated significantly in recent years. Income poverty is projected to increase by over 100 million in Asia-Pacific, with South Asia bearing the brunt of this problem. The number of people who suffer from hunger and malnutrition is predicted to increase by at least 50 million in the region, and governments have fewer resources to invest in health, education and social protection, just when people need them the most.

Poverty and overpopulation are having a hugely detrimental effect on development in the region with South Asian states making the least progress on achieving the MDGs of the entire Asia-Pacific. All of the South Asian states, bar Sri Lanka, are at the bottom of the 17 worst performing states in South Asia. The primary goals are poverty reduction, elimination of hunger, completion of basic education, increase in tertiary education and achievement of gender parity. It looks unlikely that these states will meet the MDG targets on reducing hunger and child mortality and on expanding access to safe drinking water and sanitation. However, the majority of the South Asian states are on track to eliminate gender inequality in education and to halt the spread of tuberculosis, or have already achieved these goals.

Real Gross Domestic Product (GDP) has slowed considerably since the beginning of 2012. Regional industrial production, exports and capital flows began to show signs of weakness at the end of the first quarter of 2012, reflecting a slowdown in the recession economies of the region’s primary export markets (Europe and North America), as well as a lack of progress on structural reforms. This has meant that unemployment in the region continues and that the need for wealth and job creation is high on the agenda. For South Asia to maintain its economic development and alleviate poverty, the region will need to create 1 million jobs per month for the next 20 years. There is also a significant concern that increased job insecurity may accentuate the social tensions that exist in parts of the region as well as social exclusion and gender inequality.

The entire region is vulnerable to climate change, being one of the most disaster-prone regions in the world. Over the past 20 years over 750 million people, 50% of the population in Asia, have been affected by at least one natural disaster, with over 230,000 deaths and USD 45 billion in damages. Natural disasters have detrimental social and economic impacts on the region’s people and resources; they add complexity to development, stretch national capacities and resources, and have an accentuated impact on the poor. This issue is likely to become of particular concern as there is evidence that the frequency and severity of natural disasters will increase and will therefore have negative cumulative effects on development goals and poor communities.

6.2.2 The Nature of Aid in the RegionThe common consensus on the primary focus for South Asia is poverty alleviation in order to successfully tackle the large extent of absolute poverty and hunger in the region, as well as the predicted population boom in the near future, and to ensure that this is achieved in a sustainable way. Tied in with poverty alleviation are economic development, and wealth and job creation, as are promoting gender equality and reducing social exclusion. Greater cross-border trade and regional integration will need to increase to help encourage economic growth and create jobs, as well as address energy constraints, and reduce incentives for cross-border conflict. Environmental issues, such as mitigating climate risks and preventing disasters, are also increasingly becoming key priorities, as the frequency and severity of natural disasters increase

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and potentially have a negative effect on development. Donors are seeking to assist with better management of shared eco-systems and will address the critical links between food, water and power generation in the region.

South Asia is a priority region for many of the donors, and is often seen as the next priority region after Sub-Saharan Africa, primarily due to the high levels of absolute poverty in the region. In response to the large and diverse array of development challenges, the region contains some of the major donors’ largest country programmes, including many long-term flagship programmes, and receives a high concentration of funds.

South Asia is another of DFID’s priority regions, where the other four of the top ten recipients35 are situated, and is the second biggest recipient of DFID’s financial aid, receiving USD 1.9 billion in the 2011/2012 financial year. Five of DFID’s priority countries are situated in the region: Afghanistan, Bangladesh, India36, Nepal and Pakistan. DFID’s primary focus in South Asia is on poverty alleviation and on mitigating climate risks, such as floods and tsunamis. However, DFID is involved in many other sectors, such as promoting gender equality, reducing social exclusion and the provision of basic services. DFID hopes to tackle the region’s problems through well-targeted strategic investments, by opening up economic growth and trade and by attracting larger investments from the private sector. DFID’s priority focuses in the region concern MDG1: Hunger and Poverty Alleviation and MDG5: Maternal Health, as these are some of the biggest issues and most off track MDGs in the region. DFID’s regional goals for Asia by 2015 are: to prevent 7,400 maternal deaths; develop eight national programmes which integrate a multi-sectoral approach to food security and

nutrition, and reduce malnutrition; prevent the trafficking of 60,000 women and girls into garment and domestic work within Asia, and to

the Gulf States and the Middle East; help 500 million people benefit from better resource management and reduce climate change

vulnerability in regional river basins; enable 40% time and cost savings through improvements at six key regional border crossings.

The Netherlands also views South Asia as a priority region with two of its partner countries lying there, Afghanistan and Bangladesh. It is the second largest recipient of Dutch aid: South and Central Asia received USD 254 million in 2011. This reflects the Netherlands’ goal of concentrating more on the world’s poorest and most poverty stricken countries and is focused on the four ‘spearhead’ sectors of security and the legal order, water, food security, and sexual and reproductive health and rights. Unlike most other IDLAs, the majority of Dutch aid is classed as unspecified, which makes it difficult to gauge more accurate statistics.

South Asia is another core region for the WB, particularly with regard to the IDA, which provided USD 5.3 billion of the total USD 6.6 billion provided in 2012. The WB’s priorities in South Asia are to reverse the economic slowdown that has occurred in recent years, and poverty alleviation as 571 million people are living in extreme poverty. In the pursuit of alleviating poverty and reversing the region’s economic slowdown, the WB plans to focus on creating more and better jobs, as well as loosening constraints to growth by building skills, improving health and nutrition, promoting regional co-operation, and strengthening governance, with a strong focus on improving the lives of women and girls.

Graphic 6-17 IBRD and IDA Sectoral Lending in South Asia, World Bank, 2012

35 India, Afghanistan, Pakistan and Bangladesh36 The UK will stop providing aid to India by 2015

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The EU is less concentrated on South Asia than other donors preferring to concentrate on ACP states and their neighbourhood regions first. In line with the EU’s upcoming plans to consolidate the countries it donates to, this could mean a reduction in the amount of aid to South Asia. But currently the EU provides aid to all South Asian countries. Its concentration in the region is preventing natural disasters and climate change mitigation, dealing with internal conflict, regional integration, and strengthening civil society, including preventing human rights abuses.

6.2.3 Opportunities for Mott MacDonaldAs mentioned, after Sub-Saharan Africa, South Asia is the next largest recipient of global development aid, due to the high levels of absolute poverty, despite successful economic growth within the region. Like Sub-Saharan Africa, the amount of development assistance to the region is likely to increase in future to coincide with donors plans, to focus on fewer countries and those countries most in need, and as such it is well worth MM advancing its position in the region. South Asia’s difficulties with poverty are currently only set to increase with an anticipated population boom in the region over the next few years. The primary focus in South Asia is on poverty alleviation, economic development, including wealth and job creation, and mitigating climate risks, such as floods and tsunamis, promoting gender equality and reducing social exclusion. However, there is involvement in many other sectors, including water, agriculture, and the basic services.

As of early 2013, IDD had on-going projects in Afghanistan, Bangladesh, India, and Pakistan. However, the only country that IDD could claim to have a significant regional presence in is Bangladesh, with large projects in a number of sectors including education, water and sanitation, and economic and rural development, and to some extent Pakistan, with the presence of MMP, and a number of recently closed projects. Aside from Bangladesh, all of IDD’s on-going other projects in the region are in the sectors of water and environmental sustainability.

MM may want to develop its presence in Afghanistan, Bangladesh, India, and Pakistan, These are the ‘priority countries’ and ‘key recipients’ of the region where more than one of the donors MM primarily works with are active or which receive a substantial amount of aid. Although South Asia is a relatively small region in terms of the number of countries, these four are definitely worth focusing on more than Nepal and Sri Lanka, due to the larger amounts of aid flowing into these four countries, based upon their greater

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populations and development needs. As mentioned, MM does have experience and some presence in these countries, and this should be built upon to further consolidate its position in these countries, along with greater utilisation and collaboration with MM offices in India and Pakistan. IDD has already begun to try to develop its presence in Pakistan.

As with Sub-Saharan Africa, there is a wide array of sectors that MM can utilise its expertise in to consolidate its position in the region, due to the region’s need to combat poverty and hunger, create wealth and jobs, and mitigate climate change risks. Development in South Asia is focused around poverty alleviation, economic development, and climate change and the environment, and therefore sectors that support these objectives will be the best to focus on. It is recommended that MM seeks to utilise its experience by applying it to the sectors of economic development, wealth creation, private sector development, skills development, basic services, climate change mitigation, food security, environment, and water, with gender as a cross-cutting goal.

6.3 Middle East and North AfricaThe Middle East and North Africa are quickly gaining more attention in the development arena, after the turbulent Arab Spring in 2011. Donors are now focusing on improving governance, security and stability in the region through strengthening civil society and governance institutions and wealth and job creation. Funds are likely to increase over the coming years.

Map 6-7 Map of Middle East and North Africa, 2010

6.3.1 The State of Development in the RegionThroughout the Middle East and North Africa there were dramatic political changes that occurred in 2011, including revolutions, popular protests and elections, causing violent conflicts in some countries and significant reforms in others. The true fallout of these changes is yet to be determined and the fluctuations and effects are still occurring and continuing now. The foundations of the Arab Spring shared a common thread, with citizens demanding good governance, inclusive growth, and greater job and socioeconomic opportunities. These stimulating movements have seen a new impetus from many donors to their involvement in the region and as such the region will begin to see an increase in the amount of aid it receives particularly from the EU and the WB.

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The main development goals of the region steer away slightly from the MDGs and concentrate on governance and security, strengthening civil society, economic growth, wealth and job creation, gender equality, and creating socioeconomic opportunities for women and youth. Many MENA countries have weak social, political and administrative accountability mechanisms and politically-oriented socioeconomic planning models and these have resulted in the neglect of large portions of the population. These nations face the challenge of forming new, accountable governments that reflect popular aspirations. Gender inequality remains prevalent in the region, and is a serious concern for many donors. Statistics show that only 25% of Arab women participate in the labour force, half the average for developing nations, and because of the androcentric culture in many Arab societies, many women experience limited roles outside the home, meaning that women are under-represented in civil society and governments. Human and income poverty reflect the convergence of social, economic and political exclusion. While 50% of the Arab population is rural, agriculture, the primary occupation in rural settings, accounts for only 15% of the Arab GDP. This means that high unemployment rates prevail, economic and job opportunities are scarce and economic growth is slow.

The huge disparity in economic wealth and stability and security between the various countries in the region means that MDG achievement varies greatly from state to state, for example many of the oil-producing Gulf states are key donors themselves, whereas fragile and conflict affected states, such as Iraq, are struggling to achieve these goals. The region as a whole has made significant progress towards achieving MDGs in health and education, and poverty alleviation on the whole is being achieved, but there are still struggles with reducing income poverty in rural areas and with labour markets and unemployment. A key concern for many donors is that women’s economic and political participation remains very limited in the Arab region. Additionally, women’ representation in national parliaments still remains low, despite the fact that some governments have adopted some temporary measures, such as the quota system, to allow more space for women’s political participation.

6.3.2 The Nature of Aid in the RegionIn the wake of the Arab Spring there is a renewed impetus towards development assistance in the region, and aid will focus on the underlying issues and causes of the uprising with sector focuses on good governance, strengthening civil society, economic growth, job and wealth creation, particularly for women and youth, gender equality, regional integration, as well as achieving the MDGs.

The EU is one of the primary donors involved in the MENA region. The EU is very much concerned with developing its own region and its neighbour states to ensure economic and political stability and development for the Eurozone. A significant proportion of its aid is donated to development programmes in the MENA region through the European Neighbourhood Policy.

The Neighbourhood Policy is one of the EU’s key development priorities. The policy focuses not only on MENA but also on Eastern Europe. Countries covered by the policy received USD2.1 billion in 2011. The policy is designed to improve prosperity, stability and security between the EU and its neighbouring states. It includes 10 countries based in the MENA region: Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Occupied Palestine Territories, Syria, and Tunisia. Through the ENP the EU hopes to build relationships and implement development projects on the basis of shared values such as human rights, democracy and market economic values. Depending on the extent to which these values are shared, the ENP goes beyond existing relationships to offer political association and capacity development, deeper economic integration and wealth creation and increased regional mobility and integration. Therefore, the EU focuses on the sectors of governance and security, economic development, wealth creation, private sector development, social and economic inclusion, and civil society strengthening.

MENA also is one of the target regions for the WB. In the wake of the Arab Spring in 2011, the Bank aims to respond to the region’s calls for better governance, more jobs, better socioeconomic opportunities and more inclusive growth. Therefore, the Bank has made the Arab World one of its six strategic themes. The Bank believes that the Arab World has a strong potential for growth, but remains poorly integrated into the

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world economy and is struggling with regard to some key developmental factors. It has the highest unemployment rate among developing regions, as well as the lowest economic participation by women. The region’s poor and rich countries alike suffer from such problems as water scarcity, lack of economic diversity, weak public accountability, and conflict.

The WB believes that it needs to operate slightly differently in this region, focusing on deeper consultations with a wider group of stakeholders and with a particular focus on civil society. Its opinion is that consultations in the region are particularly crucial to development to prevent the corruption and cronyism that affected the previous regimes. Economic development outside the oil sector is also critical to the region’s overall development, with a particular focus on job creation for the region’s young. The WB may have donated only USD 1.5 billion to the region in 2012, significantly less than to Africa and South Asia, however, the difference between MENA and Africa and South Asia, is that MENA received its aid entirely in grants. The WB aims to create jobs, strengthen governance, increase social and economic inclusion, and accelerate economic growth.

In close co-operation with the Arab League of States, the World Bank Group has established the Arab World Initiative (AWI), a partnership to foster effective collaboration in the interests of economic integration and knowledge sharing among the countries of MENA. The initiative focuses on three pillars: human development and improving the quality of education, infrastructure, and micro, small and medium enterprise development.

Dutch and British aid is focused on two countries: the Occupied Palestine Territories and Yemen, and on state building, wealth creation and economic development, and gender.

6.3.3 Opportunities for Mott MacDonaldThe MENA region is quickly evolving into a key region in global development. After the turbulent Arab Spring in 2011, donors, particularly the EU and the WB, were quickly beginning to invest more and more in projects in the region, focusing on improving governance, security and stability through strengthening civil society and governance institutions and wealth and job creation, in response to citizens’ cries.

MM has very little international development presence in the region, with only a couple of water projects in Algeria, private sector development projects in Turkey, and health and education projects in Yemen. MM needs to further increase its presence in Morocco, Occupied Palestine Territories, Turkey, and Yemen. These are considered priority countries by a number of donors and as such receive a high amount of development assistance. MM would do well to give particular focus to establishing itself in the Palestine Territories, which is viewed as a priority country for all four of MM’s primary clients. Not only is it the top recipient of EU funds since 2008, receiving almost USD 0.5 billion a year, but the WB also has allocated USD 63 billion in special financing to Palestine. As mentioned, MM currently has limited presence in the region, but IDD has already begun to further its presence by bidding, or preparing to bid, for further projects in Algeria, Turkey, Yemen and Libya.

The main development goals of the region steer away slightly from the MDGs and concentrate on governance and security, strengthening civil society, economic growth, wealth and job creation, gender equality, and creating socioeconomic opportunities for women and youth. Therefore, MM would do well to seek to invest in sectors that directly benefit these goals, such as private sector development, skills development, governance, and gender, where it already has sufficient experience.

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6.4 Other Regions

6.4.1 South East AsiaSouth East Asia has begun to see a reduction in the amount of aid due to the graduation of many of its countries, such as Thailand, Vietnam and Indonesia, from LICs to MICs. South East Asia has seen positives in the continuing increase of economic growth at 4.3% in 2011, and a continuing fall in poverty with a reduction of people living on less than USD 2 a day around 24 million. The fact that many donors are restructuring their aid budgets to involve a reduction of bilateral aid commitments, along with a growing international consensus to focus on the world’s poorest states, means that many South East Asian states will see a reduction in bilateral aid.

South East Asia has demonstrated good MDG performance with significant gains on reducing gender disparities in primary, secondary and tertiary education enrolment, preventing rise in HIV prevalence, reducing the spread of tuberculosis, halving the amount of people without access to safe drinking water, and reducing the consumption of ozone-depleting substances.

The primary goal of the majority of donors in South East Asia is climate change mitigation and natural disaster prevention. Recent natural disasters such as floods, tsunamis and typhoons in countries including Thailand and the Philippines, have highlighted the importance of disaster risk management, and therefore many donors will continue to include the South East Asia region along with individual countries in their environmental development plans, and in sectors that help to protect developing states from the negative impacts the natural disasters can have on development.

Other priorities include: greater intra-regional trade; continuing poverty alleviation; cross-border natural resource management, and managing of eco-systems; gender; basic services, hunger, and energy; maternal and reproductive health; Combating human trafficking.

DFID has decided to reduce its bilateral aid to the region to Myanmar only, though the rest of the region may factor into climate change and environment initiatives. In Myanmar, DFID plans to focus on improved peace and security, government transparency and accountability, access to basic services and tackling disease. Average spending to Myanmar is around GBP 46 million a year and is supplied through the UN to local NGOs and not through the Myanmar government.

The EU currently provides aid to all of the countries in South East Asia, with Indonesia being the greatest recipient, receiving around EUR 250 million a year. The EU’s primary goal in the region is the prevention of natural disasters, climate change mitigation, strengthening civil society, wealth creation and poverty alleviation, and reducing vulnerability of citizens and human rights abuses. However, the region could see a reduction in aid as the EU is likely to constrict the amount of countries it donates to in the near future.

The Netherlands recently reduced the number of countries it donates bilateral aid to to just 15. The only country in South East Asia that will continue to receive aid is Indonesia, and this will only be on a short

Map 6-8 Map of South East Asia

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term basis, likely to end in 201537. Indonesia is the second largest bilateral recipient of Dutch aid receiving around USD 125 million in 2011. Dutch aid will focus on a wide berth of sectors including economic development, water-related infrastructure, education, reforestation, trade, social development and institutional development.

The WB provided USD 6.6 billion to East Asia and the Pacific, which includes South East Asia. The majority of this was provided through IBRD loans, and the IDA provided USD 1.2 billion. In 2012 the WB began engagement with Myanmar, with the aim of supporting reforms that will benefit all the people of Myanmar, particularly the poor and vulnerable. This now means that all South East Asian states receive aid from the WB. The leading sectors were public administration, law and justice, water and sanitation, food protection, and transportation. The Bank’s regional strategy continues to focus on climate change and disaster risk management, poverty reduction, urbanisation and infrastructure, and improved governance.

6.4.2 Eastern EuropeEastern Europe seems to be another region that will see reduced aid as donors begin to focus on the world’s poorest and least developed countries. It has seen decent economic growth in recent years at around 5-4%, as well as a reduction in poverty and in poor access to basic services. The main issues that plague the region are its high emission of greenhouse gases and social exclusion. With almost a third of people excluded from society, it is the region suffering from the world’s highest rise in HIV cases.

Therefore, the main goals in the region are to continue the economic growth and develop the competiveness of the region through infrastructure development, job creation and the development of a greater skilled labour force, and investment climate reform. The development of governance is also a key priority for the region, not only to facilitate economic development but also to promote human rights and social empowerment, including the rights and roles of women, as well as making governments more responsive to their citizens. Social sector reforms are needed to foster the inclusion of marginalised people into political, social and economic life, and to ensure equal rights. Health sector reforms and assistance are needed to combat the alarming increase in the rise of HIV infections. The final priority in the region is mitigating and adapting to climate change, reducing the region’s high carbon footprint, and promoting sustainable energy.

The donor that provides the largest amount of aid to Eastern Europe is the EU. Like the MENA region, Eastern Europe falls under the European Neighbourhood Policy, a policy designed to improve prosperity, stability and security between the EU and its neighbouring states, so both can benefit from increased economic and political stability and growth. The programme includes three Eastern European states Belarus, Moldova, and Ukraine. Through the ENP the EU hopes to build relationships and implement development projects on the basis of common values such as human rights, democracy and market economic values. Project focuses include economic development, strengthening governance and security, and social inclusion.

The WB also provides aid to Eastern Europe as part of its Eastern Europe and Central Asia development programme, and lent USD 6.6 billion to the programme in 2012. The WB’s regional strategy is based upon three pillars: deepening reforms for improved competitiveness, supporting social sector reforms for inclusive growth, and helping countries take action to improve energy efficiency and address climate change for sustainable growth.

37 The Netherlands originally planned to end aid to Indonesia by 2012, but opted to continue the programme for another three years.

Map 6-9 Map of Eastern Europe

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DFID and the Netherlands do not provide aid to any countries in Eastern Europe.

6.4.3 Central AsiaCentral Asia is a further region that will see reduced aid in the near future due to donors’ priorities shifting towards focusing their aid on fewer countries. The region has seen decent economic growth in recent years, achieving 3.4% growth in 2012. However, growth is slowing in the region as a result of the sovereign debt crisis, reducing cross-border financial flows, trade and workers’ remittances. The region suffers largely from the same problems as Eastern Europe. High numbers of people are excluded from society, including women, an extremely high increase in the numbers of HIV infections, persistence of poverty, and a high emission of greenhouse gases. Many countries also are politically and economically fragile. As such Central Asia is coupled with Eastern Europe in many donors’ development plans.

As the problems of Central Asia are similar to those of Eastern Europe, so are the priorities to reform the social sector to ensure the accountability of governments and involvement of citizens in the political process; the promotion of human rights; the inclusion of marginalised society into social, economic and political life, including women; the reduction of poverty; combating the increase of HIV infections; encouraging sustainable energy; reducing the high carbon emissions of the region and mitigating and adapting to climate change. The reversal of the economic slowdown is also a high priority through the development of the competiveness of the region, infrastructure development, job creation and the development of a greater skilled labour force, and investment climate reform.

DFID provides aid to two of the poorest countries in the region: Tajikistan and Kyrgyzstan. DFID projects in these countries focus on improving political, social and economic stability. Tajikistan in particular has been struggling to achieve all MDGs, and it is highly unlikely these will be achieved. Kyrgyzstan has done better but social violence in recent years has stalled progress. DFID projects focus primarily on economic development through private sector development, particularly SME promotion, and improving regional economic migration, as well as on MDG development, particularly in the maternal and child health, and education sectors.

The EU views Central Asia as part of the Eastern Europe region and thus includes it within its ENP, a policy designed to improve prosperity, stability and security between the EU and its neighbouring states, so both can benefit from increased economic and political stability and growth. ENP includes three Central Asian states: Armenia, Azerbaijan, and Georgia. Through the ENP the EU hopes to build relationships and implement development projects on the basis of common values such as human rights, democracy and market economic values. Project focuses include economic development, strengthening governance and security, and social inclusion.

The WB also provides aid to Central Asia as part of its Eastern Europe and Central Asia development programme, lending USD 6.6 billion in 2012. Its regional strategy is based upon three pillars: deepening reforms for improved competitiveness, supporting social sector reforms for inclusive growth, and helping countries take action to improve energy efficiency and address climate change for sustainable growth.

The Netherlands has no aid relations with Central Asia.

Map 6-10 Map of Central Asia

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6.4.4 Latin America and the CaribbeanLatin America and the Caribbean (LAC) has been one of the most successful regions in terms of development since the onset of the MDGs, and as such is likely to see a reduction in the amount of aid it receives38. In particular Latin America has made great strides in development and the MDGs and is now firmly in pursuit of furthering economic growth and integrating into global markets. The Caribbean has also made great progress but some countries still suffer from the problems that plague many Small Island Developing States. The region has made important gains in democratic government which is the most proportionally representative in terms of gender and economic growth. On the whole, the region has been highly successful, achieving an average of between 4% and 5% economic growth in 2012, and all Caribbean countries (apart from Haiti) have reached MIC status. This economic growth has pulled over 73 million out of poverty since the on-set of the MDGs, and has contributed to significant progress in the consolidation of democracy, and increasing access to health, education and other basic services.

Despite this significant progress, there are still many issues that plague the region. There continues to be a large disparity in the income wealth with 10% of the population controlling 48% of the wealth. This economic inequality is threatening the social and political stability in the region. HIV is also a rising problem in the region with around 1.7 million infected. After South Asia the region is the second most prone to environmental hazards and disasters, on top of this there is a real risk that climate change could increase the impact that these disasters have on the region’s poor. Finally LAC states are more affected than any other region by the violence and instability resulting from the illicit trafficking of arms and drugs.

Projects and programmes in this region therefore aim to focus on strengthening democracy and its institutions, consolidating the rule of law, promotion of greater participation of members of society, promotion of sustainable development and energy, reduction in greenhouse emissions, mitigation of, and adaptation to, climate change, as well as natural disaster preparedness and prevention, thereby ensuring the continuation of economic growth and wealth creation, assisting in preventing armed violence, and in increasing security.

DFID has decided to withdraw all bilateral aid to the region39, however, DFID continues to provide aid to the Caribbean through its Caribbean regional programme. This programme is designed to combat issues that threaten development across the Caribbean including economic shocks, high levels of violent and organised crime, natural disasters and climate change, and gender equality and empowerment. The programme is intended to reduce the region’s vulnerability to these problems.

The EU provides aid to both Latin America and the Caribbean, but the EU’s up-coming MFF 2014-2020, is likely to involve a reduction in the number of countries the EU provides aid to, and the largely successful Latin American countries may see reduced aid, or be omitted from EU bilateral assistance. Currently the EU’s priorities in Latin America are: the fight against poverty and social inequality; the consolidation of good governance and the promotion of peace; economic co-operation, trade development, and support for regional integration.

38 Latin America more so than the Caribbean.39 Aside from continuing to provide aid to the British Overseas Territory; Montserrat.

Map 6-11 Map of Latin America and the Caribbean

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The Caribbean states, however, form part of the EU’s core regional focus: the ACP states. The ACP strategy promotes a strong partnership between the European Union and the Caribbean on development, poverty, democracy, human rights and global threats to peace, security and stability. The Commission wishes to shape a political partnership based on shared values to take advantage of the Caribbean region’s economic and environmental opportunities and promote social cohesion. The overarching objective of the EU’s development strategy is to help all the countries in the Caribbean region achieve their long-term development goals in a self-sustaining manner and join the ranks of the developed states by 2020. The EU is proposing action on three main fronts: shaping a political partnership based on shared values, addressing economic and environmental vulnerabilities and promoting social cohesion, and combating poverty.

The WB has fiscal relations with all countries in the region providing USD 6.6 billion in 2012, however, the vast majority of this was provided in IBRD loans, with the entire region receiving only USD 220 million in grants. Public administration, law and justice, transportation and education were the priority sectors in terms of money received in 2012. The WB’s development agenda in the region has a strong focus on economic development, creating sustainable and socially inclusive economic growth, increasing economic productivity, reducing dependence on low value-added commodity, addressing production capacity constraints, modernising infrastructure, and boosting innovation. It also focuses strongly on good governance and improving the effectiveness of the state, and improving citizen security.

The Netherlands do not provide bilateral aid to the LAC region.

6.4.5 PacificThe Pacific region receives a small percentage of global aid. The amount of aid provided to the region does not look like it will see a drastic change in the near future. The Pacific has had mixed success since the onset of the MDGs. Pacific Island countries have achieved real progress. Life expectancy has increased, infant mortality rates have declined, and fewer people are struck with infectious disease. Due to its small size the region is often coupled with East Asia in various donor and organisation development plans. However, as the entire region consists of Small Island Developing States, its small size, limited natural resources, narrowly based economies, large distances to major markets, and vulnerability to exogenous shocks, have been affecting growth and have often led to a high degree of economic volatility. This means that they have very unique and specific development issues compared to the East Asia region. The major problems that are affecting many of these Small Island Developing States are poverty, economic underdevelopment, and climate change and natural disasters. Combating these problems is made more difficult by the scarcity of the populations across large remote areas.

Map 6-12 Map of the Pacific

Sustained development progress will require greater economic integration and development, more equitable natural resource agreements, and more open labour markets in metropolitan neighbours. Adaptation to climate change will also be vital for the longer term future of the Pacific Islands.

The Pacific forms part of the EU’s core regional focus: the ACP states. The ACP strategy promotes a strong partnership between the European Union and the Pacific on development, poverty, democracy,

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human rights and global threats to peace, security and stability. The EU’s strategy towards development in the Pacific is governed along three points: stronger political relations on matters of common interest such as global political security, trade,

economic and social development and the environment; more focused development action, with greater emphasis on regional co-operation to build up critical

mass, enhance regional governance and facilitate mutual enrichment; more efficient aid delivery, including greater use of direct budget support and closer coordination with

other partners, in particular Australia and New Zealand.

In this strategy, the EU concentrates on sound management and protection of the environment, which is essential to the prosperity of the Pacific region, and takes into account its specific character. Some of the islands are small, remote and vulnerable to natural disasters. They also face the challenges of state fragility and weak governance. Moreover, their political and economic importance has increased owing to a growing demand for their substantial natural resources (fish, timber, minerals, oil, and gas).

The WB has been scaling up its assistance in the Pacific Islands, moving from a regional approach to individual country strategies to better acknowledge country-specific challenges and priorities. In recent years, it has developed specific country strategies for Kiribati, Samoa, Tonga and Tuvalu, with other Pacific Island countries to follow. The Bank Group’s engagement with the Pacific Island countries reflects the fact that their development trajectories have been influenced by their economic geography, with unique challenges arising from remoteness. As of July 2012, Bank cumulative lending to the Pacific Island countries was USD 109.6 million for 28 active projects in the areas of aviation integration, connectivity and security, rural development, economic development and job creation, sustainable energy and natural resource management, and climate change mitigation.

DFID and the Netherlands have no bilateral aid relations with Pacific Island states.

6.4.6 Opportunities for Mott MacDonaldAs demonstrated, these regions are beginning to see a decrease in aid as donors increasingly face pressures to cut their aid and focus on those areas where it will have the greatest impact and which require it most, but also because many of these regions, such as South East Asia and South America, have been largely successful since the onset of the MDGs. Many of these regions are seeing increasing economic growth, a reduction in poverty, and decent progress towards achieving the MDGs. Most of them have a few specific issues that need to be tackled rather than a multitude of interlinking problems such as those that plague Sub-Saharan Africa and South Asia. However, the two most consistent issues that affect nearly all regions include environment and climate change mitigation, and the rise in HIV infections.

Therefore, it is recommended that MM does not focus too many resources on these regions, and if it wishes to aim for projects, it needs to be very selective. Aside from focusing on environmental protection, climate change mitigation, and HIV prevention and reduction, MM needs to closely consider the strategic advantage of bidding for projects in these regions, particularly if they shy away from the major aims of each region. With aid quickly shifting to be concentrated on fewer countries in fewer regions MM should carefully consider its long-term goals before committing resources to developing presence in these regions.

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http://documents.worldbank.org/curated/en/2011/11/15483321/tuvalu-country-assistance-strategy-period-fy2012-2015

http://documents.worldbank.org/curated/en/2010/09/12810596/tonga-country-assistance-strategy-period-fy2011-2014

http://documents.worldbank.org/curated/en/2012/03/15908648/samoa-country-partnership-strategy-period-fy2012-fy2016

http://documents.worldbank.org/curated/en/2011/01/13743318/kiribati-country-assistance-strategy-period-fy2011-2014


7. Sectors

Over recent years the majority of ODA spent on various sectors has risen along with the increase of ODA. ODA spending within each sector is also rising. However, since 2009 there have seemed to be some changes in sector trends, whilst with pressures to increase aid, no sector seems to become completely out of fashion. Governance and water and sanitation have seen dips, whilst infrastructure and environment saw sharp increases. With the deadline for the MDGs fast approaching, the majority of donors are shifting their focus to the world’s poorest countries and projects that will have the greatest impact on poverty alleviation and achieving the MDGs. Owing to the restrictions on many donors’ aid budgets caused by the recent economic and financial crisis and the subsequent recession, many donors are seeking to prioritise sectors that have the greatest effect on economic development and wealth creation in an attempt to reduce developing countries’ need for international assistance, and allow them to build their own way out of poverty. Donors are also looking to invest more in sectors that have the opportunity to have greatest ‘multiplier’ and ‘run-off ‘effects, whereby the project pursues more than one MDG and causes multiple direct and indirect benefits.

The UN believes that partner country policy commitments determine the success of development interventions. Locally developed strategies, based on national consultation and participation through representative political structures, accountable and capacitated institutions and adequately incentivised public servants are key to effective implementation of the MDG strategies and policies. During conflict and fragility, non-state actors are better placed to provide social services. Building institutional capacities and restoring core government functions are needed in post-conflict situations. Rapid improvements in development can be made when supply-side investments can be backed by solid demand-side policies. This means that institutional strengthening along with capacity building contracts is needed to achieve this goal. This will also lead to increasingly effective and efficient development as demand-side policies become more successful.

Graphic 7-18 Gross ODA by Sector 2002-2010, OECD, 2011 (Source: Development Initiatives based on OECD DAC CRS data)

The UN firmly believes that the MDGs continue to provide the opportunity for the global community to reduce poverty in its many forms. However, it recognises the recent issues that have compromised the

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pursuit and realisation of these goals. In light of this the UN set out its MDG action agenda 2010 – 2015. This agenda set out a list of eight complementary strategies and policies for MDG acceleration:1 Support country-led strategies and policies for MDG acceleration. The UN calls for country led

development and effective governance. MDG success is down to the selection and implementation of in-country policies and in-country commitments to goals and targets which should be developed based on broad national consensus. The importance of coordination between line ministries and planning and implementing agencies of different levels (national and sub-national) must be stressed.

2 Foster inclusive and pro-poor economic growth. Rapid poverty and hunger reduction are a result of high per capita economic growth driven by agricultural productivity, employment intensity and equitable distribution of income, assets and opportunities. Supporting agriculture through farm input provision can contribute to production and increase food security. Expanding non-agricultural private sector activities is necessary for structural economic change. Crowding-in the private sector involves public investment in infrastructure, transfer and diffusion of technology.

3 Increase public investments in education, health, water, sanitation and infrastructure. Investments in these industries lead towards significant progress in universal coverage and high quality services.

4 Invest in expanded opportunities for women and girls and advance their economic, legal and political empowerment. This helps all MDGs but especially health, poverty alleviation and primary school education.

5 Scale up targeted interventions, including social protection and employment programmes. Partnerships with domestic and international civil society groups work well when launching quick gain interventions. Mass immunisation and the distribution of bed nets and antiretroviral drugs contribute to saving lives, particularly when implemented in an integrated manner. Social protection and cash transfer programmes provide cost-effective access to nutrition supplements, regular health check-ups and schooling. Programmes targeting women can have a multiplier effect on the other MDGs. Social assistance programmes also reduce vulnerabilities during crises and shocks. There is strong evidence that public employment programmes impact on poverty reduction fairly quickly and provide low-income countries with the opportunity to adopt countercyclical policies. Targeting mechanisms must be strengthened to avoid wasteful transfers. Sustainability of social transfer programmes is essential, with the ultimate objective of moving to universal coverage.

6 Support climate adaptation, enhance access to energy and promote low-carbon development.7 Accelerate domestic resource mobilisation to finance MDGs. Many countries are broadening their tax

base and enhancing the efficiency of tax collection. The institutional capacity of revenue authorities must be strengthened, while ensuring transparency and accountability in the use of public resources. Changes in tax structures must be smooth to avoid a decline in total revenues, as is the case during transition from trade taxes to VAT. Establishing progressive taxes is necessary to avoid heavy burdens on goods and services that the poor disproportionately consume. Improving the efficiency of public expenditure is possible by both lowering the unit cost of providing public goods without reducing the quality or quantity of public services as well as reducing wasteful spending.

8 Ensure global partnership creates an enabling environment of the MDGs.

Recent UN conclusions over the past successes and failures on the road to achieving the MDGs have led to suggesting five broad conditions for success. The UN believes that effective partnerships with NGOs, private sector and civil society can help bring these strategies into fruition.1 Country-led development and effective governance are necessary. Strategies that are locally developed

and consider broad national consensus, taking into account the voices of the poorest and most marginalised communities, tend to lead to more effective and sustainable outcomes. When country governments work alongside governance institutions, civil society and the private sector, allowing each sector to have an active role in the design, implementation and monitoring of the countries’ development plans and policies, they are more likely to be successful. However, for policies to be successful they require capable, resourced and accountable civil service institutions to feed into them.

2 Private sector-led and inclusive economic growth, with a focus on agricultural productivity, can help meet the targets for poverty reduction and hunger. Provision of credit for high productivity sectors such as manufacturing, export and agro-industry is vital for diversification and economic structural change.

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National strategies and international partnerships need to support systematic large-scale mobilisation and allocation of industrial and agricultural finance in order to create a big push in employment creation.

3 Scaling up public investments in physical infrastructure and human capital is necessary for both crowding in the private sector and expanding base services, including health and education. Increasing domestic resource mobilisation is essential for scaling up MDG related investments.

4 Quick gains can be made through carefully targeted interventions including innovative social assistance schemes and public employment programmes. Social protection programmes contribute to the reduction of poverty and inequality, help households manage risk, reduce incidence and impact of shocks and build human capital. The public sector plays a critical role in implementing work programmes in response to social and economic crises, mainly by acting as employer of last resort and providing job training.

5 Climate change adaptation and lower carbon development provide opportunities for sustainable MDG acceleration.

Graphic 7-19 Share of Global ODA by Sector, OECD, 2011

In line with the global shifts in sectoral focus many donors that MM frequently works with are also shifting their focus to where they feel their aid will have the greatest impact.

DFID is now planning to change its focus towards wealth creation, agriculture, and infrastructure, believing that these focus areas can be used to help countries build their own way out of poverty, and that they will have a run off effect on other sectors.

With the due date for the completion of the MDGs now very close, the EU plans to prioritise sectors with a high impact on poverty reduction such as governance, social protection, health, education, employment, agriculture and energy. The EU has also decided that bilateral aid to countries will go to no more than three sectors per country to maximise the impact of EU aid by focusing on countries’ weakest sectors.

The Netherlands has decided to focus on four ‘spearhead areas’ in which it believes it can add special value: security and the legal order, water, food security and sexual and reproductive health and rights. Nuffic believes that these are areas where Dutch businesses, civil society organisations and knowledge institutions can add significant value and expertise.

WB, IDA-financed operations address primary education, basic health services, clean water and sanitation, gender, environmental safeguards, business climate improvements, infrastructure and institutional reforms. These projects pave the way toward economic growth, job creation, higher incomes and better living conditions.

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7.1 Wealth Creation and Economic DevelopmentThere is a consensus in the international development arena that wealth creation and economic development need to become the primary goal to help developing countries build their own way out of poverty and no longer have to rely on international fiscal assistance. Wealth creation will allow all sectors to receive accelerated momentum in achieving their goals. Employment-intensive growth is central to reducing poverty. Pro-poor policies are crucial to development and to reducing inequalities and poverty. Evidence suggests that achieving full and decent employment requires addressing the lower participation and higher unemployment rates of women and youth. Therefore sectors that contribute to and facilitate wealth creation and economic development will begin to receive more attention. Inclusive and sustainable economic growth is crucial to long-term poverty reduction.

DFID agrees that economic growth is the most effective way of raising incomes and lifting people out of poverty. Projects and goals are highly ambitious and contain a strong focus on facilitation and creation of job and economic opportunities as sustainable ways to reduce poverty. DFID will therefore look to procure projects such as increasing access to financial services and investment climate reform.

The EU plans to encourage more inclusive and sustainable growth schemes, SME development and wealth and job creation. Trade and investment policies may be used to foster inclusive growth and sustainable development in developing countries. Many developing countries have deepened their integration into the world economy and have become increasingly important players in international trade. In contrast to the rise of emerging economies, many developing countries, especially in Sub-Saharan Africa, are still struggling to reap the benefits of increasingly integrated world markets. The EU has plans to rectify this problem.

In 2011, the Netherlands adopted a new development co-operation policy which shifts Dutch aid away from social sectors towards economic sectors and relies more on the private sector. The Netherlands believes that economic growth is at the heart of international development and co-operation and as such wants to invest in economic development and incorporate Dutch business and expertise. The Netherlands wants to utilise public-private partnerships, business instruments and economic diplomacy to alleviate poverty, whilst increasing commercial profit. Therefore, a larger proportion of the development budget will be spent on promoting these economic instruments.

7.2 InfrastructureInfrastructure development is becoming more and more significant to donors’ forward spending plans with the aim to support and develop countries’ trade and economic capacities, and allowing countries to build their own way out of development. Infrastructure is likely to be one of the global primary sectors in the next few years, receiving large amounts of funding. Development assistance is moving to focus on providing finance and technical assistance for infrastructure projects including roads, bridges, ports and energy systems, which by their very nature require investments that are long-term and fiscally large. There is a significant need to improve transport infrastructure worldwide, with the major focus on the landlocked countries of sub-Saharan Africa, in order to facilitate and develop growing trade movements. In the pursuit of wealth creation, many donors including DFID and the EU are bringing infrastructure to the forefront of their development objectives as these are key sectors to help countries facilitate economic development. Increased infrastructure allows for safer, easier and more efficient access within and between countries; this in turn leads to increased trade and therefore private investment. An increase in private investment leads onto the creation of jobs and economic growth.

What the WB terms the ‘Infrastructure Deficit’, the lack of all-weather roads, and a reliable and safe source of energy for many people in developing countries, particularly rural areas, is one of its major priorities. To address this infrastructure deficit, the WB has launched the ‘Transformation through Infrastructure’ strategy, which will govern the its engagement in infrastructure through to 2015. It will maintain support of infrastructure to meet basic needs, and it will also enhance its focus on transformational projects and mobilise private sector financing. This support will account for around 40% of the Bank’s overall lending.

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For example in 2012 the programme included USD 5.2 billion for energy and mining, USD 4.5 billion for transportation, USD 3.9 billion for water, sanitation and food protection, and USD 0.2 billion for information and communications.

7.3 AgricultureThere is likely to be renewed concentration on food security and agriculture projects in the future, due to worldwide growing food shortages and population increases, along with the wealth creation priority. By supporting sustainable agriculture, countries can increase food production and boost trade and their economy. Increased agricultural and food security can help to alleviate poverty and unemployment by creating jobs, alleviating hunger, which also combats malnourishment and other health issues. As donors aim to focus on results-based projects in pursuit of realising the MDGs, agricultural projects will be becoming increasingly popular due to their multiplier effects across other MDGs.

By supporting sustainable agriculture and rural development through equitable provision of agricultural inputs, including subsidiary programmes, DFID hopes to contribute to higher food production. Agriculture and land management contracts in Sub-Saharan Africa and South Asia will continue to be prominent and even increase over the next few years in an attempt to combat the increase in absolute poor in these regions. DFID also has projects designed to reduce poverty, hunger and vulnerability through support to cash transfers, direct nutrition interventions and efforts to support household food security.

The EU wants to consolidate its sector involvement on those sectors that will have the greatest impact on poverty and the greatest run-off effects on other development goals. Therefore, sustainable agriculture, food security and nutrition are high on the EU’s development co-operation agenda. Inclusive and sustainable economic growth is crucial to long-term poverty reduction. To this end, the EU plans to encourage more inclusive and sustainable growth schemes, such as agriculture. The EU will continue working on strengthening nutritional standards, food security governance and reducing food price volatility at international level.

The Netherlands places food security very high on its agenda as one of its spearhead areas where it believes it can add special value. Therefore, the focus that the Netherlands will place on this sector both technically and financially will increase.

The WB works closely with partner countries and the ‘Comprehensive Africa Agriculture Programme’ to increase agricultural productivity, subsequently creating jobs and creating products for trade. In 2012 the WB provided almost USD 1 billion in development financing for agriculture. Infrastructure development is also a key aspect of this pillar, especially transport corridors, to enhance trade facilitation, information and communication technologies, and energy. Infrastructure not only facilitates economic growth but also provides greater access to basic services.

7.4 Private Sector DevelopmentPrivate sector development is also being given increasing priority again by most donor agencies, partly due to self-interest but also due to the desire for developing countries to bring themselves out of development and the recognition that economic development fuels social development. Private sector development boosts the economy: facilitating trade, creating jobs, alleviating poverty, and having run-off effects across other sectors. This will tie in with an increase in PPP ventures in development programmes. Expanding non-agricultural private sector activities is necessary for structural economic change but crowding-in the private sector involves public investment in infrastructure and transfer and diffusion of technology.

For developing countries, the expansion of the private sector, notably of micro, small and medium sized enterprises, is a powerful engine of economic growth and the main source of job creation. Foreign investment also plays an important role, including through the linkages of domestic firms to international markets and through investments in infrastructure and natural resource based activities. One of the main challenges for governments in developing countries is to establish, design and implement institutional,

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organisational and regulatory frameworks which are conducive to, and often a precondition for, private sector development.

For economic growth to thrive it needs a favourable business environment to support it. Donors like the EU and WB therefore plan to support the development of competitive local private sectors including by building local institutional and business capacity, promoting SMEs and co-operatives, supporting legislative and regulatory framework reforms and their enforcement (including for the use of electronic communications as a tool to support growth across all sectors), facilitating access to business and financial services and promoting agricultural, industrial and innovation policies. This will therefore allow developing countries, with a special focus on the poorest, to become more integrated with and harness the opportunities of global markets. Future measures will enlarge the scope for small- and medium-sized enterprises to invest in developing countries, and the forging of new coalitions between companies, NGOs and individuals.

7.5 Basic Services and GenderBasic services will continue to receive a large portion of aid budgets, due to donors aiming to achieving the MDGs, their effect on poverty alleviation, and as a foundation needed for further development. The desire to achieve the MDGs by 2015 will generate an increase in projects providing basic services, such as health, education and water and sanitation. Gender also remains high on the agenda as a cross-cutting theme. It is likely that projects will continue to have a strong gender bias. With regard to education, the primary focus areas of aid will be targeting the high ‘out-of-school’ populations, improving the quality of education, skills development, and education in fragile states. Health donors plan on: continuing to decrease child mortality rates, combating infectious diseases, bettering reproductive health, and improving the efficiency and effectiveness of health systems. The primary goals for water and sanitation focus on increasing access to safe water and increasing awareness of the benefits of hygiene.

Education remains to be a key DFID priority. DFID’s focus is now on countries with large out-of-school populations and fragile states, hoping to gain the greatest impact from its aid. DFID plans to conduct projects which work towards: the access to, and quality of, education, gender equality and completion rates, a significant increase in girl’s education and improved learning outcomes, addressing teacher absenteeism, improvement of performance management, and support for incentives for teachers to work in challenging environments. Water and sanitation also remain important goals for DFID. Important innovative goals include reducing the burden of waterborne diseases and gender, and increased access to clean water and sanitation, using community-led approaches and hygiene awareness to generate demand for sanitation. Desired activities in regard to health include promotion of women’s choice over whether and when to have children, increased focus on child mortality, malaria and infectious diseases and supporting health system strengthening.

The EU aims to develop and strengthen health systems, reduce inequalities in access to health systems, promote policy coherence and increase protection to improve health outcomes for all. With regard to education, the EU plans to enhance its support for quality education to give young people the knowledge and skills to be active members of an evolving society. Through capacity-building and exchange of knowledge, the EU needs to support vocational training for employability. Job creation and facilitation is also integral to economic growth and development and therefore the EU plans to support decent work agendas, social protection schemes and encourages policies to facilitate regional labour mobility.

The Netherlands places great importance on achieving tangible results in development co-operation and therefore Nuffic aims to concentrate on sectors that can produce these results, such as education, HIV/AIDS, water and environment, and maternal and reproductive health. The Netherlands recently decided to put extra focus on the MDGs that are furthest off-track, i.e. MDG 3, the promotion of gender equality, and MDG 5, improving maternal health. However, aid to the health and education sector from the Netherlands has declined in recent years and there is a general trend to transfer aid from social sectors towards stimulating economic growth.

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The WB believes that gender equality and the empowerment of women and girls are among the most effective ways to combat poverty, hunger, and disease and to stimulate development that is truly sustainable. Gender equality requires integrating work across multiple sectors and sustaining efforts over long periods. The WB is working to expand girls’ access to education and create other opportunities for empowerment. The IDA plays a critical role in investing in women’s health and education and ensuring their equal access to economic opportunities. The IDA believes that progress on key gender indicators, such as girls’ enrolment and completion rates, maternal mortality, labour force participation, and asset ownership also depends on investments in water, sanitation, transport, productive assets, and access to financial services. Infrastructure, agriculture and private sector development are all essential to expanding women’s economic opportunities.

7.6 Governance and SecurityThe recent fall in funding in the governance sector is unlikely to signify a continuing trend. The public sector will receive additional impetus following anti-corruption initiatives to satisfy the need for accountability, while civil society strengthening will be addressed through TA. A stable public sector is needed to help facilitate an accelerated growth of the private sector, along with that in other sectors.

DFID’s priority on governance and security is addressing conflict and insecurity, strengthening local democratic institutions including the media, improving accountability, and is ensuring that poor people have more power over how aid is spent. Desired activities include: reinforcing citizens’ demand for good governance and oversight of basic service provision; supporting the development of local democratic institutions, civil society groups, the media and enterprise; giving women a stronger role in decision making; increasing access to security and justice for poor people and piloting new approaches to reduce violence against women.

The vast majority of the EU’s budget goes into social infrastructures, including government and civil society. The EU plans to focus on developing good governance in political, economic, social and environmental terms. EU support to governance will feature more prominently in all partnerships, primarily through incentives for results-oriented reform and will focus on partners’ commitments to the central EU values of human rights, democracy and the rule of law, and to meeting people’s demands and needs. Support for governance may take the form of programmes or project-based interventions to support actors and processes at local, national and sectoral level.

Good governance, poverty reduction, women and development, establishment of systems and organisations form part of the Netherlands’ key priorities under their ‘security and the legal order’ spearhead.

7.7 Energy and Climate ChangeThere is likely to be a significant growth in the energy sector with a strong emphasis on renewable and alternative energy sources in an effort to make development more sustainable. These received increasing prompts following the Fukushima nuclear disaster in Japan, the BP oil spill in the Gulf of Mexico and the volatility of the main oil producing countries. Development is viewed as intimately interconnected with climate change, especially in the area of adaptation. In addition, there is a real trade-off for poorer countries, which already see their scarce development resources potentially diverted to climate action. There is increasing pressure to supplement this deficit. This is a serious issue for Africa: while the continent contributes less than 4% to global warming, it is already affected by climate change, bearing considerable adaptation costs and attempting to mitigate risk.

Climate change is a new strategic priority for the United Kingdom. ODA commitments have increased significantly in recent years with almost USD 1.5 billion dedicated to biodiversity and climate change mitigation in 2010, with concentration on enhancing low carbon private sector led growth, adaptation, forestry and on strengthening institutions to implement ambitious climate change strategies.

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EU development policy plans to promote ‘green economies’ that can generate growth, create jobs, and help reduce poverty by valuing and investing in natural capital. Sustainability has to be a core part of agricultural development. Development is not sustainable if it damages the environment, biodiversity and natural resources and therefore increases the exposure and vulnerability to natural disasters. As such, the EU will support sustainable practices, including the safeguarding of ecosystem services, giving priority to locally developed practices and focusing on smallholder agriculture and rural livelihoods.

The EU also views energy as a core sector for future focus. Energy is important for poverty reduction, partially to meet basic human needs, but it is also essential as an income-generator and for providing economic growth. The EU is one of the major leaders in regard to energy development and plans to drive the sector over the next few years. The EU plans to offer technology and expertise as well as the development funding, and plans to focus on three main challenges: price volatility and energy security, climate change, including access to low carbon technologies, and access to secure, affordable, clean and sustainable energy services. The EU hopes to help develop the energy sector by incorporating the private sector investment and expertise.

The WB views climate change as being a core sector, not only because of its importance of MDG 7, but also because of the effects climate change may have on sustainable development. Developing countries are particularly sensitive to climate change, as they are more dependent on agriculture and other climate sensitive natural resources for income and well-being. They also lack sufficient financial and technical capabilities to manage increasing climate risk.

7.8 RecommendationsAs mentioned with the rise in ODA, the amount that each sector receives and the variety of sectors that aid flows to is continuingly increasing, which provides a strong argument that there are no ‘bad sectors’ for MM to focus on. MM already has substantial experience and expertise within some of these sectors, such as economic development, private sector development, basic services and governance, which it should continue to expand upon. However, there are clear changes in the sectors that will see increasingly large amounts of aid based around the encompassing theme of wealth creation which MM would do well to seek to develop its portfolio in, to ensure that it remains a leader in international development.

There is increasing consensus in the international aid arena that wealth creation needs to become the number one priority in terms of development. Wealth creation includes multiple sectors that MM is active in, including economic development, job creation, private sector development, education, gender, and skills development. MM is already active in these sectors but needs to further develop its expertise in sectors that contribute to wealth creation, to ensure it is at the forefront of donors’ choices for wealth creation programmes.

Infrastructure development is becoming an increasingly important theme as its run-off effects are being better understood by many donors, including the primary donors that MM works with. Currently the international development divisions within the group have limited experience in infrastructure, which includes transport and power. Obviously MM is a leading company in these sectors and as such it could create greater synergies between its transport and power divisions and its international development ones to allow the company to hit the ground running in this field and become a dominant player.

Agriculture is a sector that will also begin to see increasing support from many major donors due to the number of multiplier effects it provides, including poverty alleviation, job and wealth creation, hunger alleviation, reduction of malnourishment and other health issues, as well as a boost to possible trade and export commodities. MM currently has limited experience in the sector and needs to develop its portfolio in this sector.

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8. Post-2015

The Millennium Development Goals have been the driving force behind development since 2000, and have singularly shaped the development arena and aid architecture. They have governed where aid should be delivered. Its subsequent High Level Forums, whose role was to monitor the progress of the MDGs, have governed how aid should be delivered. The deadline agreed for the MDGs was the end of 2015 and some of the MDGs’ targets have already been met. Many others have greatly missed the mark, and success has varied significantly across regions and countries. This short-fall provides a conundrum for development assistance and aid relations, as fulfilling the MDGs was predicted to eradicate poverty, which unfortunately is not going to be the case. Whilst all donors are firmly committed to fulfilling the MDGs, and will concentrate their resources on this goal in an attempt to reduce the MDG short-fall, the international aid community has half an eye on what comes next, in the post-2015 aid world. As this date is less than three years away, this chapter tries to assess what a post-2015 aid world will look like, what donors’ priorities may be, which regions and sectors aid will focus on, how aid will be delivered, and the role of technical assistance in this. This chapter aims to assist MM in preparing itself to become a post-2015 technical assistance company sooner, rather than later.

For over a decade, the MDGs have remained a focus of global policy debates and national policy planning. They have become incorporated into the work of non-governmental organisations and civil society more generally. Many policy-makers and those within civil society believe that on the whole there has been notable progress on poverty, hunger and disease, however, progress has been uneven and many countries, regions and targets are off-track and are unlikely to be reached by 2015. Since 2000 the aid architecture has changed rapidly and new challenges and considerations to development need to be addressed. Questions of inequality and (re)distribution of wealth are becoming increasingly important in all countries, particularly in the largely successful MIC countries of China and India, where despite unparalleled economic success over recent years, there are still vast numbers of poor people. This is coupled with the growing challenge of articulating greater coherence in economic development, social development and environmental sustainability, an increase in players within the aid architecture, as well as a huge population spike and anticipated population boom. Development financing is becoming more complex than the traditional North-South project aid which was dominant at the beginning of the new millennium. There are many new modalities and an increased number of players as public and private, philanthropic and corporate, North and South donors are all providing development assistance. Development thinking is becoming more multi-directional as new global challenges emerge and the supply of public goods become more global in character and the international community searches for better ways to address macroeconomic, social and environmental imbalances, as well as insecurity. This implies a need to consolidate a growing number of different agendas.

These requirements mean that it is likely that a new round of global goals to follow the MDGs will be adopted after 2015.

Unfortunately, not too much attention has been given by individual donors to their post-2015 plans as they are determined to focus and achieve the MDGs. However, many organisations and institutes have given more thought over what will happen. Whilst there is currently only speculation and suggestion over ‘what comes next’, we can still use this theoretical information to make informed guesses.

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8.1 Sustainable Development GoalsWith the end of the Millennium Development Goals in 2015, the international community has already begun to mobilise on investigating the next step. In June 2012 at the Rio+20 Summit on sustainable development, the international community confirmed a common global vision for an economically, socially and environmentally sustainable future. Rio+20 recognised the ‘Green Economy’ in the context of sustainable development and poverty eradication as an important pathway for achieving sustainable development. Therefore, the international community agreed to step up on key sustainability challenges and started the process of the formulation of the ‘Sustainable Development Goals’ (SDGs), with a final report presented to the UN General Assembly in 2014. At the same time, UN Secretary-General Ban Ki-Moon commissioned a high-level global sustainability panel tasked with investigating the course that the international development community should take after 2015. They have issued a preliminary report recommending the adoption of a set of Sustainable Development Goals, to help move development into a stable trajectory. This is due to culminate in a UN special General Assembly to discuss progress and the next step, in autumn 2013. These actions will also help inform the process of developing SDGs and will contribute to their realisation. These two processes are currently separate but their outcomes are likely to converge into a single framework.

The SDGs have not yet been formally agreed upon, and there is no guarantee that they will be adopted, but due to the significant investment in their investigation, and the initial consensus, it looks as if they will be the most likely course of action. These SDGs seem to be based upon on two considerations: lessons learnt from the MDGs, and global priorities. The idea and interest of the SDGs has been gaining momentum due to the increasing realisation and consensus that development needs to be sustainable. Sustainable development is generally defined by the ‘Triple Bottom Line Approach’, which is economic development, environmental stability and social inclusion: Partnership: Embrace the need to engage all social and economic forces – North and South,

governments, NGOs, civil society, and the private sector – as essential to building real and lasting solutions to the challenges we all face and, increasingly, that we will all share;

Sustainability: Assist local communities to become more self-sufficient and resilient, and to manage their natural resources sustainably for the long-term. Ecological risks like climate change will increasingly and disproportionately affect people living in poverty, and generate more poverty;

Inclusion: Poverty reduction should be based not only on reduction in deprivation, but must also recognise the critical factors of discrimination and disparity as increasing challenges to individual and social well-being. This approach should focus especially on enhancing active citizenship and the participation and place of women and youth.

However, specific objectives vary between different societies, and there is no consensus regarding the trade-offs and synergies between the points. One suggestion recommends that these three broad objectives will be further divided into three goals each.

It is also argued that this Triple Bottom Line Approach will depend on a forth condition: good governance. Good governance is needed at all levels: local, regional, national and global. Governments and official agencies should be responsive to the citizenry. Good governance should not only apply to the public sector, but also the private sector, as companies need to recognise, and act upon, their responsibility to their stakeholders.

The MDGs were primarily targets for poor countries to which rich countries were to add their solidarity and assistance through finances and technology. The SDGs should have a different approach. As sustainable development is viewed as a global initiative, the SDGs should not concentrate on what the rich can do for the poor, but on what all countries can do for global development and sustainability. The SDGs should a) be universally applicable to all countries, whilst taking into account different national realities, capacities and levels of development and respecting national policies and priorities, b) incorporate the three dimensions of sustainable development and c) be action-oriented, concise and easy to communicate and limited in number. Goals will need to be less the result of ‘top-down’ decisions but will be more shaped by

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broad participation by all stakeholders, including the public, and must be truly global in nature rather than a matter of determining how ‘rich countries’ will contribute to helping ‘poor countries’. It is also viewed that the SDGs need to be more inclusive of emerging global players. Middle income emerging economies such as China, India and Brazil will need to become crucial leaders of the SDGs, and will have their own challenges of balancing growth and environmental sustainability, of vulnerabilities to adverse trends such as climate change, and of rising geo-political roles, regionally and globally.

8.2 UNAs mentioned the UN is still investigating its policy on the SDGs, and it is unlikely that it will launch its official stance on post-2015 development until 2014. However, it has already begun considering the options for the future. The UN currently has two bodies examining the potential forms of the SDGs, to help the consultation process and coordinate system-wide visions and preparations: the ‘High Level Panel (HLP) of Eminent Persons on the Post-2015 Development’ (referred to as the ‘HLP’), due to make its final report in autumn 2013, and the ‘Rio+20 Intergovernmental UN Working Group’ (referred to as the ‘Working Group’), due to present its conclusions in autumn 2014. These two frameworks are likely to be combined into a single framework. Both groups have revealed their preliminary findings.

The UN is adamant that economic development needs to be the key to sustainable development and poverty alleviation. Many member states agree that sustained, inclusive economic growth needs to be central to the strategy to achieve development and development goals, with a particular focus on employment creation. Macroeconomic policies are a core element of inclusive economic growth and employment creation. Macroeconomic stability and adequate policy responses are needed to weather crises and shocks. This will allow for stable economic growth and facilitate employment creation, thus allowing for sustainable development. The UN wants to see much greater coherence in the post-2015 agenda among macroeconomic, trade, investment, financial, rural development and social policies in order to promote sustained and stable economic growth and adequate creation of jobs, whilst ensuring environmental sustainability. The key elements to sustainable economic development are: supporting human capital development, especially in higher education and skills; encouraging sophisticated agricultural markets; supporting financial markets to help with screening new ideas and mitigating risks; pursuing deep and sophisticated energy markets; enhancing cross-border trade and regional markets, particularly in Africa and South Asia, through

appropriate infrastructure development.

In addition to maintaining a clear focus on human development, the post-2015 development agenda will have to address other emerging or pressing challenges. The preliminary report of the HLP analyses a range of challenges, from an increasing environmental footprint with increasing disaster risks to rising inequalities, continuing violent conflict, rapid demographic change, rapid urbanisation and continuous migration flows. There is also the knowledge gap between and within countries and governance and accountability deficits at various levels that require the strengthening of compliance with the rule of law. Food and nutrition security, water and sanitation, energy, and access to quality health services (including reproductive health), education and vocational training are also of crucial importance.

8.2.1 HLP on Post-2015 DevelopmentSo far the HLP has agreed that a post-2015 development agenda should build upon the MDG framework and keep the focus on human development, whilst addressing emerging challenges and not overloading the agenda with too many goals40.

The HLP agrees that the post-2015 agenda should continue to complete any unachieved MDGs goal. This will include a focus on the MDGs that are furthest behind their targets, MDG 3 Promoting Gender Equality and Empowering Women and MDG 5 Improving Maternal and Reproductive Health. This will be

40 Refer to Annex III for HLP’s Key Recommendations

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complemented by a focus on ‘the central anchor’ of focusing on poverty reduction, whilst taking on board the new challenges that have arisen including sustainability, the importance of inclusive growth and productive capacity, conflict, gender equality and women’s empowerment, and global partnerships. The HLP are in agreement that the concept of ambitious but realisable goals, coupled with performance indicators, is one that needs to continue and is likely to be adopted again. The Post-2015 UN Development Agenda needs to ensure that globalisation becomes a positive force for all. Currently the benefits of globalisation are unevenly shared. The HLP suggest that there needs to be a holistic and coherent approach that will include the four pillars of sustainable development41:1 Inclusive and Social Development: the post-2015 agenda and goals should maintain the focus on

poverty, with the primary goal to reduce poverty in absolute terms42. However, this goal may go beyond this and focus on reducing relative poverty43 as well. This would require focusing on non-income measures, such as agriculture, infrastructure, and private sector development. Directly related to this is that inequality, particularly in terms of gender, is growing in many countries. As such the post-2015 goals could seek to tackle inequality alongside poverty.

2 Inclusive Economic Development: inclusive economic development requires sustainable patterns of protection and consumption. Inclusiveness is broader than just the pro-poor focus and applies universally to all countries, focusing on not only defined poor, but also on vulnerable populations. More inclusive economic development would enable an adequate generation of productive employment and decent work, reduction of poverty and inequality, low-carbon as well as resource-and-waste-efficient economic growth and welfare.

3 Environmental Sustainability: the HLP strongly highlight the need to make economic growth not only inclusive but also environmentally sustainable. In line with the Rio+20 summit there needs to be a sustainability agenda incorporated into the global economy which allows developing countries to grow , whilst ensuring that natural assets continue to provide the resources and environmental services on which well-being relies.

4 Peace and Security: violence, fragility and a general lack of security are all hugely detrimental to development progress. Despite receiving 38% of ODA no low-income fragile state is currently on track to meet the MDGs. There is a growing consensus between the DAC states that this needs to be specifically addressed. Good governance is needed at all levels: local, regional, national and global, and governments and official agencies should be responsive to the citizenry.

These four ideals correspond to the Triple Bottom Line and Good Governance approach. The post-2015 framework should encompass both the ‘poverty agenda’ as embedded in the MDGs, as well as sustainable development and the shaping of Sustainable Development Goals, resulting in one comprehensive coherent agenda with one set of goals. However, the core set of ‘development enablers’ (how development is going to be achieved) should be a guide for policy coherence but not a prescription for development. The HLP advise that when setting out the agenda there should not be ‘blueprints’, or a one-size-fits-all approach, and the agenda should leave room for individual countries’ national policies.

8.2.2 Rio+20 Working GroupThe Rio+20 Working Group is another investigatory body that is examining the post-2015 agenda and the application of the SDGs44. One of the primary outcomes of Rio+20 was the agreement of the member states to launch a process to develop a set of Sustainable Development Goals. It was agreed that the contemplated scope of the SDGs needs to be broader than that of the MDGs. First and foremost they must encompass the completion of the MDGs that were not achieved by 2015, whilst also integrating the three dimensions of the Triple Bottom Line Approach far better than the MDGs did. The SDGs, unlike the MDGs, should also be universal, applicable to all countries irrespective of levels of development, but of course allowing differentiation between countries in line with their development needs and objectives. This will

41 For more information see Annex IV42 Absolute poverty is defined as those who are living on less than USD 1.25 a day.43 Relative poverty is defined as living on less than USD 2 a day.44 Some of the conclusions they draw are similar to the HLP, but since at the time of writing they are two separate bodies, duplications

will still be mentioned here.

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hopefully integrate the economic, social and environmental dimensions of sustainable development. Rio+20 also raised the need for a more sustainable financing strategy (so as not to be affected by financial crises) and greater monitoring and evaluation, and data collection than for the MDGs. The working group argues that the post-2015 agenda and the SDGs should be used to accelerate convergence on sustainable development.

8.3 OECD DACWhilst much still needs to be clarified, the OECD DAC backs the UN post-2015 agenda of focusing on poverty alleviation and completing the MDGs. They also back the UN consensus of sustainable development and SDGs that will be based upon three fundamental principles: human rights, equality and sustainability, and four pillars of sustainable development: inclusive social development, inclusive economic development, environmental sustainability, and peace and security. The OECD DAC believes that these factors should also be complemented by one cross-cutting theme of gender and women’s empowerment. These dimensions will contribute to coherence and harmonisation among policies at different levels, local, national, regional and global. In response to the shifting development agenda the OECD DAC envisions itself in a different role post-2015, as a major contributor to the broader international process and a supporter of an inclusive, country-led and -owned process, which includes an adequate platform for poor people, especially women and girls, to assert their needs and wants, as well as creating synergies and linkages between the many bilateral and multilateral organisations. The DAC is keen that donors should remain committed to the components of the Millennium Declaration that underlined the MDGs and the four pillars of sustainable development, and that they should underlie the future goals: peace, security and disarmament, development and poverty eradication, protecting our common environment, human rights, democracy and good governance and gender equality.

8.4 EUThe EU is one of the few major donors that have begun actively investigating their own post-2015 agenda. The EU agrees with the UN that a post-2015 agenda must concentrate on alleviating poverty, completing the MDGs, and ensuring that prosperity and well-being are sustainable. The EU believes that these challenges are universal and inter-related, and that a universal policy framework is needed. The framework should not only focus on poverty alleviation and economic growth but also on issues of governance, human rights, and peace and security, which are enabling conditions for progress. The EU plans to contribute to the pursuit of the sustainable development agenda and to implement Rio+20 commitments through a range of policies, including its strategy for smart, inclusive and sustainable growth: ‘Europe 2020’. This over-arching policy covers resource efficiency, low carbon economy, research and innovation, employment, social inclusion, and youth. Implementation and regular review of the Europe 2020 strategy should contribute to greater coherence, mainstreaming, and integration of the dimensions of sustainable development in EU policies. A number of key EU policies are under development to make the EU’s sustainable development objectives operational. Before 2015, through its external action and the implementation of the ‘Agenda for Change’, the EU will continue facilitating progress towards the MDGs and sustainable development in developing countries, with a specific focus on LDCs and fragile and conflict affected states. At the same time the EU will begin to carry out actions that will contribute to the implementation of Rio+20 commitments.

The EU proposals made in the run-up to Rio+20 indicated that they should also focus on resources which represent public goods and basic ‘pillars of life’, such as energy, water, food, security, oceans, sustainable consumption and production, as well as social inclusion and decent work. At the same time, goals should also be coherent with existing international agreements, such as goals and targets on climate change and biodiversity, as well as social protection floors.

The EU believes that the new framework should be universal in aspiration and coverage, with goals for all countries, with a focus on the eradication of poverty and on promoting prosperity and well-being. The framework should integrate the three dimensions of sustainable development: economic, social, and environmental, taking into account the lessons learnt from the MDGs and building on the work for

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elaborating the SDG. Goals should constitute a base level of living standards by 2030. As such, the framework should cover: basic human development (based on updated existing MDGs and also reflecting issues such as social

protection); drivers for sustainable and inclusive growth and development that are necessary for structural

transformation of the economy, needed to ensure the creation of productive capacities and employment and the transition to an inclusive green economy capable of addressing climate challenges; and

the sustainable management of natural resources.

The framework should also address justice, equality and equity, capturing issues relating to human rights, democracy and the rule of law, as well as the empowerment of women and gender equality, which are vital for inclusive and sustainable development and important values in their own right. It should also address peace and security, building on the existing work on peace building and state building goals.

The SDGs should be limited in number and apply universally to all countries, but should have targets respecting different country contexts and goals. In order to ensure ownership and relevance, the goals should be tailored and made operational at the national level. Special consideration should be given to the needs of fragile and conflict affected states.

The EU believes that the responsibility for achieving the desired outcomes is first and foremost national. The mobilisation of all resources is needed, domestic and international, private and public. Financing and other means of implementation should be addressed in a comprehensive and integrated manner, given that the potential sources for implementing various global goals are the same. The framework should be based on the individual responsibility of countries to take action, coupled with partnership between all countries and stakeholders. Goals should provide incentives for co-operation and partnerships among governments, civil society, including the private sector, and the global community at large. All countries should contribute their fair share towards reaching the goals. Goals should also induce stronger accountability.

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9. Recommendations

Regularly analysing trends in development aid should provide MM with insight and evidence to support its business development. As demonstrated in this report, international development is becoming an increasingly diverse market and therefore MM needs to consider carefully where it wishes to expand its resources and focus its efforts. This section outlines the primary recommendations for MM business development drawn from this report45:

Sectors MM would doo well to further develop its expertise in sectors that contribute to wealth creation.

This theme includes multiple sectors that MM is active in, such as economic development, job creation, private sector development, education, and skills development. MM must ensure that it can combine and synergise its expertise in these sectors under a Wealth Creation Framework. (Chapter 7)

MM is a leading global company in the areas of infrastructure, transport and power, sectors that will increasingly see greater amounts of aid allocated to them as the link between infrastructure, trade and development is increasingly understood. Currently, the international development divisions within the Group have limited experience in infrastructure, transport and power and MM therefore would do well to seek to create greater synergies (‘backward linkages’) between its international development divisions and the relevant infrastructure, transport and power units to allow MM to hit the ground running in this field and increase its share in this growing market. (Section 7.2)

Agriculture is a more traditional sector for international aid, but also one that will see increasing support from many major donors due to a number of multiplier effects it provides, including poverty alleviation, job and wealth creation, reduction in malnourishment and other health issues, as well a boost in possible trade and export commodities. MM currently has limited experience in the sector and needs to further develop its portfolio in this sector through strategic recruitments and possibly acquisitions. (Section 7.3)

Regions Sub-Saharan Africa is the main region where development aid will flow to and where MM would

ideally concentrate most of its efforts on. It is recommended that the key countries MM focuses its IDS activities on include: Democratic Republic of the Congo, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Rwanda, South Sudan, Tanzania, and Uganda. Main sectors within these countries include: basic services (including education, health, and water and sanitation), and wealth creation (including private sector development and economic development). However, MM also needs to develop its capacity with regard to infrastructure, power, and agriculture for the IDS market. Donor agencies reviewed in this study with major programmes in the above countries include: DFID, EU, the Netherlands and the WB. MM should strengthen relations with local representatives of these IFIs in order to further expand into these countries. (Section 6.1)

45 The report is based on a review of current policies and programmes of DFID (UK), DGIS/NUFFIC (Netherlands), EuropeAid (EU)

and World Bank only. In future updates, we intend to include also USAID and MCC, and possibly still other IFIs such as the regional

development banks. Justifications and elaboration of each recommendation can be found in the chapter indicated in the brackets at

the end of each bullet point.

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South Asia will also see increased amounts of aid, and MM could utilise its regional presence and offices in South Asia to win more IFI funded work. It could particularly seek to develop or consolidate its presence in Bangladesh, India and Pakistan. Focus in most of South Asia is on economic development, private sector development, skills development, basic services, climate change mitigation, food security, infrastructure, environment and water, with gender as a cross-cutting issue. IFIs with major programmes in this region include DFID, EU and the WB, and MM would therefore do well to reach out to the local offices of these IFIs in order to expand into these countries. (Section 6.2)

Middle East and North Africa (MENA) is the third region that will see increased development support. MM needs to consider increasing its presence in Egypt, Morocco, Occupied Palestine Territories and Turkey. The primary sector focus in this region includes wealth creation, education, skills development, governance and security, private sector development, gender, and infrastructure. IFIs with major programmes in this region include the EU and the WB. (Section 6.3)

There is no point for MM to focus too many strategic resources into other regions, aside from these three, and if it yet wishes to aim for projects elsewhere, it needs to be very selective about which ones it goes for. Aside from environmental protection, climate change mitigation, and HIV prevention and reduction, most sectors in the other regions will see a reduction in aid. MM needs to consider carefully its long-term goals before committing resources to developing its presence in these regions. (Section 6.4)

Technical Assistance MM further needs to develop its in-house Monitoring & Evaluation knowledge and capabilities and

those of each of its staff members. While having full-time M&E experts may not be the best allocation of resources for all international development divisions, our technical assistance will be more valuable and transferable if all our staff avail themselves of some M&E expertise and training. (Chapter 2)

MM needs to expand its network of local and regional consultants, NGOs, and most importantly private sector organisations. (Chapter 2)

MM can further its market share in international development by establishing more regional and local offices to act as a hub for a group of countries, incorporate local expertise, and thereby develop a large network of domestic consultants and organisations. (Chapter 3)

To ensure that it remains a competitive TA firm, MM must ensure that it avails itself of up-to-date expertise in, and knowledge of, cross-cutting issues such as gender, public private partnerships and capacity development. MM already has good knowledge of many of these cross-cutting issues across its divisions, but needs to investigate how this information can be more effectively shared. (Chapter 2)

MM needs to increase its relationship with other private sector organisations in international development, and build its portfolio of PPP assignments. (Chapter 3)

MM needs to make sure that it can adapt to new requirements that come with alternative aid modalities, including grant management and programme based approaches, to ensure competitiveness in applying for projects involving these new modalities. (Chapter 3)

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Glossary

Aid Architecture The system of institutions, rules, norms, and practices which govern the fiscal resources of development.

Aid Fragmentation The phenomenon that the uncoordinated proliferation of donors and other players in the international development arena leads to inefficiency and ineffectiveness due to the duplication of efforts, missed opportunities for effective partnerships, and unnecessary transition costs.

Aid Packages The fiscal amount and composition that aid is delivered in.

Aid Modalities The form used to transfer development aid from the donor agency to the partner country.

Country Programmable Aid A measurement of OECD-DAC aid flows which tracks the portion of aid over which recipient countries could have significant say. It is deemed a more accurate measurement of donors’ real spending.

Donor Agency The organisation that provides funding for development programmes and projects.

General Budget Support GBS is the direct transfer of financial resources into the treasury of the recipient country. These financial resources supplement the total revenues for meeting development objectives.

Grant Fund Management The handover of control of a specified budget to an interim facilitator (usually a TA firm) to manage grants which achieve specific goals. Usually the facilitator, in consultation with the donor(s) and partner countries, will manage the grant by deciding, procuring, establishing and implementing multiple projects using the funds they have been granted by the donor agency.

Multiplier Effect A direct benefit caused by a project, outside the project scope and sector.

Official Development Assistance A measurement of OECD-DAC aid flow that is administered with the promotion of the economic development and welfare of developing countries as its main objective, is concessional in character and conveys a grant element of at least 25%. ODA can include aspects such as humanitarian aid and debt relief.

Pooling of Funds Pooled funds exist when multiple donors contribute into a single account which is kept separate from the partner country government budgets. Pooled funds are set up to support the implementation of a specific policy or strategy in line with

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government development strategies and are therefore ring-fenced from other objectives.

Project Aid An aid delivery modality which involves donors recruiting and funding specific projects in line with partner country development goals, as well as their own.

Public Private Partnership (PPP) Public Private Partnerships is partnership in which a development agency, such as a donor, works together with a private sector entity, with each contributing resources to achieve a shared development objective. Some PPPs may be conducted between the national governments or ministries of the countries themselves, in order to bolster trade or natural resource production.

Run-off Effect A positive indirect effect of a programme outside the desired or planned scope.

Sector Approach An aid delivery modality that focuses on an entire sector, facilitating either the development of the sector as a whole, or being one project that focuses on many activities within that sector. Also known as a Sector-wide Approach (SWAp)

Sector-Wide Approach See Sector Approach

Technical Assistance See Technical Co-operation

Technical Co-operation The provision of advice and/or skills, in the form of specialist personnel, training and scholarship, grants for research and associated costs. Technical co-operation projects can vary from large projects delivered over several years to shorter-term engagement of individuals or small teams. A supplier contract can be with one lead organisation, a consortium of organisations or a self-employed individual.

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Annex I. The Millennium Development Goals

GOAL 1: ERADICATE EXTREME POVERTY AND HUNGER TARGET 1.A Halve, between 1990 and 2015, the proportion of people whose income is less than $1.25

a day TARGET 1.B Achieve full and productive employment and decent work for all, including women and

young people TARGET 1.C Halve, between 1990 and 2015, the proportion of people who suffer from hunger

GOAL 2: ACHIEVE UNIVERSAL PRIMARY EDUCATION TARGET 2.A Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a

full course of primary schooling

GOAL 3: PROMOTE GENDER EQUALITY AND EMPOWER WOMEN TARGET 3.A Eliminate gender disparity in primary and secondary education, preferably by 2005, and

at all levels of education, no later than 2015

GOAL 4: REDUCE CHILD MORTALITY TARGET 4.A Reduce by two thirds, between 1990 and 2015, the under-five mortality rate

GOAL 5: IMPROVE MATERNAL HEALTH TARGET 5.A Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio TARGET 5.B Achieve by 2015 universal access to reproductive health

GOAL 6: COMBAT HIV/AIDS, MALARIA AND OTHER DISEASES TARGET 6.A Have halted by 2015 and begun to reverse the spread of HIV/AIDS TARGET 6.B Achieve by 2010 universal access to treatment for HIV/AIDS for all those who need it TARGET 6.C Have halted by 2015 and begun to reverse the incidence of malaria and other major

diseases

GOAL 7: ENSURE ENVIRONMENTAL SUSTAINABILITY TARGET 7.A Integrate the principles of sustainable development into country policies and programmes

and reverse the loss of environmental resources TARGET 7.B Reduce biodiversity loss, achieving by 2010 a significant reduction in the rate of loss TARGET 7.C Halve by 2015 the proportion of people without sustainable access to safe drinking water

and basic sanitation TARGET 7.D Have achieved a significant improvement by 2020 in the lives of at least 100 million slum

dwellers

GOAL 8: DEVELOP A GLOBAL PARTNERSHIP FOR DEVELOPMENT TARGET 8.A Develop further an open, rule-based, predictable, non-discriminatory trading and financial

system (including a commitment to good governance, development, and poverty reduction, nationally and internationally)

TARGET 8.B Address the special needs of the least developed countries (including tariff- and quota-free access for exports of the least developed countries; enhanced debt relief for heavily indebted poor countries and cancellation of official bilateral debt; and more generous official development assistance for countries committed to reducing poverty)

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TARGET 8.C Address the special needs of landlocked countries and small island developing states (through the Programme of Action for the Sustainable Development of Small Island Developing States and the outcome of the 22nd special session of the General Assembly)

TARGET 8.D Deal comprehensively with the debt problems of developing countries through national and international measures to make debt sustainable in the long term

TARGET 8.E In co-operation with pharmaceutical companies, provide access to affordable, essential drugs in developing countries

TARGET 8.F In co-operation with the private sector, make available the benefits of new technologies, especially information and communications

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Annex II. DFID Country Sector PrioritiesSectors are listed in order of priority within the country.

Partner Countries / Regions Country Priorities

Afghanistan Wealth creation Governance and security Education Humanitarian aid

Africa Regional Programme Wealth creation Climate change Humanitarian aid Health Governance and security

Asia Regional Programme Health Wealth creation Climate change Poverty, hunger and vulnerability Governance and security

Bangladesh Education Health Poverty, hunger and vulnerability Climate change Governance and security Wealth creation Water and sanitation

Burma (Myanmar) Health Poverty, hunger and vulnerability Education Governance and security Humanitarian aid Wealth creation

Caribbean Wealth creation Governance and security Climate change

Central Asia (Kyrgyzstan & Tajikistan)

Governance and security Wealth creation Health Water and Sanitation

Democratic Republic of the Congo

Health Wealth creation Humanitarian aid Governance and security

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Partner Countries / Regions Country Priorities Poverty, hunger and vulnerability Education Water and sanitation

Ethiopia Health Education Poverty, hunger and vulnerability Governance and security Water and sanitation Humanitarian aid Wealth creation Climate change

Ghana Education Health Wealth creation Poverty, hunger and vulnerability Governance and security

India Health Education Wealth creation Governance and security Poverty, Hunger and vulnerability Climate change Water and sanitation

Kenya Health Education Poverty, hunger and vulnerability Wealth creation Governance and security Humanitarian aid. Climate Change

Liberia Health Water and sanitation Wealth creation

Malawi Education Health Wealth creation Poverty, hunger and vulnerability Governance and security Water and sanitation

Mozambique Wealth creation Education Health Governance and security Poverty, hunger and vulnerability

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Partner Countries / Regions Country Priorities Water and sanitation

Nepal Governance and security Wealth creation Health Climate change Education Water and sanitation

Nigeria Health Wealth creation Governance and security Education Water and sanitation Poverty, hunger and vulnerability

Occupied Palestinian Territories Education Poverty, hunger and vulnerability Governance and security Wealth creation Health

Pakistan Education Health Governance and security Poverty, hunger and vulnerability Humanitarian Wealth creation

Rwanda Wealth creation Education Governance and security Poverty, Hunger and vulnerability Climate change

Sierra Leone Health Governance and Security Water and sanitation Wealth creation Education

Somalia Governance and security Humanitarian aid Health Wealth creation

South Africa Health Wealth creation Climate change Governance and security

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Partner Countries / Regions Country Priorities

South Sudan46

Governance and security Poverty, hunger and vulnerability Education Water and sanitation Humanitarian aid Health

Sudan Governance and security Poverty, hunger and vulnerability Education Water and sanitation Humanitarian aid Health

Tanzania Wealth creation Education Governance and security Health Water and sanitation Poverty, hunger and vulnerability Climate change

Uganda Health Wealth Creation Governance and security Poverty, hunger and vulnerability Humanitarian aid Climate change

Yemen Poverty, hunger and vulnerability Governance and security Wealth creation

Zambia Health Wealth creation Governance and security Poverty, hunger and vulnerability Education Water and sanitation

Zimbabwe Health Poverty, hunger and vulnerability Governance and security Education Wealth creation Water

46 South Sudan was not yet an independent country at the time of this review and therefore some recent priorities may be inaccurate

or missing.

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Annex III. Key Recommendations from the Report of the UN System Task Team on the Post-2015 UN Development Agenda

Lessons learned from the MDGs and emerging challenges The Post-2015 UN Development Agenda needs to draw on the lessons learned from the Millennium

Development Goals. Based on this learning the post-2015 framework should retain the format of concrete goals, targets and

indicators….. …keeping a good balance between realism and the level of ambition in the definition of goals and

targets. It will be important for the post-2015 agenda to include some general policy guidelines as means of

implementation of the new agenda without being overly prescriptive. While the post-2015 agenda should consist of global goals that are universally applicable the agenda

should allow for target settings adapted to regional, national and sub-national conditions in adherence to international standards.

The focus on human development and the eradication of poverty should remain at the core of the new agenda, however, it must allow for the inclusion of emerging challenges.

Emerging challenges include the persistence of major inequalities; the knowledge gap between countries and within countries; shifting demographics; a growing environmental footprint, peace and security issues; and governance and accountability deficits at the global, regional, national and sub-national levels.

A vision for transformative change A new vision of transformative change towards inclusive, people-centred and sustainable development

is needed. The post-2015 framework should build on the values outlined in the Millennium Declaration and should

build around three fundamental principles: respect for human rights, equality and sustainability. These three principles could inform the identification of goals for the post-2015 agenda, which could be

defined along four, highly interdependent dimensions: inclusive economic development, inclusive social development, environmental sustainability, and peace and security.

A high degree of policy coherence at the global, regional, national and sub-national levels will be required. A core set of ‘development enablers’ can be identified as a guide to build policy coherence without making the post-2015 global agenda overly prescriptive.

Possible contours of the Post-2015 UN Development Agenda When shaping the new agenda the development community should be cautious of three dangers:

overloading, being too prescriptive or too vague, and being donor-centric. The global partnership needs to be reshaped to avoid the perception of being a donor-recipient

relationship. The challenges faced by the world today require a new partnership for development that includes the full range of actors and flexible forms of partnerships at all levels. The global partnership for development should be truly global with clear commitments.

Consideration should be given to the possible benefits of an agenda for a longer time horizon (15 to 25 years) to allow for major transformational changes.

An agenda for a longer time could be set to include intermediate targets (for 5 years or so) to review interim progress and adjust long-term goals in consideration of future emerging challenges.

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Target setting should include a combination of absolute and relative targets to properly take account of population dynamics and different demographic structures across countries and regions.

The outcome of the Rio+20 Conference on Sustainable Development The Rio+20 Conference launched an intergovernmental process to develop a set of global aspirational

goals to focus efforts on priority areas for sustainable development An Open Working Group, comprising 30 representatives nominated by Member States, will be tasked to

develop a proposal for SDGs. In addition, the Secretary-General is asked to provide the initial input to the work of this group and to

establish an inter-agency technical support team. Stakeholders have outlined the need to ensure that the process of identifying sustainable development

goals is coordinated with and consistent with the processes of defining the post-2015 development agenda.

The way forward The first step, from now through to the special event to be convened by the President of the General

Assembly in 2013, is to foster an open, inclusive, and transparent consultation process with contribution from a wide range of stakeholders. The second step, from the special event through 2015, is to increase efforts to achieve intergovernmental consensus while maintaining an open and inclusive process.

A set of intergovernmental meetings and processes, such as the Rio+20 Conference in June 2012, have and will serve as major milestones leading up to 2015. They will inform the post-2015 agenda by identifying new priority areas.

A High-level Panel, appointed by the Secretary-General, will convene from July 2012 to provide recommendation on possible contours on the post-2015 agenda and will contribute to further the political process. The panel will deliver its first report in the first quarter of 2013.

The UN System Task Team delivered its first report with recommendations on the post-2015 UN Development Agenda to the Secretary-General on 4 June 2012.

The UN System Task Team will continue to support the process through its analytical inputs, expertise and outreach towards the definition of a post-2015 development agenda that responds to the aspirations of all people for a world free of want and fear and consistent with economic development, social progress and environmental sustainability.

The UN Task Team stands ready to provide technical inputs and support to the Open Working Group, once constituted, as agreed in the Rio+20 Outcome Document, and to the overall process of identifying the sustainable development goals as part of the Post-2015 UN Development Agenda.

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Annex IV. The Four Pillars of Sustainable Development

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