5. Policy Directions in Aid Management

This Chapter draws together the empirical evidence and the qualitative analysis considered in previous Chapters to provide some practical policy prescriptions. It then proceeds to consider how these prescriptions may be applied to the H-A-R Action Plan. At the outset it should be acknowledged that the data and the analysis presented in previous Chapters suggest that there are encouraging signs of progress: at a macro level there is evidence that indicates a relatively close alignment between resources and national priorities, while at sector level a large number of TWGs appear to be embracing the aid effectiveness work, including to develop coherent sector programmes and complementary capacity development strategies.

Priority Policy Actions

Building on these strong foundations, it is therefore useful to consider how further improvements in aid management might be secured and how remaining challenges might be addressed. In this latter category it must be noted that progress in our aid effectiveness work is closely associated with, and highly dependent on, the broader public sector reform programme. Predictable funding of the NSDP, for example, will rely in part on the further strengthening of the national planning and budgeting exercise, in particular through the Public Financial Management reform. Similarly, the development of sustainable national capacity will depend, in part, on public service reforms and continued pay reform. Notwithstanding the dependence on these reforms, however, there is much that can be directly addressed in the context of improved aid management.

Based on a synthesis of the recurring themes discussed in this Report, there are four key policy areas in particular that are considered to be both necessary, in terms of their potential impact on development results, and feasible, in terms of having the existing capacity to implement them. In the context of the current H-A-R Action Plan, the following activities might therefore be prioritised:

Recommendation One:   Increased Effectiveness of the Technical Working Groups and GDCC

Reaching the NSDP targets will require a concerted effort, including to strengthen aid effectiveness at sector and thematic level. Technical Working Groups, and their lead ministries, must be sufficiently well managed and organised, and must have the technical and financial resources that are necessary to support the national effort to strengthen ownership and to align development assistance to national priorities and systems.

  1. Development partners should actively engage with lead ministries to review the TWG Guideline and to identify a roadmap, and monitoring tool, for increased aid effectiveness;

  2. Line ministries and TWGs should identify the nature of transaction costs associated with aid management and agree specific prescriptive actions to address them;

  3. Programme-based approaches must evolve so that they represent real efficiencies in aid management, as opposed to being just one more modality in addition to project financing. Improved practices include pooled technical cooperation, joint reviews, increased use of evaluations and common implementation arrangements using Government systems.

The TWGs, and more so the GDCC, play a role in brokering the often complex dynamics and sets of issues that underlie the development partnership. It is therefore essential that they function effectively as their role is far greater than simply supporting aid effectiveness work, which cannot succeed unless the broader fundamentals of development relations are working satisfactorily. These fundamentals include the building of trust, creating an environment in which different interests and positions can be brokered, and establishing a mutually agreed framework for setting priorities and then moving forward together in implementation and review.

The 'Guideline on the Role and Functioning of the TWGs' attempts to support these objectives and to provide practical advice on how effective dialogue can be strengthened at a technical level. From an aid effectiveness perspective the challenge is not only to develop a coherent sector framework, either some form of programme-based or sector-wide approach, for example, but also to introduce new working practices that will ensure that a more strategic approach can be taken to finance and implement both sectoral and cross-cutting activities that are associated with the national priorities set out in the NSDP. This is considered particularly necessary as the alignment of support around the NSDP has caused inevitable 'crowding' in some priority sectors and the early evidence does not unambiguously show that these programmes, which are now relatively mature, have contributed to reduced transaction costs. A related priority is then to establish a results-based monitoring system that will provide the basis for joint review.

In its role as the Royal Government's aid coordination focal point, and as the secretariat to the GDCC, CRDB/CDC is mandated to provide aid management-related support to TWGs and other Ministries, Departments and agencies that they request. This support, intended to complement the Guideline and to reinforce TWG efforts to become more effective, may include providing advice and guidance on:

  1. The H-A-R Action Plan principles and their links to the Paris Declaration;

  2. Database related work and the preparation of sector profiles;

  3. Paris Declaration familiarisation, implementation and monitoring;

  4. Programme-based and sector-wide approaches;

  5. Technical support to secretariats;

  6. Aid management capacity needs assessments; and

  7. Dedicated aid management training.

Supporting the increased effectiveness of the TWGs is the responsibility of both the Royal Government and development partners. Engagement at TWG level is required to ensure that potential benefits of the coordinated approach are realised and that the programme-based approach delivers demonstrable benefits in terms of Government ownership, increased efficiency and development results.

Recommendation Two: Implement the Strategic Framework and the CDC Mandate

The Strategic Framework for Development Cooperation Management provides a full set of institutional arrangements and responsibilities that, if fully implemented, will translate into improved development results. The role of CDC is critical to promoting the alignment of aid with national priorities at sectoral and aggregate levels.  

  1. Development partners should routinely include CRDB/CDC in arrangements for signing new financing agreements and country strategies;

  2. Development partners are requested to enter details of all their support into the CDC Database and to provide copies of signed project documents and agreements;

  3. Development partners should ensure that consultations with CDC take place at least on an annual basis, including to validate data.

Building on the role of CRDB/CDC in providing the support that is requested, it is likely that the application of the CDC mandate, set out in the Strategic Framework for Development Cooperation Management, will lead to direct and immediate improvements in both aid effectiveness, for example through increased alignment to national priorities, and to development results, for example by ensuring that resources are consolidated for more coherent planning and budget execution.

For example, if new projects were routinely discussed with CRDB/CDC, as well as with other relevant Government officials as is intended in the Sub-Decree that sets out the role of CDC, then the following benefits might be realised:

  1. Alignment at both an aggregate and sub-sector level might be more effectively guided by Government, strengthening national ownership and the likely impact of development assistance;

  2. By working in collaboration with the Ministry of Planning, a PIP number could be routinely issued to a project that could then be routinely entered into the CDC Database. This would make the preparation of the PIP a significantly more routine and accurate exercise, with direct and immediate benefits to the national planning effort as well as to efforts to track resources in national systems;

  3. A more efficient aggregate allocation of resources might be promoted at a national level by considering the implementation of the country strategy of a development partner, ensuring that their support, and its mode of delivery, is closely associated with their perceived area of competency; and

  4. Individual aid effectiveness principles can be routinely applied by establishing certain practices as defaults (e.g. use of national systems, joint reviews, and coordinated approaches to capacity development). The implementation of the H-A-R Action Plan would then become more than a discretionary exercise as exceptions would need to be explicitly justified.

Having developed the CDC Database to a point where it has a structure that can support both the aid effectiveness and the national planning exercises, CRDB/CDC will also consider the introduction of more strategic consultations with development partners. These will consider the portfolio of each development partner more closely, providing support to them in ensuring that their valued assistance is delivered in a manner that will maximise its impact.

This exercise may include the use of 'data audits', in particular for the monitoring of the H-A-R Action Plan and Paris Declaration Indicators (including by providing the support that was identified as necessary during the February-April 2007 data collection exercise), and evaluations that focus on the process of learning from past experience and the application of lessons to future programming. It is intended that this process will be conducted efficiently and will focus on the promotion of linking development assistance with development results. Serving as the 'hub' of aid management, CRDB/CDC can then share these lessons through the GDCC or through future Aid Effectiveness Reports.

Recommendation Three: Focusing on the Capacity Development Impact of Technical Cooperation

The new aid environment, premised on more efficient aid practices and closer working partnerships, requires that technical cooperation which accounts for nearly half of all external assistance is managed more strategically and with a greater focus on linking it to the achievement of tangible results.

  1. Development partners should participate in and support the study on technical cooperation to be undertaken by CDC in the latter half of 2007 and discussed in the Partnership and Harmonisation TWG;

  2. The recommendations of the report should be linked to the implementation of the H-A-R Action Plan across all line ministries and TWGs, including to undertake a capacity needs assessment and to develop a coherent and Government-managed approach to strengthening systems and developing national capacity;

  3. Development partners should work together to assess the capacity and advisory components of their support to Government and, in the context of the major reforms and the use of a programme-based approach, seek to work in partnership with Government to rationalise the use of technical cooperation and the number of advisory personnel.

It is something of a paradox that technical cooperation is perhaps the component of ODA that attracts most attention but yet remains relatively little understood. As a consequence, the contribution of technical cooperation to overall aid effectiveness and the attainment of development results is often therefore considered a rather contentious issue, both globally as well as in Cambodia. Regardless of the nature of technical cooperation inputs experts, equipment, training, scholarships etc. or the immediate objective for which it is deployed - policy work, establishing and strengthening national systems - the rationale for its provision remains the same: capacity development.

There is an emerging consensus on how sustainable capacity can be developed, including the potential contribution that can be made through technical cooperation inputs. What is becoming clear is that capacity is usually developed most successfully when it is based on national foundations and where efforts to support it are under local management. In the current aid environment, this may mean that the use of technical cooperation in Cambodia becomes more associated with partnership-based efforts to support the national programme.

It may be, for example, that in the context of a partnership-based approach and the core reforms there can be sharply diminishing marginal returns in the use of technical cooperation experts and advisers. As more delegated partnerships and co-financing arrangements are established, or as resources are pooled in Government systems, it may therefore be time to re-think the use of technical cooperation, ensuring that Government receives policy-based support that provides it with sufficient options but not to the extent that can lead to confusion, inefficiency, and sometimes frustration in the development or implementation of programmes. Based on a dialogue with development partners in 2006, these issues will form the basis of analytical work to be conducted in the latter half of 2007.

Recommendation Four: Promoting Mutual Accountability

Enhanced mutual accountability will strengthen the development partnership and ensure that common responsibilities and individual efforts combine to support NSDP implementation. The promotion of enhanced mutual accountability requires an increased focus on constructive engagement and the further development of existing dialogue mechanisms and monitoring tools.

  1. Government lead ministries and development partners should conduct joint reviews across all reforms, TWGs and sectors. These should include an evaluation of JMIs and aid effectiveness indicators identified jointly in TWGs and seek to evaluate the contribution, impact and practices associated with the delivery of development assistance;

  2. Where considered necessary, TWGs may choose to employ an independent monitoring exercise to identify partnership-based solutions to aid partnership-based challenges;

  3. Annual routine monitoring of the JMIs, the H-A-R Action Plan and its associated indicators will continue to provide the basis for a dialogue at the annual CDCF meeting.

Mutual accountability introduces some balance to the development partnership and provides the basis for establishing the trust and openness that satisfy the more qualitative criteria required to promote both aid effectiveness and development results. Mutual accountability explicitly recognises that both Government and development partners have obligations as well as entitlements in financing, implementing and monitoring the national programme. It is therefore encouraging that progress has been made in developing both the tools and the mechanisms for a mutual accountability approach that is suited to the particular characteristics of Cambodia.

Included amongst these tools are the H-A-R Action Plan and the Joint Monitoring Indicators (JMIs), both of which were revised in 2006/07 to ensure that they reflect the current partnership priorities of Government and development partners. The CDC Database, and indeed this Report, which now provides information on aid effectiveness indicators and summary profiles of sector funding, will also play a broader mutual accountability role by sharing information with a wider range of stakeholders and promoting peer review.

With regard to mutual accountability mechanisms, the TWGs must continue to consolidate and build partnerships that are based on achieving results in an environment characterised by transparency and accountability. The reports submitted by many TWGs suggest that while progress has been made there is still some way to go in establishing mechanisms for sharing information and for ensuring that both parties live up to the commitments they have made regarding the funding and implementation of the programme. The GDCC and the CDCF will continue to provide senior-level dialogue opportunities where a wide range of matters that impact on the development partnership can be discussed and resolved in an atmosphere of mutual trust and understanding.

The notion of mutual accountability is relatively new and many countries, including Cambodia, are still exploring and innovating how best to apply the principles to the practice. Cambodia is perhaps further ahead than many other countries in terms of evolving both tools and processes but it is perhaps the manner in which they are used that provides the real test. Both Government and development partners must appreciate the value of the TWG-GDCC mechanism and not take its use for granted.

Consolidating the Implementation of the H-A-R Action Plan

The four priorities identified above promoting effective TWGs; implementing the Strategic Framework for Development Cooperation Management, in particular the full application of the CDC mandate; and, improving technical cooperation, and strengthening mutual accountability are central features of the H-A-R Action Plan. The findings of this Report therefore do not identify new priorities or propose that we change direction; rather, they are more about where we choose to place emphasis and where we agree that we are most likely to see our efforts rewarded with improved development results.

Other than to augment the H-A-R Action Plan with a set of indicators, this Report therefore makes no proposals on revisions to the H-A-R Action Plan. These indicators are adapted from the Paris Declaration indicators with additions that monitor progress in the reporting and validation of information on aid flows as well as in making increased use of delegated cooperation and co-financing arrangements, a baseline for which can be established once the data has been validated by development partners. For all indicators except for this latter case the national targets are provided as a result of the Paris Declaration, although this data must also be subject to some further validation and will become part of routine outreach work by CRDB/CDC. Although a set of national targets have now been established as a result of the Paris Declaration monitoring survey, TWGs will also be encouraged to identify their own targets for some or all the indicators according to their own priorities while monitoring can be routinely undertaken through the CDC Database.

Based on the recommendation to continue implementing the H-A-R Action Plan, to place more emphasis on the four topics identified above, and to associate the Action Plan with a set of indicators, it is also suggested that the latter half of 2008 be used to prepare some form of mid-term review of the H-A-R Action Plan. It is believed that these recommendations will provide strategic direction to the implementation of the H-A-R Action Plan and will also promote some efficiency and focus to the activities that are pursued in the TWGs.

Many of the practices included in the four main recommendations, and featured elsewhere in this Report, are of course common to many other partner countries and it is relevant to note the activities that some of these countries are prioritising, often in the form of what has become known as a Joint Assistance Strategy. These Strategies attempt to rationalise the multiple development partner planning and programming exercises so that resources can be presented in a more consolidated manner. This consolidated resource envelope is then intended to facilitate a more coherent planning exercise in the context of the national development plan.

Principles and practices discussed in this Report that are often included in a Joint Assistance Strategy exercise include:

  • Identification of a coherent and consolidated medium-term resource envelope that supports a robust national planning and MTEF exercise;

  • A division of labour that defines 'comparative advantage' and promotes a focus on a limited number of sectors or themes (often informed by a costing exercise to identify resource needs);

  • A discussion on the use of complementary modalities in the context of programme-based approaches, defining the roles of budget support, programme-based assistance, projects and technical cooperation, as well as the use of delegated partnerships and co-financing; and

  • Identification of good practices (e.g. a donor division of labour, complementarity in use of different aid modalities, joint reviews, 'quiet times' when mission activity is reduced) that strengthen national systems and ensure the efficient and effective provision of development assistance.

These practices, which the Royal Government endorses in principle, are either present in the existing H-A-R framework or can be incorporated into it at a future time, for example during a mid-term review. This would provide for a more effective approach than developing a separate Joint Assistance Strategy as the evidence of these exercises elsewhere is that they are either time-consuming in the extreme or else are not always fully Government-led.

It must also be noted that the existing policy frameworks, including the Strategic Framework for Development Cooperation Management (which provides organisational arrangements), the H-A-R Action Plan (which sets out priority actions), the National Operational Guideline (which provides aid management procedures) and the TWG Guideline (that sets out approaches to sector costing and programming) are yet to be fully implemented or even taken account of in the practices of many development partners.

The focus of both Government and development partners must therefore now be placed on the implementation of these existing frameworks and not on developing yet another common plan or strategy. This renewed emphasis on implementation must also be applied to the related reforms, e.g. the PFM and D&D reforms, that will make the national planning and budgeting process the means by which both domestic and external resources are allocated and managed. At this time the Government is therefore not persuaded of the merits of developing any further aid policy framework, including a Joint Assistance Strategy.

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