NN42, June 2009
A Safari Towards Aid Effectiveness?
Sector Approach, Business as Usual or Change of Behaviour?
By Jean-Marc Castejon, European Training Foundation
Email: Jean-Marc.Castejon@etf.europa.euKeywords
TVET; Aid modality; Egypt; Jordan
Summary
Drawing on examples from TVET reform in Egypt and Jordan, this piece argues that the relevance of a specific aid modality is linked with the timing of the reform.
There is a call for change in the management of development. Aid flows are unlikely to make a serious dent into global poverty if donors do not change the way they go about providing aid and developing countries do not enhance the way they currently manage it. Business as usual will not only erode the credibility of development assistance in the North and South, but more importantly, it will undermine the international community?s ability to reach the MDGs by 2015. Disappointing results could make aid, not poverty, history!
The Paris Declaration (PD), endorsed on 2 March 2005, is an international agreement to continue to increase efforts in harmonisation, alignment and managing aid for results with a set of monitorable actions and indicators. It is trying to change behaviour in the world of aid development. In some ways, it is an attempt to regain the lost ground and restore confidence after the uneven successes of structural adjustment. The PD does not address aid modalities (project or budget support) but indicators of progress of aid effectiveness. But it mentions the strengthening of capacity by ?avoiding parallel implementation structures? and the result oriented framework for the assessment of sector programmes (indicator 11). So less money for technical assistance and more for general budget support. My contention is that the relevance of aid modality is linked with the timing of the reform.
Projects or budget support are two approaches to committing finance under its ?direct arrangements? with partner governments. The great hope put on the budget support after the near dismissal of the project approach, beside expected simplification of procedures through lowering of transaction cost, was to revisit key issues such as the role of ownership of reforms, capacity building and conditionalities in development management. ?Budgetary support shall be contingent on the administration of public finances of the beneficiary country being sufficiently transparent, reliable and efficient, and on well-defined sectoral or macroeconomic policies approved in principle by international financing institutions having been put in place. Disbursement of budgetary support shall be conditional on satisfactory progress towards achieving the objectives in terms of impacts and results? (PD).
The trouble with projects is that they assumed too much: they assume ownership, stability in policy directions, and above all they assumed institutional capacity to meet a number preconditions. In the field of education, take the issue of school autonomy: what are the chances of a pilot project on school autonomy amidst a heavily centralised system? It would have to bypass the current system. So projects had to protect themselves from the system rather than endorse it, which makes technical assistance in a way irresponsive to country circumstances.
So budget support deals at least in theory with problems that projects brushed under the carpet: sector approach, capacity building, relevant use of technical assistance, leadership, ownership. The focus is at least in theory on a country-owned national policy and strategy (for example, a PRSP, Association Agreement, or agreed National Action Plan). Domestic political considerations must drive reform processes and ?ownership? of these reforms is critical for their successful implementation. Even if a public financial management (PFM) system is regarded as weak, this does not automatically exclude a beneficiary country from receiving budget support. Indeed, one of the objectives of budget support is to support the achievement of the goals of national policy and strategy by strengthening the PFM system through which such a policy and strategy is implemented.
The question is again: here again, don?t we assume too much? Of course, in the use of budget support it is said that there are no absolute ?thresholds? in the sense that certain static minimum conditions in the area of national policy and strategy, macroeconomic policy, and public financial management have to be met. Instead, the key factor is the direction and magnitude of change. Whilst a rigorous diagnostic assessment is needed, a dynamic interpretation of the eligibility criteria is required, a case-by-case approach.
Does budget support made a difference as compared with the project approach? Well, may be. It makes a difference in that it points to the right problems. Take the leadership issue: in a sector reform, you need a leader and preferably not self-proclaimed. If a sector is one ministry (e.g. education), then the process can be smooth from preparation to implementation. But when a sector is distributed across several ministries, problems start. In Egypt for example, there are 28 public VET training providers. Who is going to decide on leadership of the Employment and TVET sector? There has been no leadership so far, that is no sector, so why should things change? Though defining a sector?s contours and identifying a leader is a problem, it stays a problem which does not go away when the financing agreement is signed. A consensus may be reached, but it may be fragile. It takes a strong political commitment to keep a sector together: in Jordan, the Ministry of Labour (MoL) is leading the sector reform but it has less training centers than the ministry of education. So the MoL needs to quickly build their institutional capacities, which is a multidimensional task: on the one hand it is about building trust with other stakeholders and especially with the ministry of finance; on the other hand it is about adding new capacities such as planning and monitoring, in a ministry whose function has so far been limited to granting work permits to foreign workers. The change is huge. Is it realistic?
When a sector is redefined for reform purpose and includes as a result several ministries, the bargaining power of the stakeholders is weaker because a sector cannot be strong right from the inception phase of the reform. The issue of bargaining power is always underplayed and brushed away under the rhetoric of partnership, long after Douglass North (1989) has emphasized that institutional development depends almost entirely on it. If their voices are to be heard, stakeholders need to increase their bargaining power both within the sector (see the case of social partners) and with the donors. In all cases, there is almost no chance of success of a turnaround outside a political opportunity. A turnaround does not just require policymakers to sign something (?stroke-of-the-pen reforms p 114). Reforms need first determined policy makers.
Jordan provides a very good example of this political opportunity: in the wake of the new National Agenda, the leadership, strategy and action plan have been built by a determined minister of labour who knew how to draw from a pool of expertise available, and especially from the European Training Foundation. The question of when (at what stage of the reform) is technical assistance most valuable is a key question. The problem did not arise in projects, but it is vital in budget support. The perspective of aid is first an incentive. The issue of technical assistance is not that the country does not see the money; it is if external professional people are of any use. And here timing is all: ?Technical assistance during the first four years of an incipient reform, and especially during the first two years has a big favourable effect on the chances that the momentum of the reform will be maintained. It also reduces the chance that the reform will collapse altogether? (Collier, 2007). Jordan is a good case: first a massive injection of technical assistance to get prepared in institutional capacity (monitoring, organisation, planning), followed by a general budget support. But without a continued political commitment there will be no reform. We trust that these examples show that translating Paris into sensible policy is by no means a straightforward business, and particularly in the skills development ?sector?.
References
Collier, P. (2007) The Bottom Billion, Oxford University Press.
North, D. (1989) Institutions, Institutional Change and Economic Performance, Cambridge University Press.
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