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Aid Alert: China Offically Joins the Donor Club

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Several thousands gathered in the port city of Busan in Korea (the fifth largest port in the world) this past week at the Fourth High-Level Forum on Aid Effectiveness (#HLF4 on twitter). More than 100 ministers (mostly of development cooperation) attended. UN Secretary-General Ban Ki-moon, President Lee of Korea, President Kagame of Rwanda and U.S. Secretary of State Hillary Clinton spoke at the opening plenary. Clinton is the first U.S. secretary of state to attend an aid forum. Her speech signaled to others that she wants the United States to play better with others in the development sandbox -- not just on the vision laid out by President Obama in his United Nations speech two years ago, but in the implementation. (Unfortunately, U.S. performance on the quality of aid quality was, to say it nicely, not great -- on the basis of data collected in 2009.)

This forum followed similar gatherings in Paris in 2006 and Accra in 2008 and, as at those gatherings, the traditional donors made promises to do better in the way they administer aid. For a good pre-Busan explanation of what it was all about read this on the always readable Duncan Green blog.

Many observers could be forgiven for skepticism about the usefulness of these international jamborees. Still Busan #HLF4 exceeded my (low) expectations -- in spirit if not in the concrete form that would make it possible to really applaud. Though it will not grab even the minor headlines coming out of the conference on climate in Durban, South Africa (where expectations are even lower- more on this here), aid insiders are likely to remember it for one big reason: China actually and formally acknowledged in Busan that it is an official donor. After balking it signed on to full membership in a new donor club.

More on the China issue below, but first what else happened at Busan?

International conferences produce official communiqués or in this case an outcome document (these documents keep officials up late the night before, parsing words and clauses). At least the resulting document is frank that progress up to now on improving the "quality of development cooperation [aid in other words] has been uneven and neither fast nor far-reaching enough." (For how little progress donors have made against their own promises go here; for a quantitative assessment that illustrates how uneven progress has been go here.

The outcome document itself suggests no radical new thinking or action but simply more of the same in the Avis mode: Try harder.

Still in the corridors and in the unofficial side events, the emphasis was in fact on getting more concrete or more clear in some areas:

Transparency: Hillary Clinton got applause when she announced that the United States will join the International Aid Transparency Initiative (IATI). I hear it was no easy task for aid officials to get membership cleared through State, Treasury and other departments. Kudos to Clinton and to USAID Adminsitrator Raj Shah for championing it - and to officials and staff at the Millennium Challenge Corporation who have emphasized transparency since the beginning of MCC. The state of reporting at USAID is still poor - if you look up disbursements to Pakistan in 2010 you get the following message: "There are no historical disbursements" for Pakistan. (For the high costs to the United States of the lack of transparency about civilian aid disbursements in Pakistan, go here). IATI was started independently of the donor club (i.e. of the Development Assistance Committee of the OECD, which is the club of the traditional donors plus one once-emerging market, Korea. So it's a big deal that the United States and several other big donors have joined up, and indeed that IATI is named and endorsed in the outcome document.

Accountability: The language has shifted slightly from "mutual accountability" (e.g. of donor and recipient to each other: donor keeps the money flowing/recipient improves its governance) to accountability of donors to their taxpayers (a reasonable idea though some commentators seem are ambivalent about it) and of aid-recipient governments to their own citizens in their use of aid -- and the relationship that has to good governance, the social contract, and democracy itself.

Results: Well everyone talks results, but the talk is now on paying (after the fact) for performance, and on measurable outcomes, not just outputs, and certainly not inputs. The ministers from the UK and Norway seized some justified bragging rights at a side event CGD sponsored (with DfID and Oxfam), and described aid programs now underway (education in Ethiopia, forest protection in Brazil, Guyana and Indonesia) where they are paying after the fact for verified outcomes. This is what we call Cash on Delivery happening, and I am happy to brag about it. At our event Sweden, the World Bank, the European Commission, and Oxfam (with some caveats) promised more outcome-based programs.

Learning and risks. These are new words, representing healthy new thinking, among aid insiders. That's a step in the direction of donors' recognizing and managing the possibility of failure - and maybe even innovating from time to time. In the discussion of results-based aid at our event, the question of whether and how much risk recipient governments should take came up. (Most of the risk is the position we take in the case of Cash on Delivery.)

There was also lots of talk about the private sector (as in profit-making) and its role in development finance, and the outcome document refers to "non-state" actors, including big philanthropic foundations, and of course the role of civil society. But I heard the side sessions on the private sector were not particularly interesting.

And what about China?

A key objective of the OECD organizers (the chair of the donors' aid committee there is Brian Atwood, the head of USAID during the Clinton Administration) was to bring into the fold the "new donors" - China, India, Brazil, some oil economies, South Africa. For why that matters go here. To do that a new entity was created: The Global Partnership for Effective Development Cooperation. This new entity looks to me like a development ministers' counterpart to the G20 finance ministers: a grouping meant to ensure implementation of the approach (transparency, accountability, results, etc.) "at the political level". The idea is that it's a new club -- not the OECD old (boys?!) club that Atwood chairs -- and its activities will be supported not only by the OECD but by the more inclusive United Nations Development Program.

Now for some inside baseball. There was a bit of a row about in what exact form China would sign on to new entity: with or without clarity that it was fully endorsing both abstract and worthy principles (transparency, accountability) but also such standards of conduct as full reporting of its disbursements and untying of aid. The document has plenty of awkward language referring to "on a voluntary basis" and "differential" commitments (differential is the key word for China in the Kyoto Protocol, as it implies no binding commitments for the "south" nations), so it is not clear why China balked at all. Apparently when China balked, the Europeans were ready to make it easy for China to join the club without committing to the standards - including the reporting standard. It was the Americans, the Australians and the Canadians who pressed for more clarity from China that it was endorsing the fundamental principles, and the Koreans who worked it out with the reluctant Chinese (whose relatively junior delegation perhaps hesitated to make any commitment without an OK from higher up). That Brazil, South Africa and Mexico, and even India were joining up probably helped.

How much it will matter is yet to be seen. In her speech, Hillary Clinton took a dig at countries that give with one hand, and seize natural resources with the other. That no doubt miffed the Chinese... On the other hand, it is good to know that the leadership of USAID (Raj Shah), AusAid (Peter Baxter), Canada (Margaret Biggs) pushed for all club members to publicly commit to higher standards, even with the proviso that doing so is on a "differential" and "voluntary" basis (which is in any event, always the case for sovereign nations in an international setting). Endorsing norms and principles without committing to implement them is, let's hope, a step in the right direction.