As More Aid Flows to Fragile States, a Call for a Better Approach

Global poverty has been reduced dramatically over the past two decades. Less than 11 percent of the world’s population were living in extreme poverty in 2013 compared to 35 percent in 1990. But improvements have largely come in stable countries. Many of the remaining pockets of extreme poverty are in “fragile states,” countries that are vulnerable to internal and external shocks and can easily tip into crisis when faced with an environmental, economic, social, or political change.

Unlike those of their stable neighbors, the institutions of fragile states tend to preserve the conditions of vulnerability, contributing to cyclical crises. In these conditions, when governments are “unable or unwilling to govern effectively,” can aid make a difference?

In a recently released report by the Brookings Institution, Laurence Chandy, Brina Seidel, and Christine Zhang take a closer look at the effectiveness of foreign aid in fragile states and suggest ways to improve measurement and quality.

As more and more attention is given to fragile states, the authors call for the standardization of aid practices and greater use of multilateral donors, both to streamline efforts and to prevent the exacerbation of instability by donors that have little experience or expertise working in these complex environments.

Establishing New Indicators

Many measures of aid effectiveness essentially equate “good practice” with funding projects in well-governed countries, where donors can be relatively sure of how their money is spent, write the authors. But as the need for aid becomes more concentrated in fragile states – home to some 2 billion people today – new metrics are needed.

Fragile states are home to some 2 billion people

Effective aid delivery across both fragile and stable states should, according to the Organization for Economic Cooperation and Development (OECD)’s Principles for Good International Engagement in Fragile States and G7+ New Deal for Engagement in Fragile States, show respect for country programming, systems, and staff; work in cooperation with other donors; and be a source of stability for recipient countries.

Building off of these essential themes, the authors propose 10 indicators of effective aid delivery: informing the recipient country of the donor’s budget plans; strengthening the recipient government’s accountability instruments; cooperating on country missions to reduce the burden on recipient countries and creating a shared knowledge repository; and channeling aid through cooperative agreements, providing donors with added support in situations where they may lack expertise.

With these indicators and themes in place, the authors assess how aid practices differ in fragile and stable countries and compare quality across donors.

Winners and Losers

Using money allocated toward the 10 indicators as their benchmarks, the authors perform two analyses: comparing aggregate donor assistance in fragile and stable environments (as determined by lists from World Bank and the OECD Development Assistance Committee) and then disaggregating data from the 22 largest donors between 2007 and 2014 to determine organization performance.

The findings show differences in general donor behavior in fragile and stable countries. Donors are more likely to provide aid through another organization in fragile states rather than directly, but are less likely to work jointly with other donors in fragile states. And fragile states receive less aid from multilateral donors, like the United Nations or World Bank, than stable states, but receive more “multi-bi” aid, a mechanism wherein individual donors can pool funds in a trust which are then administered by a multilateral agency.

Certain donors performed much better on some indicators than others. France scored positively for the use of country financial management systems in fragile states, but received a poorer score for the volatility of funding. The Netherlands scored higher for providing multi-bi aid than the other 21 donors, but received one of the lower scores for informing recipient countries of their spending decisions. Fifteen donors did not use recipient financial management systems at all, and 14 donors neglected to conduct joint activities with fellow donors.

“So long as donors are engaged…they face a responsibility to ensure they are delivering aid effectively”

Unsurprisingly, donor practices are less effective overall in fragile states than in stable states, and performance within fragile states themselves can vary between donors. For instance, while Denmark, Canada, Sweden, Norway, and the Netherlands all performed relatively well within both fragile and stable states – as indicated by their high scores in both environments – countries like the United Kingdom, Japan, and Australia all performed better in stable states than in fragile states.

The United States received poor fragile and stable scores, reflecting the authors’ assessment that, “poor performers in fragile states tend to perform poorly everywhere, and alter their practices for the worse in fragile settings.” This theory is further reinforced by eight of the worst performing donors in fragile states – including France, Belgium, and the United Nations – who were also the worst performing donors in stable settings.

When grouped together, bilateral donors tended to perform worse than multilateral donors. Given the fact that multilateral aid is less prevalent in fragile states than bilateral aid, the authors write this represents a “failure in the division of labor in the aid industry.”

Standardized Measures

Although donors have thankfully come to view fragile states as a “shared responsibility of the global community,” according to the report, the downside is that inexperienced organizations working in fragile states may lead to waste and even harm.

To avoid this fate, the authors call for poorly performing bilateral donors to rely on better-performing multilateral agencies, such as the World Bank’s International Development Association, one of the largest sources of low-interest credit to the world’s poorest countries. The World Bank has promised to scale up resources in fragile states and offers an opportunity for bilateral donors to join a much larger, better performing intervention, write the authors.

Most humanitarian and development organizations are not prepared for the type of cross-sectoral programming necessary for the multifaceted nature of conflict. The OECD in their annual States of Fragility report suggests donors work with multiple types of actors across a myriad of sectors, from natural resource management and climate change to public health, to be effective.

The authors urge donors to define a minimum set of standards, like the 10 indicators highlighted in the report, which are observable, verifiable, and can be adopted by the entire development community. Doing so will improve aid efficacy by making the myriad of efforts in fragile and stable states more comparable.

Upholding and maintaining such standards won’t be easy, they acknowledge. The 2005 Paris Declaration on Aid Effectiveness made an attempt to set universal targets and principles aimed at making aid more effective by 2010. In 2011, when the OECD surveyed progress, they found only one 1 of the 13 targets had actually been met by the deadline. But “so long as donors are engaged in fragile states, they face a responsibility to ensure they are delivering aid effectively as possible,” concludes the report.

Source: The Brookings Institution, G7 Plus, London School of Economics, The Organization for Economic Cooperation and Development, The World Bank.

Photo Credit: A member of the UN peacekeeping force in the Central African Republic carries food aid, courtesy of Catianne Tijerina/UN Photo.