Unpicking the Multilateral Aid Review

Ed Hedger
2 March 2011
Comment
Much of the reaction to the reviews published yesterday is likely to focus on the results of the Bilateral Aid Review (BAR), and the decision to cut direct aid from the Department for International Development (DFID) to countries such as Burundi and Niger, while continuing with programmes in India and South Africa. Opinions will vary and it is clear that judgements have already been made about where DFID can expect to secure the best results.

Away from that debate, the findings of the Multilateral Aid Review (MAR) will have equally significant implications for how the UK aid budget is spent. In 2009/10, £2.4 billion of DFID funds went directly to multilateral organisations through core contributions and a further £1.3 billion of UK bilateral aid was delivered through multilateral channels. So decisions about where to allocate these funds are just as important for those concerned with the value for money of UK development assistance.

The Framework
Evaluating the relevance, efficiency and effectiveness of 43 very different external organisations is a complex task and DFID appears to have done a respectable job.

The systematic approach to reviewing performance against a common framework is to be welcomed, even with its caveats. There seems to be a reasonable balance of strategic considerations (a poverty focus and UK development priorities) and organisational strengths (cost consciousness and transparency) in the assessment made of each organisation.

Colleagues at ODI have already noted a possible tension in the MAR methodology for determining the ‘Needs-Effectiveness Index’ which combines contradictory measures of country fragility on the one hand and policy/institutional strength (through World Bank CPIA) on the other. The details of that index and its implications for the review model will need further unpicking, but it was only one of multiple components scored in the review. Even with this tight specification and quantitative evidence, the addition of a criterion on ‘likelihood of positive change’ still gives DFID flexibility to keep faith with some poor performing multilateral organisations if they commit to improving. That is probably sensible and reflects the need for strategic judgements as well as strict value for money concerns.

Two thoughts occurred to me on the MAR framework in comparison to the BAR:

  • First, the processes and criteria were quite different and it isn’t obvious how the two were reconciled. The BAR included detailed bids for funding in the form of ‘Results Offers’ from DFID country offices/programmes which set out the results they will deliver up to 2015. In contrast, the MAR focused more on qualitative measures around strategy and performance. Multilateral organisations were not invited to submit ‘Results Offers’ in the same way as bilateral country programmes. Equally, it is not clear how much the historical performance of individual DFID country programmes in delivering results was taken into account in assessing the credibility of specific results offers.
  • Second, I understand that the respective shares of overall DFID spending through multilateral and bilateral channels were decided in principle before the detailed reviews were launched. Apparently some adjustments to the preliminary results of each were then needed to ensure strategic coherence across the two and to resolve any competing claims for funding. What is not clear from the review documentation is how that reconciliation was done and which criteria were used.

The Results
Many of the MAR results did not come as a surprise. It was announced last year that core funding to the World Bank will rise by 25% (to £888 million per year under the IDA 16 replenishment) and that the DFID contribution to UNICEF will nearly double (to £40 million per year). DFID has long been clear that it supports the strong results focus of organisations like the Global Alliance for Vaccines and Immunisation (GAVI) and the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM).

Announcements on replenishment levels for both are due in the coming months and will provide for substantial increases – not least because they (along with the World Bank) are likely to be favoured channels for absorbing additional UK aid as it scales up to 0.7% of Gross National Income in 2013. The World Bank has also been in the spotlight this week following publication of the International Development Select Committee report on World Bank effectiveness, which broadly endorsed the UK allocation to IDA 16.

The decision to cut funding (International Labour Organization, UN International Strategy for Disaster Reduction, UN Industrial Development Organization and UN Habitat) or to apply ‘special measures’ (UN Educational, Scientific and Cultural Organization, Food and Agriculture Organization, International Organization for Migration and Commonwealth Secretariat) to poor performers that do not offer value for money to the UK sends an important signal. However, in practice, these decisions won’t all play out until the relevant budgetary cycles and replenishment rounds for the multilateral organisations.

It was already known that the FAO would come in for heavy criticism, but given the FAO’s important international role at a time of high food prices there is a strong case for its continuation– albeit with heavy conditions attached for rapid reform and performance improvement. Even where future funding is assured for other organisations that are assessed to offer good value for money overall, there remain important areas for improvement. Across the class of multilateral development banks, issues of gender and fragile states have been revealed as a particular weakness, so DFID will need to sustain its pressure on these two UK priorities.

Two cases stand out as ‘multilaterals to watch’ as DFID translates the MAR findings into specific decisions about challenging under-performance and providing future funding:

  • First, the African Development Fund of the African Development Bank (AfDB) achieves a scoring of ‘good’ in terms of value for money. Given the large bilateral programme footprint in Africa following the BAR spending allocations (despite the cuts in Burundi, Niger, Lesotho and elsewhere) and the relatively weak scores for contribution to results and work in fragile contexts (which are both key UK priorities), the need for vigorous dialogue well ahead of the next replenishment in 2013 is critical. Interesting to note also are the high rankings for the AfDB revealed by ODI research into aid-recipient country perceptions of multilateral organisation effectiveness and the preference rankings of governments in those countries.
  • Second, the overall view on European development cooperation is ambiguous. The European Development Fund (EDF) is one of the top scorers in the MAR, but the European Commission (EC) Budget contributions achieve only ‘adequate’ value for money. Negotiations continue over UK Government funding for the next EU Financial Perspectives (2014-20) and the possible ‘budgetisation’ of the EDF within the main EU budget. However, DFID has made no commitments about the EDF despite its high scoring. The UK International Development Select Committee has already been a challenging voice on the poverty focus of EU aid through the EC budget and the MAR results show it to be relatively weak on both the pro-poor and results components.

So, what else and what next?
Unlike the BAR, the multilateral review does not directly recommend or determine funding allocations to multilateral organisations in most cases. So, the key question is what happens next as a result? The Humanitarian Emergency Response Review (HERR) is expected to report in the coming months. This will inform not only decisions about humanitarian aid spending, but will also complete the jigsaw of priorities and allocations to countries, regions and multilateral organisations. Ahead of this, further analysis of the strategic coherence between the BAR and MAR results will reveal the strength of those combined assessments. As the availability of data on UK aid spending scales up significantly (alongside the amount of that spending), a key area to watch will be bilateral aid spending through multilateral channels. Currently it is not clear from the MAR how these decisions will be made and how they will match the MAR results.

Ed Hedger