Markets in everything: 2021: the secondary market for development products.

Francis Watanabe is project portfolio manager for the government. He acquires development interventions on the secondary market, to add to his portfolio on early child development. Innovators, like the Gates Foundation or Oxfam, or even local governments, start up their interventions, and after the first rated evaluation sell them off to the highest bidder on the secondary market. Interventions from a reliable provider, with a good results projection and long life span are in high demand. Buyers normally will pay for all the investments and overhead, and are prepared to pay the innovator for the further project management. The management fee for high yielding projects can be set quite high. Private sector innovators with a good success rate can earn a good living, and in some sectors, like micro-finance, most innovators are from the private sector. In early child development however, most innovators are former NGOs or foundations.

Watanabe is expected to reach a very good results/cost ratio for his portfolio, better than the average from the donor group, so he cannot just rely on market data. He also has to research on the latest scientific findings and try to identify upcoming new techniques or new innovators. He can also improve his ratings by identifying local champions in difficult environments. Real bargains can be concluded when other countries decide to switch to other priorities, and they offload their old portfolio.

Thanks to the secondary market approach, most donors have managed to improve the development results of their work with a factor two or even three, all on a stable budget.

It seems like this market approach just had to happen when the different building blocks for the system were available:

  • In order to have a functional market, knowledge asymmetry should be solved as much as possible. The transparency drive in development funding provided the information needed. The International Aid Transparency Initiative lead to the availability of data on every intervention by every actor in a comparable way. IATI started just did this.
  • The results based approach lead to a system where interventions should deliver on the promised results.
  • Standards in results reporting and impact evaluations led to the rating of projects for a specific development outcome. Independent rating agencies emerged from evaluation and audit consultancies.

The acceptance of the Sphere standard as the absolute poverty line set a baseline and brought it all together.

The real breakthrough came with the sphere standards, setting concrete lines for absolute poverty. Donors wanted to spend the bulk of their money on palpable morality & evidence based interventions for the poor, instead of for vague institutional goals or long term elusive economical growth.

Inevitably once the results based approach was accepted, coördination and partnership moved from the agenda. Indeed, as ownership and the “do no harm principle”were part of the basic set of principles, debating coördination and partnership was not necessary any more. Any intervention bypassing ownership issues would get a bad rating for sustainability. Partnerships and coördination became more organic: it had to serve the development goals. Pragmatically the operators moved from partnership to competition and back again, according to the needs of the beneficiaries.

However, still a hefty 30 % of the interventions happen outside of the system. This is normal, as most of the interventions that don’t cover basic services are more difficult to assess on their results potential and their value would be too difficult to estimate. Indeed: important work still happens in the rule of law, security, democracy, governance and economic development. However, a secondary market for this type of projects still seems a few decades away.

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The Black Rabbit and Permaculture

I have been very quiet on my blog lately, as I was totally absorbed by my garden. It is the first time in many years I am living in a home with a real garden where I can grow my produce and I enjoy every minute of it. As I vaguely remember being an agricultural engineer, with some solid experience with small-scale farming systems in Latin America and Africa, I was excited to get on with it. although I must admit that there has been a lot of sowing and growing, but not yet a bountiful harvest.Apparently, the thinking in agriculture from those traditional smallholders has seeped into me. Central is the quest for maximize the use of available resources (land, harvest residue, water) instead of just keeping them organised. .As leeks will be far apart for most of their growing season, why not growing radish, cress or even carrots in between them? Can I diminish the evaporation from the beans by growing a row of corn around them? Mulching with lawn clippings or with wood chippings? What about damage of blackbirds, snails, slugs, Cabbage whites?
Why should I grow dwarf beans when I can have beanstalks? I am also trying just to accept my loss when plague strikes, and apply some tricks to save water. The limits of my environment show starkly, and I should get some pesticides or fertilizer if I want to get really impressive results. But why should I.  I enjoy the constant experimentation, without a trace of RCT.Just now I learned that there seems to be a movement applying these central-African approaches: permaculture.

However, this kind of thinking doesn’t go down well in my more traditionally minded environment. My chaotic patches of multiple-layered inter-cropping systems are just not done. Uniform plots wit mono-cultures and straight lines are the rule.

On top of this new obsession with gardening, I started to sport again, as my tendonitis finally abated. No marathons for me any more, but I am building up to do some “sprint triathlons”. OK, that is only one eighth. This morning I was biking on a lonely bike-path along the canal, when I was surprised to see the rabbits lost all their fear for cyclists. It was there I saw the Black Rabbit. Just one black rabbit among its grey brothers and sisters. It might be the one who got away. Perhaps the group has lost the “wild”factor through interbreeding with tame animals. I wonder what will happen when the hunting season arrives. Although, I guess humans don’t hunt from bicycles.

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The Sphere Project: Minimum Standards in Humanitarian Response and the Poverty Line.

The Sphere standards and humanitarian efficiency.

The latest edition of the Sphere Handbook was presented on the 23rd of June, and the more I read it and think about it, the more relevant I find this standard.

“The Sphere Handbook is a voluntary code and self-regulatory tool for quality and accountability[…] The Handbook does not offer practical guidance on how to provide certain services […] it explains what needs to be in place in order to ensure a life with dignity for the affected population.”

The standard is based on the experiences in the field of some of the main actors in Humanitarian assistance, and prefers localization above rigid compliance. It sets practical service levels on everything from protection, coördination, water, sanitation and hygiene, food security and nutrition to shelter and health services, but it leaves it open to the actors to decide how to reach these service levels, leaving room for innovation and improvisation. The “do no harm”principle refers explicitly to the strengthening of local institutions.

Although it is a voluntary code, a generally accepted standard is a god-send for evaluators. Suddenly interventions of different organisation can be compared against the same standard. While in the past evaluations were rarely comparing the efficiency and effectivity of different actors, this becomes feasible. Although the Sphere standards are voluntary, they will become the yardstick against which to measure outcomes.

It is difficult to underestimate the potential effect of having a common standard for evaluating outcomes in driving the quality and efficiency of humanitarian interventions. NGOs will be able to prove how much better their cost/benefit ratio is when compared to multilateral agencies. iNGOs will be able to prove the need for international staff to reach the required quality. Where efficiency and quality gains are possible, the policy for outsourcing and in-sourcing will be scrutinized.

The Sphere standard will be a “living” standard, but it should be rigid enough to drive the accountability an innovation processes.

Looking at the past months, I am surprised to find only limited enthusiasm with the results-based crowd for the Sphere standards.

The Sphere standards and the development paradigm

The sphere standards belong squarely in the humanitarian paradigm. Humanitarian assistance is a moral imperative. The aid is aimed at saving lives, alleviate suffering and preserve human dignity. The support should be given in a neutral and impartial way.

Mentioning the Sphere standards in relation to the development paradigm is not considered appropriate. Indeed: development is seldom framed as only a moral imperative. It rests on the crossroads of different values. The definition of development aid is vague and mixes values (gender equality, human rights,…) with economical development (poverty reduction, infrastructure,…) and governance. Often, in the presentation of development cooperation, poverty alleviation is linked to economic results and even to direct interests for the population in the North, such as getting rich by having more markets or the need to limit immigration. By definition, the actual development interventions are not the result of a single moral imperative, but the result of a political compromise between the needs of the population, the needs of the different local institutions and political powers, and the needs of the international actors.

Within the development paradigm, as there is always an interplay of factors, it is difficult to focus the intervention every actor on its comparative advantage. Institution building is particularly difficult, and national governments are supposed to deliver sophisticated services before they even can deliver the basic functions of the state, like security and the rule of law. Foreign donors try their hand at poverty alleviation, institution building, governance and economic growth, sometimes with little to show for.

In some failed states, this means that the only basic services available are those provided by the humanitarian actors, while development assistance focuses on elusive institution building goals. The poorest of the poor, living with less than Sphere standard level services, are out in the cold. However, the moral imperative to help these poor still stands. The moral imperative ruling humanitarian assistance, should protect everybody in a situation that normally leads to humanitarian interventions, even if the state would like to build institutions one day.

The necessity to assure that the poor receive this basic level of services is recognised by Paul Collier in the Bottom Billion, where he advocates for alternative service delivery mechanisms, and the added value for focusing aid on the poor is highlighted by Owen Barder in his presentation to the British House of Lords.

With the Sphere standards, there exists a framework to prioritize assistance according to the needs to the poorest, based on a moral imperative. Once the conditions improve, the more complex development priority setting could take over.

The Sphere standard as an absolute poverty line

The current international poverty line (was it US$1.25 or 2?) is only used as an indicator for poverty. If you are below this line, it doesn’t really help you. Being poor is not leading to any specific action of the international community. On the other hand, there are also the Millennium Development Goals that set benchmarks for overall government action, but little that tells a poor what he could expect as services.

Moving to the Sphere standard for service delivery to the poor, would create instantly a well defined program. It would also solve the moral issue concerning the pockets of poverty in middle income.

Is it necessary to put the Sphere standard on the agenda in Busan? I think so.

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Is rent-seeking effective development practice?

I must admit, I only now read “The undercover Economist”. It made me look with new eyes to the set-up of my environment: development and humanitarian assistance. It made me also look again at some behaviour of development actors in the

Rent-seeking is a natural tendency in the economy: It is always easier to try to make more money without producing anything than going through the effort of competing on the delivery. Typical examples of rent-seeking are protection rackets, cartels and monopolies, regulation or corporatist behavior to keep other entrants in the market out.

Rent-seeking is something we link normally to “corrupt third world bureaucracy”.

However, to what degree is rent-seeking behaviour embedded in the development thinking? Are organisations and institutions better understood when we accept that they maximize income and power instead of doing good according to their mandate and expertise? I will try to highlight some consensus thinking that carries risks for promoting rent-seeking behaviour. In order to decide whether this risk translates in real live rent seeking behavior, a more thorough study would be necessary.

I will touch briefly on 3 elements: the role of the gatekeeper and coördinator, government assistance and humanitarian assistance.

Development and humanitarian aid thinking is being dominated by some initiatives that claim to boost efficiency through the promotion of principles. Do these principles favour innovation and competition or do they strengthen entrenched powers and lobbies?

In most of these efforts, coördination and the role of the coördinator is central. OECD is leading the Paris Agenda on the global level, while the World Bank is leading the budget support efforts in the field. This gives both organisations indeed the possibility to boost their influence, power and ultimately, resources. The discourse of e.g. UNDP on their place at the table for sector wide approaches is telling: it looks like the benefits of being bestowed with the central role are important. The danger for rent seeking behaviour by these central players is important. However, it is not easy to separate a “well deserved leadership role” from the role of a rent-seeking gate-keeper: in most cases the well deserved leadership role could make some rent-seeking possible, with overall positive effects. However, the way the World Bank used flawed research to promote its role in the past is hinting that rent-seeking cannot be excluded.

In the humanitarian reform, the central place of OCHA and the UN-system is officially recognized, while there is de-facto competition from the NGO-sector, the Red Cross movement and MSF.

The OCHA headquarters extra-budgetary expenses increased from 20.5 millions in 2005 to 70 millions in 2009. The overall assessment is that OCHA became a lot more responsive and efficient in that period. However, this is a huge increase, that could have been used elsewhere in the humanitarian system.

The Paris Declaration is the father of all aid efficiency efforts. Only five principles underpin the Paris Declaration. Absent are poverty or governance results. The focus is on the process of aid transfers. By prioritizing the process an not the results, it entrenches the power relations within the described process. A declaration more geared to results would leave more leeway for innovation, in instruments, partnerships and processes.

The Paris Declaration starts from the absolute ownership by developing countries. This squarely puts the monopoly on strategies in the hands of the programme country government. Not the population, nor the Parliament. On a lot of issues this is normal (e.g. security, elections, even education). However, on other issues crucial for development, other actors might be better placed: banking, industrial development, even some forms of private education. Moreover, in some areas where government is the duty bearer, they might be able to limit themselves to a normative role. By putting the ownership fully in the hands of government, the Paris declaration limits the need for getting the backing and legitimacy from the parliament and the population. So it would not be surprising to see the governments getting Paris Type Assistance to have little problems to keep power, just like any petrol based government. This principle is even more risky when considering the number of governments without a popular mandate or without proper feedback systems. It is a fact that poverty alleviation is not a central thought for most governments in the world, not even in the North.

The second principle is that donors align behind the country government objectives and use local systems. Of course, when dealing with core government services, and the local systems are not broken beyond repair, this seems to be a good idea. However, development assistance is more than core government services and local tender procedures are often very much “tied” to national providers that are not always the most efficient or lead to a higher price, as the local market can be rigged.

Harmonisation is the next principle, with different aspects: donor countries coordinate (read: form a cartel, often lead by the member with the highest capacity such as the World Bank or DFID). On the other hand: the simplification of procedures and sharing of information are weapons against rent-seeking.

The other two principles, results and mutual accountability are possibly a protection against rent-seeking: if results are measured and acted upon, this feedback loop would lead to more results, and the increased accountability would equally improve the effectiveness.

The Paris Declaration obviously protects the signing parties, governments and important multilaterals from competition, while including a few guarantees against abuses.

Good Humanitarian Donorship is the other important “principles” document. The principles are legion: 23 principles, many of which are clearly putting results for the beneficiaries central: Principles 1 to 3 states what the results should be, for whom, and how we assure the beneficiaries get the results.

The general principles mostly strengthen this results oriented drive: promoting the humanitarian law, timely, needs based funding, involving of the beneficiaries in the humanitarian response, etc.

A risk for rent seeking resides in the needs based allocations: as it are the humanitarian actors who write the needs assessments and run the programmes afterwards, the manipulations of needs assessments is an obvious danger. Moving to a cartel-like approach with joint needs assessments will not solve this risk. An independent needs assessment or review is needed.

Principle 10 supports and promotes the central and unique role of the United nations in providing leadership and coördination, the special role of the Red Cross and the vital role of the UN, Red Cross and NGO’s in implementing the humanitarian action. Why the leadership to the UN and not to the Red Cross? Why do we give the lead on water provision to UNICEF and not to an NGO? Should there really be a lead? It is important to limit rent-seeking that the different competing actors are explicitly kept on board. Due to the mandate and legitimacy of the UN-system with all governments, this central role can be argued, but should also be earned in every crisis again.

Coherent action is needed in the logistics-intensive urgent operations. An hierarchical, army-like structure comes to mind. However, a regulated monopoly could be more effective than the current vague formulation, authorizing to harvest contributions for coördination, without the means to be held accountable. A privileged position is created, without a strong accountability structure.

Without any doubt, a lot of the improvements in the humanitarian system have been facilitated by principle 10. However, there is a risk for rent-seeking if the accountability is not properly in place.

As the main principles, numbered aptly numbered 1 to 10 are overwhelmingly gearing towards results, rent seeking might be more limited within the GHD-approach than in the Paris approach.

The good practices in donor funding however contain some obvious dangers for rent seeking: funding becomes all but guaranteed for the different humanitarian organisations, and depends solely on the needs of the beneficiaries, not on the efficiency of the execution. New requests are not met by prioritizing, but by new funding.

As an antidote, the standards, accountability and learning principles strengthen the oversight and innovation. Oversight and innovation makes it easier to identify rent-seeking and break entrenched interests.

The role of the civil society is generally recognised in development thinking. In humanitarian assistance the NGOs are even given a “vital role”.

Concluding, in the GHD principles, there are risks of rent-seeking, mostly by creating gate-keeper and coordinator functions. In the Paris Declaration this behaviour seems to most entrenched, and a further study whether this actually leads to rent-harvesting by these gate-keepers would be necessary.

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Robin Hood Tax: I voted for it before I voted against it.

I am in favour of a financial transaction tax, because we can.

Indeed, we all know nothing is sure except for death and taxes, so I honestly think that if financial transactions can be taxed, we should at least try.

For the moment, labour is heavily taxed, while we surely want more work. Consumption is heavily taxed, while most people like to consume, and according to classical economic theory, consumption is a good thing. This is why we are always looking for things to tax, to lift the burden, mostly from labour. If we tax financial transactions, how much can we rake in for financing the global or national commons, before the tax will affect negatively the economy? Or would there be an ideal level, where up to a certain point, taxing financial transactions diminishes volatility while not affecting liquidity to a degree it damages the economy? Most articles and blogs I read seem to argue that financial transactions can be taxed, and up to a certain point, the total effect of taxing these transactions would even be positive, like taxing gambling, leading to less negative externalities. So I definitely think we should tax financial transactions, but we should be cautious and have good feedback systems in place, so we can raise the level until the optimal utility for society is obtained.

What should we use this tax for? This tax should be used to finance the budget of the government that raises the tax. It should be diluted in the total budget, because it is necessary to limit the pressure to raise this tax to a level that is defined not by the carrying capacity of the financial system, but because of the funding needs of one department or sector. We could consider the tax can finance the national government or global governance.

This tax cannot be seen under the same rules as pollution: “the polluter pays” means you pay to redress damages. Most financial transactions don’t do any damages (remittances, foreign direct investment, etc.), while some speculative transactions can do damages or at least don’t bring much added value to the overall economy.

So using the financial transaction tax to diminish the overall tax burden is a good policy, up to a level probably with less externalities than taxes on labour or consumption.

But what if we allocate the financial transaction tax to climate change adaptation or development? The group setting the tax level would be the environmental lobby, craving for income, balanced by the financial sector wanting to limit this transfer. I would be surprised if the result of this power struggle would deliver optimal results for the environment or the financial sector.

The environment and development should be financed as much as needed and affordable; while the financial transaction tax should be as high as useful to maximise its benefits. The two should not be directly linked.

A few more links on Robin Hood:

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Galileo Day Campaign: 29 February 2012

Reposting, because it only gets more actual:

The day to celebrate the Earth and Science

Leap day is the single day we all think about our place in the universe, and how we know that place; it honors the earth we live on and our knowledge of the science of nature.

This is why we propose to baptize the 29th of February 2012 “Galileo Day”: a day of wonder about the beauty of the universe around us. A day to recognize the benefits of science and of the scientific method. Finally, a day to honor the individuals who stand up for what they know is true. As Galileo Day or Earth Moves (Us) Day, Leap Day could eventually become a public holiday.

Now that the last leap day has sped us by, it is the right moment to launch this campaign as it is important to start early. There is still time to weigh the pros and cons of such a day without the need to rush. A day with a message Leap day is the single day where we all think about the workings of the world in the wider universe. Every person using the Western calendar will pause at least once during this day and contemplate the orbit of earth around the sun. An orbit that takes a year, that cannot be exactly divided in a number of full earth days. It is the day every person is just a bit proud that He Understands His Position on a Moving Object in Heliocentric Space, contrary to flat-earthers or geo-centrists, who share, in our mind, a place next to Neanderthals and other extinct species.

Predicting seasons is a practical skill

In the tropical hunter-gatherer societies, seasons came and went, and many of these societies used the lunar year rather than the solar year. It was rather the approximate onset of the seasons than the possibility to predict them with precision that counted. However, agricultural societies or seafaring communities, were very keen on predicting when they could expect the seasons to come. The agricultural societies tended to follow a calendar that follows the movements of the sun, and the skill of predicting the seasons was held in high esteem. Priests and scientists are the custodians of this lore, and we are still in awe of the skills of the Egyptians, Mayans, and Chinese in calculating the calendar and the orbit of the stars.

It is difficult for 21st century city dwellers to grasp the urgency of the precision and difficulty to calculate the calendar up to the accuracy of the need for a leap day. Over the lifetime of a person of 60 years, leap days make a difference of maximum 15 days, while the onset of spring or the rainy season varies by more than 10 days from year to year. In regions with a limited growing season for agriculture, 15 days can mean the difference between life and death. Only through indirect astronomical observations is it possible to define the length of the year precisely. The calculation of the calendar was a practical science for early agricultural societies. However, with the accumulation of scientific knowledge, it became apparent that the reality, as perceived by the direct senses or passed down the generations, did not correspond with the newly acquired powers of observation.

The Greek seafarers and travelers already knew that the earth was not flat, but round (spherical). Near the end of the middle ages, improved observations led Copernicus to propose a new world order, with the Sun in the middle, and the Earth in orbit. As this information initially only travelled in a small circle of intellectuals, this view did not stir much opposition.

E pur si muove! And yet it moves!

This changed when the Renaissance broadened the impact of ideas: hunger for knowledge and science was boosting progress all over Europe and this knowledge was spread more widely. One of the better known proponents of the Renaissance is Galileo Galilei. Galileo was a devout Catholic all through his life. He was a typical renaissance man and well-rounded scientist: a philosopher, physicist, astronomer, and above all, the one considered as the father of the scientific method. He worked from a hypothesis, he tried to test his hypothesis through rigorous experiments, and was ready to accept the results of his experiments instead of his own cherished ideas.

Galileo improved the telescope, invented in the Netherlands, and soon became one of the leading astronomers of his time, able to disprove some long held views of his contemporary scientists. When this public figure gave his full support to the findings of Copernicus, placing the sun in the center and the earth in orbit, his enemies, who had suffered defeat arguing against him on other scientific issues, started a campaign against him. According to some of the clerics, heliocentrism, putting the sun in the center of the universe, was contradictory to the Bible and thus heresy. Galileo took Augustine’s position on the Bible: not everything was to be taken literally, even more so when the passages were meant to be poetic or symbolic. This campaign, like a modern press-smear campaign against a public figure, and the subsequent trial, forced Galileo to recant his position on an object orbiting around the sun. We are talking about the inquisition here, and he was probably glad to make it alive. According to popular legend, Galileo muttered after recanting his theory: and yet it moves…. Recognition of the beauty of the world and the benefits of science Indeed, it still moves us, the earth, spinning around its axis, spinning around the sun and around the center of the Milky Way. Galileo died in 1642 and in 1758 the Church authorized the full publication of Galileo’s work. The acceptance of the Copernican world view was postponed, but as it was grounded in reality, observation and scientific method, it prevailed. This is not the story of faith against science, it is the story of jealous competitors bringing down a brilliant man through a public campaign based on prejudice. And ultimately, the scientific method prevailed, but at a huge personal cost for the involved individual. While Galileo was banned from public life, he wrote what is now considered to be one of the main works of physics ever, and the basis of the work by Newton and others. He is known as the father of modern science, while his enemies can be said to be the at the origins of the tabloid method of justice.

Leap day, Galileo day, a day to celebrate the Earth and Science

29 February 2012: Galileo / Earth moves day. We would like to propose to baptize the 29th of February “Galileo Day”: a day of wonder about the beauty of the universe around us. A day of recognition of the benefits of science and of the scientific method. Finally, a day to honor the individuals who stand up for what they know is true.

In the schools, it would be good to highlight on this day the history of the human knowledge, and the facts on our position in the universe. Scientific institutions should certainly take a day off, and governments should allow their personnel to attend to Galileo day celebrations. Post Scriptum:

Definition of Galileo Day

The 29th of February. A day of wonder about the beauty of the universe around us. A day of recognition of the benefits of science and of the scientific method. Finally, a day to honor the individuals who stand up for what they know is true.

Call it a day

Leap Day would be a logical name, as it is already in use. However, does it speak sufficiently to the imagination? Galileo Day seems rich with images and meaning (like Columbus Day). However, Galileo is very much part of the Western heritage, and the meaning of this name might be lost beyond the people educated in the fine print of European history. Earth Moves Day is nice, but could be confused with Earth Day, held on the spring equinox or the 22nd of April. Another option would be to allude to the centripetal force that holds us in place, and go for Rodaytion.

For now, as one of the editors has just finished a divine pasta dinner accompanied by a superb Italian wine, Galileo Day is the favorite. However, we are open to support another name, depending on the quality of the associated food and drinks.

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Not longer, but deeper commitments for more aid predictability

It is a truth universally acknowledged, that one of the major problems in development is the unpredictability of aid. It is taken on face value that this can be reached by introducing long-term commitments, 3-4 years, and preferably beyond. It seems to me this is the wrong approach. Deepening commitments would lead to more predictability. If badly done, long-term commitments could lead to even less predictability.

Lessons from Egypt
William Easterly wrote a nice summary on why autocrats eventually fail to adapt to changing circumstances. They can deliver immobility which is often misread for stability. It is not: with the end of the reign comes inevitably the disruption and chaos: the necessary changes are too important to implement through mere evolution. Dinosaurs don’t evolve into mammals, they are too far gone on a path that was right under different conditions in another era. Long term immobility is not always good for development. Long term predictability should rather be an engagement than a cast in stone approach.

Lessons from the UK budget discussions.
The UK-civil servants don’t get nervous because the government’s budget is annual. This is strange: their salaries are approved annually by something unpredictable as a MP. Their whole livelihood depends on it, they have no plan B, and they don’t panic.

This is because most of the budget (perhaps something like 85 %, I made the numbers up, don’t quote me on them, you get the picture) is based on a sturdy consensus in the society, beyond parties. Another 10 % is deeply entrenched with the current majority. This leaves only 5 % discretionary spending. Those are the nervous people, mostly on a short term contract.

Typically, in the donor development budget, over a legislature, apart from the “assessed” or negotiated contributions to the World Bank, the EU and the UN, nearly everything is discretionary. Longer-term programmes are as discretionary as the short-term ones. Only a wide consensus on the development budget would move it away from this haphazard spending.

The European Commission creates their policy in such a participatory way. They bring on board input from assessments and evaluations, the 27 governments, the civil society and parliament, before proposing a way forward. And after only two years there is a mid-term review. A programme based on such a wide consensus has more chance to be predictable and long-term than a programme built on the wish of a single politician. Such a broad based program can be predictable, even if all the engagements coming from it are short term.

Stop-start development
With a longer term commitment to a country, near the end of the commitment period, a thorough assessment will take place.
Firstly the donor will asses whether they want to stay engaged in the country. The results of the current programme will inform this donor decision, together with factors beyond the country (herd thinking among donors, new themes coming up, other countries become a donor darling, etc. ).
Secondly there must be decided whether the sectors and regions of engagement will stay the same, and thirdly whether they will do the same things in the same way within the sectors.
The result is, from the viewpoint of the recipient in a specific intervention, mostly a lottery. The success or failure of the programme itself will play only a limited role in the decision whether to drop it.
The process can be compared to the end of a regime. It is often preferred to start from a blank slate than to build on what was done earlier.

The cost of continuity and the cost of disruption
For the poor in the third world, continuity is central to development results. Startup costs are notoriously high, there is a learning curve, and development results must not only be obtained, but also made permanent and institutionalised.
The political economy on the donor side is not in line with the needs of the poor. The political benefit of development results is notoriously low for the donor, while the political benefit from aid announcements is high.
As donors are spread thinly over a multitude of sectors, political visibility is obtained by announcing reforms and new programmes, not by pledging continuity of engagement, nor by highlighting results.

Unacceptable reporting requirements
Long-term commitments span 3 to 4 years. This means they sit astride on 2 donor legislatures, and 2 postings of donor officials. Donor reporting “should be” limited, as this leads to “too much transaction costs” (how much does it really cost to forward an internal report? Or even, to publish it on the Internet?). This means that in a 3 year program, the first report that arrives at the donors’ desk arrives after 15 months, and is not acted upon before the project is half way. As international agreements go, they are executed without too much questioning: the cost of concluding them was too high. Abandoning an agreement is not good. As development is innovative, this means that normally the project will not be reassessed and rewired for success after 6 months of failure. The project will only be reported on after 1.5 years, and will probably continue for the last 1.5 years after the first annual report was received as it is too late to save the project anyway. Depth of commitment means close monitoring, in order to understand and allow change as it is necessary.

The evolving consensus: don’t become a dinosaur.
A short feedback loop for the donor would help him to steer its commitments towards his “comfort zone”. The areas of division of labour where the donor finds an internal consensus that they are committed. Annually, the choices in who does what, where, could be reviewed and fine tuned. Evaluations should inform this process at every turn, but also the opinions of the opposition. Rolling programmes become the norm.

After some evolution, the programmes should stabilize around some areas of commitment, where this donor can act predictably. Other areas, where this donor cannot reach this consensus, should probably be left to other actors who can. Like in Humanitarian Assistance, where the Central Emergency Response Fund has the role of rapid response and gap-filling where there are unaddressed needs, the World Bank and other development partners could play this role in development.

In search of a deeper commitment: identities count.
Long term predictability can only exist if the donor country builds a deep internal consensus on what, where and how needs to be done by whom. This commitment must go beyond principles, as it is possible to do wildly different things from year to year within the same principles. It probably must be hands on. The example of the Dutch in a former era comes to mind. They used to be the one stop shop for engagement, expertise and funding on everything water.
Depth of engagement is not synonymous for micro-management. As donors stop spreading themselves thinly, they will understand better the need for local ownership for getting results. Donor support should evolve from the evil stepmother, nagging the partner at every step, to the fairy godmother, empowering the partner to accomplish what they long for, and live happily ever after.

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The Fragmentation of Humanitarian Aid: Market failure leads to planning and broken networks.

Is Fragmentation a solution or a problem?
One of the main reasons the donor community pushes for reform in the humanitarian aid sector is the fragmentation of the services. As an antidote for fragmentation, coordination is proposed. The conventional narrative says that small interventions and fragmented approaches are inefficient. If this is the case, a market approach to the allocation of funds, where efficiency is rewarded, would create incentives to consolidate, as it would be more efficient to have less actors. Currently the system seems to fragment even further, even while high level declarations are signed to vowing to stop the fragmented service delivery.Making the system work as a market, with incentives to make it more responsive to efficiency gains would improving the results of the system as a whole. Self regulating systems of incentives normally work better for complex systems than crude top down regulation by decree.

In this blog I will try to determine whether the current humanitarian system can be defined as a market geared towards better results, and identify possible incentives to make it respond better.

Competitive markets and market concentration

A normal market has a few market leaders and a long tail. The redundancy of the market (more providers providing the same service) is not seen as a problem, but as an assurance for getting best value for money. The long tail is for practical purposes irrelevant, but it guarantees that special niches can be covered, and the big actors are kept on their toes, because the small firms could always challenge them if they manage to innovate or produce better.

An example of such a market is the one for PCs: The top 4 manufacturers produce 60 % of the PCs, the 6th a meagre 5.3 %, and all the thousands of others combined master 1/3rd of the market.

Computers are of a decent quality, and there is innovation leading to better, and cheaper computers.

Table 1
Preliminary Worldwide PC Vendor Unit Shipment Estimates for 3Q10 (Units)

Company 3Q10 Shipments 3Q10 Market Share (%) 3Q09 Shipments 3Q09 Market Share (%) 3Q09-3Q10 Growth (%)
HP 15,431,749 17.5 15,513,420 18.9 -0.5
Acer 11,527,716 13.1 11,726,586 14.3 -1.7
Dell 10,816,474 12.2 9,908,099 12.1 9.2
Lenovo 9,140,778 10.4 6,871,379 8.4 33.0
Asus 4,793,186 5.4 3,911,263 4.8 22.5
Toshiba 4,695,600 5.3 4,014,945 4.9 17.0
Others 31,896,091 36.1 30,106,333 36.7 5.9
Total 88,301,595 100.0 82,052,026 100.0 7.6

Note: Data includes desk-based PCs and mobile PCs.
Source: Gartner (October 2010)

However, fragmentation in the development world seems not to deliver this kind of expected results. Why?

The humanitarian market: perceptions of fragmentation and of competition
Looking at Humanitarian Assistance funding , which is (imperfectly) documented through the FTS system managed by OCHA, we find for 2010 a total funding of USD 7 billion.

Appealing Organisation Funding 2010 (million USD) % of total funding
All others (636 organisations) 1.507 22 %
WHO 127 2 %
UNRWA 163 2 %
IOM 219 3 %
FAO 229 3 %
UNHCR 574 8 %
UNICEF 740 11 %
WFP 3.403 49 %
Total 6,963

100 %

Data: FTS, Summary of requirements and contributions – per Appealing Organisation in 2010, dd. 9/02/2011. Note: the data don’t show all the contributions to MSF nor ICRC, 2 important actors in the field. It is possible that some NGO-funding is not reported through FTS, however, at least donor government contributions are well reported, as donors want all their contributions to show for international forums.

On first sight, this distribution looks wrongly like a normal market, with some market leaders and a long tail. There would be some risks for monopoly abuse by WF. The top 7 organisations deliver 78 % of the assistance. The Herfindahl-Index (HHI) is 26.2, which hints to an extremely concentrated market. The PC-market has only a HHI of about 8.

  • A HHI index below 10 % indicates a highly competitive index.
  • A HHI index between 10 to 18 % (or 1,000 to 1,800) indicates moderate concentration.
  • A HHI index above 18 % indicates high concentration

On closer inspection however, the humanitarian system is not one market at all.

Indeed, WFP is dealing only with food security and logistics. UNICEF with water and Children, UNHCR with refugee camps. The next organisation dealing with food security (as only one of its activities) would be Oxfam UK recieving only 0.8 % of the total contributions. Less than 1/50th of WFP. The top 7 organisations are all UN-entities focusing on a UN-given mandate, in theory not competing with each other. For execution those UN-entities rely partly on the other actors at the bottom of the pile.

Fragmentation within the sector: on what basis are NGOs selected by donors?
Humanitarian aid is organised per sector, with a UN-agency (sometimes assisted by an NGO) as “cluster lead”. The cluster lead has “only” the power of its mandate, its financial means and capacity.

Within the main sectors dominated by the UN-agencies, there is little fragmentation. There is domination by the big players and not enough competition to have a real market. The humanitarian field the cluster leads, such as UNICEF, WFP and UNHCR, receive five to ten times the amount of funding of the main NGOs competing in the same field. In the food sector this phenomenon is the most striking, with 3/4 of the funding through WFP, and an extremely concentrated market with an HHI of 70. In the Water and Sanitation sector were actors in essence do the same job, there were 162 actors in 2010 (data of 09/02/2011), the cluster lead, UNICEF, gets 39% of the resources, followed on a distance by Oxfam GB (6.7%), Solidarités (2.9 %). This leads to a HHI of 16.4, still highly concentrated.

However, the cluster cannot be seen as one market: The UN-agencies get often their funding through core resources or separate funds. This means we should split the data in 2: The UN-agencies are a separate market from “the others”.
When excluding UNICEF from this health sector analysis, the HHI drops to an unheard of 2.98. This means the market is splintered. This is a sign of little return to size. The market does not reward any possible economies of scale. For the other sectors (health, protection, shelter, coordination) the relative weight of the UN-cluster lead is lower, but the NGO-field is as fragmented.

More analysis is needed to explain this phenomenon, as it is evident that there are economies of scale in the sector, but apparently they are not rewarded by the market.

Looking at the water-data per donor, the level where the market operates seems to be the donor level. For most donors, 4 sets of partners can be identified:

  1. the UN-agencies and the Red cross
  2. Some international NGOs probably with a local presence in the donor country.
  3. Donor country specific NGOs
  4. Possibly, some crisis specific NGOs.

Each donor has its own specific funding pattern. Sometimes there is a high weight of UN-agencies and i-NGOs, sometimes the sectors with most needs prevail, more often than not, at least part of the money is spread over donor country NGOs.

The water market for NGOs apparently is not a single market, but a set of unrelated markets per donor and per set of partners.

This means that the market push towards more quality and efficiency work only within the small donor specific markets. However, at this level, the “partnership” approach could lead to an approach where the allocation is rather spread on basis of negotiation than on selection. The market model would be a cartel.

The role of the UN-cluster leads
From the data, it seems that the NGO-funding and the UN must be considered as separate markets, even with different funding sources. Indeed, there is little evidence that the donors in general (except perhaps for some exceptions, like the CRF, or ECHO) have the wherewithal to allocate funds on basis of quality and results alone.

One hypothesis that the donor governments de facto consider the services delivered by the main UN-entities as a “utility”, a service that is part of “global governance”, a near natural monopoly. The reasons why they continue to fund the small fry are unclear from the data. It could be that they need the visibility possibly through national NGOs for internal reasons, or they might want to keep the UN-entities on their toes by providing some competition and variety of actors. If they want to deliver competition for results, the system does not seem to reward the better organisations by letting them grow. If they want to keep variety of actors, they would strengthen the hand of the NGOs better if they did not fragment them so much.
With the overwhelming part of the funding for the crucial sectors going to the UN-cluster leads, it is notable that coördination, the elimination of overlaps and filling of gaps, is still perceived as a major problem. The impact of other players in areas dominated by the big entities should be limited at best. Especially in the “life saving”sectors.

However, it is possible that the small outfits are many times as efficient as the UN-entities, showing an impact that is way more important than their share of the funding. It might also be possible that there is a perceived lack of coördination, as the visibility of the small NGOs tends to be bigger than the visibility per unit of funding of the juggernauts.

The selection of NGOs by the donors
A visit to the website of ECHO (the Humanitarian Office of the European Commission) on their partnerships is revealing. On the 8th of February 2011, ECHO worked with 191 partners. On first sight, this looks like a crowded field. However, looking per member state, there are only on average 7 partners per member state. The UK alone fields some 40 NGOs, but most member states have only a few ECHO-accredited NGOs.
Within the NGO-group a hopeful tendency shows up: Most national NGOs are local branches of international outfits, with a good reputation and internal quality control systems. This means that the perceived field fragmentation might be partly a ploy from the NGOs to deliver their quality work as one, while authorizing the individual donors to shine. They “game” the system by obtaining funds thanks to their national identity and results through their global organisation.

We conclude from the FTS data that the donors don’t base their selection procedures for NGOs only on the GHD indicators (needs based, capacity of executing agency, effectiveness), but add to it, sometimes even as a prerequisite, the nationality of the provider. Different choices of partners could be acceptable if each donor would focus on a different market: a sub-sector where it takes on its responsibility in the framework of division of labour. This seems not to be the case: donor nationality is not a result area in humanitarian assistance.

The fragmentation per nationality is a concern for the quality of the humanitarian assistance. Donors don’t play their role in the oversight of the funding, as they observe only a narrow slice of the market. If the prerequisite for the allocation of resources is the geographic location of the branch in the north, the importance of other parameters, such as services to the beneficiaries, quality, transparency and efficiency goes down.

The pressure for consolidation in order to get to optimum scale is stopped in favour of the pressure to stay fragmented to maximize national donor resources. Maintaining the status quo on the division of funding is an act of survival for the individual splinters: people can lose their job. In this environment a small NGO will rather seek rents and single sourced funding rather than risk its own survival by moving to a more competitive global environment. Results focus is not in the interest of most of the NGO-players in the sector.

When donors reserve 20 % to the NGO-sector, but every donor finances a different set of NGOs, while they finance the same group of UN-entities, Red cross and MSF, the NGO-sector will be too fragmented to play a relevant political role as it is difficult to project power as a splintered group.

The way forward
To improve the humanitarian results for the beneficiaries, the problem area is the NGO-sector.
The selection of NGOs should be aimed at the general principles for government spending: best value for money and transparency through competition. Selection should be rigorous on basis of criteria that are relevant for the beneficiaries. The market for NGOs must be widened, preferably to the global level, to make it possible for NGOs to reap economies of scale. The needs for national “visibility” could be addressed through the active promotion of national chapters of international NGOs. Such a system would not eliminate small, effective or specialized NGOs, but would lead to more consolidation where this would lead to more efficiency.

Some possible action points:

  • Assure that the funding to NGOs is based on criteria of efficiency, quality and value for money.
    1. Make projects, reports, data, evaluations comparable across donors by using standard forms and data.
    2. Consider support to national NGOs without competition from iNGOs as tied aid for OCDE/DAC
    3. Fund only interventions  you can actually monitor as a donor. with a minimal size, and leave it to flexible funds, or strong actors to fill the gaps. (Correction: some small interventions by niche specialists are crucial. I would not want to cause them to lose funding).
  • Abandon direct funding to NGOs by donor governments, and fund them only through needs based allocation systems, such as thematic funds, CERF or ERF.

In the short term, dealing with the UN-system seems to need rather an evolutionary approach than a revolutionary approach. In the long run, if NGOs become more competitive, the system will have to be reformed completely.

Possible ways forward for UN-funding :

  1. Accept the role of the UN-entities as humanitarian utilities and regulate them as such. Allocate them the near monopoly they already enjoy now, but assure the drive for more efficiency by e.g. a outcome and impact evaluation, outsourcing functions for more results at a lower cost.
  2. Separate the UN-monopoly from their operations outside of their UN-monopoly; fund the monopoly as an utility, and open the rest to global competition with the NGOs.
  3. Introduce competition on basis of quality and efficiency of the organisations. This should lead to a more diverse market, with less monopoly power of the UN-entities. Levers for maintaining coördination should be build in this system.
  4. Continue the same system, with a near monopoly of the cluster lead and limited direct funding to NGOs, but assure that the choice of the NGOs is based on criteria of efficiency and quality. This would lead to more innovation while keeping a good overall coördination through the UN.

In general, when funding a specific crisis, the best results for the beneficiaries should be obtained by considering the 4 sets of partners as one market. In the light of the limited donor capacity in most countries, it can be argued that the direct funding of local partners is not feasible for each donor.

Conclusion : the collapse of complex systems
The organisation of humanitarian assistance is for the moment not based on a global market. the market is fragmented on the donor level and per set of partners: UN-system, national NGOs, International NGOs, crisis specific partners.

Within sectors calls for better regulation and a recognition of the role of the UN-entity as a “utility”delivering humanitarian assistance.

The funding of NGOs is problematic. There is a place for a competent NGO-sector, but the donor incentives create a lot of dead wood in this sector. The current system stands in the way of an evolution towards better learning, quality and efficiency. It is the funding by the donors, that leads to the current fragmentation in NGO-resources. The donors will have to reassess their funding model completely to work towards more efficiency and better results instead of against it. Otherwise the fragmentation of the NGO-sector can only increase, while the efficiency of the NGO-sector will diminish. The legitimacy of humanitarian aid itself will be under fire. Funding outside the UN-coordinated system, for ICRC and MSF as a more accountable option, could counterbalance this trend.

In order to move away from the current equilibrium, Donors should select their partners on basis of their results and not on basis of their nationality. They should be able to compare different actors with the same yardstick. A first step would be to introduce a level playing field for accepting, assessing, monitoring and evaluating interventions.

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Energy efficiency is the way to go.

A new article in the New Scientist claims that efficiency gains alone could cut world energy demands by three-quarters.

This is, of course extremely relevant for everybody in the development sector, as we tend to be cought in the maelstrom of environmental innovation, while savings are probably the more efficient way forward. Especially for the poor we like to use as guinea pigs for technology that fails in the rich world.

It seems to me that the sectors with strong commercial interests, such as wind energy, or construction, do get a lot of airtime, while other techniques don’t get any airtime at all.

Bringing down the energy bill with about 20 % of an old house in an area with harsh winters can be done by any of the following investments:

  • New triple glazing and suppression of draughts
  • Roof or ceiling insulation
  • Wearing warm underwear (lowering the room temperature with 3 degrees)
  • Wall insulation
  • Heating only the rooms where you need higher temperature.
  • Getting rid of the draughts

I did not hear about a subsidy for underwear yet. However, this intervention is by large the most economical one.

We will not run out of oil, it will get more expensive as it runs scarce. Progressively more alternatives will become economical, but to overall the price of using energy will become higher. This upward trend will be slower than wat could be expected with only oil as a source, as new energy sources become available.

As the prices go up, we will not only have to consider using better technology, we will also have to consider to just stop doing the activity we were going to do, when other pathways are open to us.

Like putting on underwear when the temperature drops or not installing a heated jacuzzi in the bathroom.

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Mainstreaming revisited

Bottom Up Thinking blogs about a “development effectiveness officer“, a person who walks around to incite people to do what they should do if they would be doing their job.
It is a recurrent problem with all “mainstreaming” issues. It is “a job well done” to taken environment, women , equity, drr, into account every time when it is relevant. NOT doing so is bad work. Taking it into account when it is NOT relevant is lack of focus and bad work. If there would be some weeding out of bad programs based on the results they get, people would learn fast to integrate everything that is needed to have a successful outcome .

When mainstreaming an issue, the focus moves from the success for the main goal of the project, to success in mainstreaming. The selection of successful interventions is not made based on the expected results for the objectives, but on “making the right noises”. A mainstreaming agenda is developed, with mainstreaming experts. This has a tendency to lead to “best practices” based on confirmation bias, and one size fits all projects.

However, mainstreaming issues are often serious problems needing attention. Just stopping the current approach will not make them go away. I don’t really have an answer to how to approach it, but like Bottom Up Thinking, I don’t feel comfortable by the steamroller political correctness the current approach seems to imply.

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The Armdroids are coming

There is an interesting article at the Harvard Business review on ” The fall of Wintel and the rise of the Armdroids” .

It is interesting how history repeats itself. Only a few years ago, at the start of the PC-era, the Intel processor was not the only game in town, neither was the Microsoft Operating system. The Wintel combination won the PC wars, because they delivered a platform for innovation. They provided a reliable backdrop of operating system and processor, around which an evolving ecosystem of peripheral hardware and useful programs could be built.

Bad programs don’t get a chance, because someone else will come up with an alternative fast.

Now the same is happening in the Mobile and tablet world: the platform combining the ARM processor and the Android operating system poised to win the mobile platform war because it leaves most room for innovation on hardware and software. This is the strength of standards and platforms: the platform itself might be static, but only when there is a level playing field you can compete of quality and cost. Without a platform and standards, there is a confusopoly. In a confusopoly, innovation is not necessary, because products cannot be compared. The market is shared, not competed for.

In development and humanitarian assistance, the lack of a common platform for evaluating results and impact is notorious. This is why fragmentation doesn’t lead to evolution and  division of labour, because the competition for resources is not based on measurable indicators such as the quality and cost/benefit analysis, but instead on “other” criteria, such as the nationality of the NGO, the domestic sensitivities of the donor, etc.

The more the focus moves to common platforms and results measurement, the more results and learning can be expected.

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Data warehouse for project proposals in humanitarian assistance

I posted the following at Opendata, please, if you are a programmer, contribute:

Proof of concept: Data warehouse for project proposals in humanitarian assistance:

For the moment nearly every donor and every UN-agency requires project forms to be filled according to their own template. They are quite strict on this, and non-compliance leads to delays in approval or even refusal.

When analysing the requirements however, it is obvious that the content in most forms is for 90 % the same. It should be possible to use a common database, with 90 % common data, and the additional data depending on the needs of the donor.

The application would be a website, where the applicant chooses first the donor he wishes to apply for. The webpage will let him fill in the form for this donor, but save the data in a common database. In an official version, it would be possible to submit from the site electronically to the donor.

If the application is unsuccessful, the applicant would be able to choose in a new donor, and fill in only the missing fields, without the need to reformat everything.

When this application would be accepted by the donors and NGOs alike, the project data would authorize learning to a very high degree: most open data efforts only make metadata available, like budgets, and project title. With this data warehouse coördination and comparative evaluation would be much facilitated, as all data are in the same format.

The proof of concept would bring together the forms of the major humanitarian donors: ECHO (European Commission), USAID, DFID, Sida, Germany.


This effort could provide the ” hardware” (ok, technically software) of the “new accountability paradigm to reflect the reality of the Aid Industrial Complex“, and links up with the IATI effort for transparency.

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A new year, a new donor budget and the fallacy of additional resources

Donor budgets are annual and modular. The legislation ruling these budgets covers normally all expenditures in all departments. This means expectations on donor flexibility are often unrealistic. While the role of parliaments in poor countries might be taken into account, often the role of donor legislation, parliaments in the donor countries and the limited importance of development in donor country political priority setting are often forgotten.

A budget in most countries is annual. This means a budget starting in January is normally proposed by the desk officer in March, April, balanced for priorities within the hierarchy and government and finally discussed, amended and approved by the parliament around November. The actual calendar depends on the donor. From that moment on, the allocation for departments, programmes, budget lines and even individual allocations is fixed for the rest of the year. Changes are still possible. However, the procedures can be difficult. In most countries, the legislation supports limiting expenditure and makes additional expenditure difficult. At the higher levels, there is a need to go back to the parliament, at the intermediate level, it might be necessary to go to the Chancellor of the Exchequer. At the lower levels, changes might be allowed within the department or even at the level of the desk officer.

Lessons learned:

  1. On the cabinet level, a government decides on the broad strokes. So the only cabinet level decision might be on the total Official Development Assistance budget for the year (allocation is annual, spending might be multi-annual). Within this budget, it is mostly the preserve of the Minister for development coöperation to make allocations.
  2. As most governments don’t allow the printing of money, additional funding for a development issue normally means savings within the same department. “Additional funding” for development is only possible if there is a disaster or other major event that convinces the parliament and the public to change its priorities, by reallocating e.g. national health service budget to disaster relief. There might be a constituency of potential health service clients who would oppose this move. International conferences, resolutions or best practices normally don’t qualify for getting this treatment. Real additional funding would e.g. mean that a government moves its benchmark for development spending up (e.g. from 0.7 % to 0.75 %).
  3. For all practical purposes, “Additional funding” for one development item, like climate change adaptation means to diminish the funding for less sexy development priorities, like primary education, health systems or democratic governance between elections. The call for additional funding is a call to diminish the funding for other development issues. The choices for savings are seldom explicit. How many people should we stop feeding to increase the funding for coördination?
  4. Who pays the piper calls it tune: If it is not on the budget, it is not important. If an item is recognized as a budget line or a programme in the official budget, it is ingrained in the DNA of the donor. Continuity is near guaranteed, even over the years. If there is only an agreement signed to give the item top priority, but there is no dedicated budget, allocation of scarce funding will be difficult. It will depend on the priority the desk officer can impose on his minister for actually paying up. However, being buried in the budget on a lower level might be useful to stay under the radar, e.g. when supporting innovative interventions with low political backing and public appeal.
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Sunday Paper – New Years’ edition

  • “Sunshine: at the IMF, of all Places”Economist’s View; A new paper argues that the best solution to a financial crisis like the one we just experienced is to increase the share of income going to labor: Sunshine: at the IMF, of all places, by Alex…
  • Where Does Hate Come From?Economist’s View; Daniel Little has a question: Hate as a social demographic : Every democracy I can think of has a meaningful (though usually small) proportion of citizens who fall on the extreme right by any standard: racist, White supremacist, hateful, anti-immigrant, anti-Semitic, anti-Muslim, nativist, nationalist, or violently anti-government individuals and groups. In the United States we have many, man…
  • Palestinians Must Be Free – By Ambassador Maen Rashid AreikatForeign Policy; Ignore the smoke screen thrown up by Israel and its apologists. The real reason for the lack of an enduring Mideast peace deal is the Israeli occupation.
  • The march of freedomAid Watch; All men are created equal. Except blacks. Except women. Except gays. American history shows the erosion of the Excepts, although never complete. Yesterday’s repeal of Don’t Ask, Don’t Tell was another small victory for freedom. Let’s celebrate, while never losing resolve to keep moving towards complete equality and liberty for All. Why even homophobes should celebrate gay rights victoriesAid Watch; One of my favorite Abraham Lincoln quotes: As I would not be a slave, so I would not be a master. This expresses my idea of democracy.If I claim the right to deny you rights, that sets the precedent…
  • Freedom from fear: Protecting people from one of the world’s most brutal rebel groupsFrom Poverty to Power by Duncan Green; Maya Mailer, Humanitarian and Conflict Policy Advisor Across central Africa, men, women and children live in fear of the Lord’s Resistance Army. This predatory group attacks women as they perform their daily tasks – fetching water or tending to their fields – and children returning from school. It abducts, mutilates, rapes and kills, using extreme violence against the most vulnerable. Surviv…
  • Assessing Humanitarian AidGlobal Development: Views from the Center; A lot can be said against the methodology DARA uses, and even against the results they publish (honestly, New Zealand doing better than the Netherlands?). However, the index is necessary and useful. Subscribing to principles, without creating a cost to the non-compliance is moot. DARA makes it worthwhile for a donor to comply, as non-compliance leads to dismal scores. Countries should get more detailed feedback, as they need to be able to explain the problems caused by the methodological issues, and address those that are caused by the lack of motivation to comply with the undersigned principles.
  • Local politics a tough nut to crackChris Blattman; Donors push “community driven development” programs largely to strengthen local institutional capacity, democracy, and inclusiveness. (Sometimes overlooking the fact that these three goals are not…
  • Development Policy Review, Theme Issue: Aid, Institutions and Governance – What Have We Learned – Resources – Overseas Development Institute (ODI); As part of ODI’s 50th anniversary celebrations, DPR has republished nine key articles in the field of aid, institutions and governance, with an introductory essay by former Editor David Booth.
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Darwin awards for international organisations and treaties

Chatting with a friend over lunch on what is real work and what is just unproductive time-filler, we touched upon the Food Aid Convention. If this international treaty would just vaporise without leaving a trace, the overall effect on food security would probably be positive, as this treaty promotes a one-size-fits-all supply driven approach to food assistance, and its renegotiating takes up a lot of time of food security professionals.

Wouldn’t a “Darwin Award for Development Treaties and Organisations” be useful, to bestow an award on those development organisations and treaties who, by simply obliterating themselves, would contribute more to the development goals they promote then by dragging on. Different from the Darwin award for humans, where the prize is only awarded posthumously, the prize will honor the laureates with the best potential for improvement of the development gene-pool, as, you know, international organisation never die.

When assessing the list of international treaties and organisations however, most of them seem, at least on first sight, to have a potential contribution to development. However, it is only as an insider you notice the disfunctionality of an institution. Probably some more informal get-togethers qualify, like the MOPAN group. The multilateral aid effectiveness exercise by the new government in the UK happening for the moment at DFID might provide some good data for awarding the price.

For my part, I would grant the Food Aid Convention this prize, any more takers?

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Results in HIV/AIDS interventions: Considerations on the need for a vertical approach in an horizontal world, and vice versa

Aids day
During Aids-day, the blogs proved that the debate between the believers in a vertical approach and the believers in a geographical approach rages on. I did not write on it before, because it is an issue with ramifications in all directions, and wonderful opportunities for tangents and meandering digressions. Most thinking is black and white: HIV/AIDS needs advocacy and a vertical approach otherwise it does not get the priority it deserves, or all development must be locally generated, and advocates should stay out.
I will try to be brief and as provocative as I can to highlight the need for a more instinctive and competitive approach on this divisive issue.
I was working in the HIV/AIDS sector in South Africa, before Mbeki got internet-shavvy, and before the Global Fund For AIDS, TB and Malaria existed. It was a very frustrating experience. The South African government was hailed as one of the few Sub-Saharan governments with a decent policy, but rates of HIV-positive cases kept going up. Donors and the government were subsidizing mostly advocacy and awareness programs, and the responsible officials were often found in international conferences. In short, everything was politically correct, and nothing worked. Until GFATM was created. They had exotic ideas such as “evidence based” interventions. Things were falling into place when the price for drugs dropped too. Alternative reading: until Brazil and MSF got their way and cheap drugs.

Lesson 1: If there is an internationally recognized crisis, focused forceful global action can be useful.
Lesson 2: “Evidence based” interventions might have a bigger chance for success than doing whatever seems right when you are at it.
Lesson 3: Advocates can make a difference. Sometimes for the better.

Since the UN was created, there have been calls for reform, but here I am talking about 2004, with a donor drive for more streamlining amongst agencies. Smaller agencies should be integrated in the bigger ones. This would lead to more efficiency, as we all know that big bureaucracies, thanks to economies of scale, are more efficient than nimble organisations fighting for their survival. One of the agencies under fire was UNIFEM, The organisation that “provides financial and technical assistance to innovative programmes and strategies that promote women’s human rights, political participation and economic security.” It should have been merged with UNDP. One of the delegates of the G77 berated: all UN-agencies have been created because there was a good reason. So good a reason, that all MS in unanimity decided to create this organisation. Are you really sure that the situation of women has changed to such a degree that we don need this organisation any more?

Indeed only 6 years later, the same donors managed to create a bigger UN-women organisation, that should strengthen the original mandate of UNIFEM, and bring it to a larger scale.

Lesson 4: never thrust a donor (or anyone) that is sure about the next silver bullet
Lesson 5: Sometimes, if something is very important, you need to create a special tasks force to make it happen.
Lesson 6: Development fads come in tides, tides rolling in and out, a new tide rolling in…

In the early years when I was working on HIV/AIDS in South Africa, it was amazing how many of the “good practices” were just copy paste from the interventions that were used in the HIV/AIDS communities on the West Coast. A group threatened by exclusion dominated by homosexuality and intravenous drug use, while in Africa victims were often heterosexual middle class. It was only when results were required that the programs got adapted.

Lesson 7: local actors seeking locally adapted solutions based on global knowledge works better than local solutions transplanted to a different ecosystem. Without good knowledge to start with, chances are good nothing will happen at all.
Lesson 8: never thrust donors or iNGOs that they are open for local input. If they think they have a silver bullet, they will push it, claiming it is localised.


Lesson 9: global institutions should offer global knowledge and try to adapt catalytic operations to local circumstances. Acceptance and rolling out should be up to the local owners of the problem (if they find it is a problem).
Lesson 10: vertical and localized horizontal programs must coexist, and fight for attention. Having a dynamic of competition, where global, vertical programs must prove their mettle, and local horizontal programs are constantly challenged is a good thing.

Lesson 11: as a donor, you invest your money best where it delivers the most. Depending of the situation and the “maturity” of the issue, this can be a global vertical program, or a local operation, or anything in between. You should have thematic and geographical programmes with different goals competing for resources and attention.

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Sunday paper

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Should Multilateral aid have results?

Multilateral resource allocation: best practice approaches (Article – ODI Project Briefings 51, November 2010)

When DFID changes track on development, it is important to notice as DFID is one of the thought leaders among donor agencies. If ODI writes about it, it is important to notice, because ODI is one of the voices DFID is likely to follow. This is why the ODI project briefing “Multilateral resource allocation: best practice approaches for Multilateral resource allocation” is important. This is why the central thesis of the report, that multilateral results are difficult to quantify and we could settle for now for a transparent, quantifiable , auditable system, makes me uncomfortable. It seems an effort to plead for status quo. It outlines a superficially quantified and auditable system, but under the hood the data are subjective and debatable. More importantly, it sidelines the more important issue of results and effectiveness, because “objective measurement is difficult”.

Will this “best practice approach” lock the donors in a transparent system, taking away the pressure to move to better results? Will process and tools drive the donors for the foreseeable future instead of outcomes and results?

Governments have judged their private sector partners on their results and cost efficiency for years in a transparent way. Why would this be impossible for Multilateral Organisations (MO)? Choosing to fund organisations of which it is difficult to measure the results and effectiveness seems not a best practice. Perhaps we could measure the results by assessing the difference without funding? Is there another way? I think so.

The central problem with the thinking expressed in the briefing is the partnership approach, where an organisation is funded because of its institutional setup and not for its results. The funding becomes an entitlement that is not questioned. In a partnership approach, the UN-organisation has a role within the wider UN-system. This “ UN-system” however is a misconception: the UN-ecosystem is not a coherent system. To the contrary, each individual Multilateral Organisation was created by all member states because a certain distinct value, e.g. child care, or health standards, had to be addressed in its own sector, separately from the others. Those values stand on their own, and serve the global public needs only in this sector. In a sectoral approach or results based approach , the UN-organisation has a role within a certain sector (e.g. global public goods in health). You should assess the role of the organisation within this sector, and compare it to the alternatives in the sector. In a sectoral approach you are not expected to compare the performance across multilateral organisations, as there should be only one organisation in the sector fulfilling this role. You should not compare allocations among MOs, because they are in different sectors.

This choice between a partnership approach and a results based approach has important budgetary implications: in a results based approach there will be a funding balance sought among the different actors in the same sector, according to their contribution to the results. In the partnership approach the different UN-agencies will be funded from the UN-budget, and essentially compete with each other for funding. Within a partnership approach it is difficult to measure up which organisation is the most efficient; in a sectoral approach it is clear to most actors what global public good is needed and provided by the multilateral organisation.

For instance in the health sector, WHO is responsible for the global public goods such as the standard health procedures, but will also compete for operations with national governments, NGOs, the World Bank, and other UN-organisations such as UNICEF. Should we fund WHO for its “efficiency of procedures compared to the FAO” or should we fund them for the work they do in the sector?

Most Multilateral agencies have a creative approach to fundraising. While they pay lip-service to the UN-principles on funding, their fundraising is businesslike, and takes the reality of development funding into account. They try to cover all the markets:

  • Core funding is the bedrock of the organisation. This money mostly comes from multilateral budgets. Core budgets are supervised by the boards, and fund the administration, core responsibilities and whatever the board finds fit to approve.
  • Thematic funding gives flexibility within a sector. This money comes mostly from thematic funds from donors.
  • Project money can come from a myriad of donor budgets: multilateral budgets, thematic budgets, geographical budgets. The big money is in this line. A lot of small projects is together a lot of money. As administration is automated, the overhead per project is limited. The proof of this being that all organisations accept nearly all projects offered.

The objective is to maximise funding for the organisation. The board looks mostly into the core budget. Thematic spending is accounted for to the donor group that feeds this fund. Projects are on one by one accounted for. Most boards have no complete picture of what is happening. This gives management a lot of freedom.

The board members meanwhile, have seldom any management experience. The oversight happens mostly by diplomats who first defend the policy positions of their country and not by economists asking for efficient organisational management.

Another “best practice” approach

A results based approach to oversight on the multilateral organisations would start from a sector approach and define the role of the organisation within the sector.

Where the organisation really provides a global public good, the oversight should happen fully by the board. The funding allocation is very much like the funding for a government department in the home country: efficiency is a necessity, bud political priority and needs decide on the level of funding. Professionalisation of the board is necessary.

Where the organisation has a competitive edge for operations, they compete with other actors for funds. The picture is of course more blurred than this: they compete with the program country administration for direct funding through bilateral funds, but on the other hand coöperate with them too. The same happens with NGOs or the civil society.

It is in operations where the big money is. In operations results are measurable and can be compared with the results obtained by the other actors. Operations that can be done directly by other actors should not be single sourced to the multilateral agencies. By abandoning the push to form consortia and cartels in all areas, and stimulate competition instead, value for money would result, just like in all other government spending areas.

Compound indicators for meaningless conclusions

The five lenses approach, although it claims to be auditable, fails to be accountable as it fails to give “best value for money” being the measuring stick for government funding.

The five lenses measure clusters of related indicators in five different areas and bring them together in one evaluation framework. Eliminating competition and results from the framework means that funding will depend the quantification of often crowd-sourced assessments. Crowd sourcing can be useful, but is dangerous in areas where group think tends to occur, with development among government officials being certainly one of these areas.

The congruence with donor’s objectives is the first lens, and difficult to argue with. All donor funding should happen in line with the donor policy. If a donor funds against his own policy, well.

It seems incredible to find in the second lens, development effectiveness, only excuses for NOT measuring effectiveness. The lens is limited to process indicators like MEFF ( rule one of the logical framework: never make your means an objective) or MOPAN (crowd sourcing amongst donor diplomats). It could be seen as an insult by all the MOs who did work hard to get their indicators right and measure them.

What would be the outcome of the measurements in the third lens “role in the international architecture”? How do you distill an auditable number from these measures? It is remarkable how the role of “global public good provider” (appropriateness of the mandate) is mixed with the competitive role in the marked “alignment of activities with comparative advantage”. You would expect the board (with the donor included, and having a veto over all the decisions) to assure that the activities are aligned with the core mandate (I could expand on this one). These core activities should be well done, but without comparative advantage, because they fulfil a natural monopoly for the global public good. Comparative advantage is only relevant in sectors where there is competition, and not in the area where the organisation has a natural monopoly. Where there is comparative advantage, competition should play, and the funding should probably not be multilateral.

The fourth lens is also rather strange, as the potential for improvement is a reward for past bad management. Normally you would think past behaviour is seen as a proxy for the future. Those who reformed before have little scope for improvement. Moreover, it would also reward the organisations that can easily be instrumentalised by one donor, while the reform dynamic should mostly happen in the oversight bodies.

I am still wondering how scale made it as fifth lens. Indeed, it is more efficient for a donor to write 1 check of 1 billion than to write 1000 checks of a million, but the relationship with results is unclear to me. It is definitely easier to transform a small organisation than a big one. I wonder whether there is any link – all other parameters like professionalism and organisation the same – between size and efficiency. A small organisation with a focused mandate will probably be a lot more efficient than an unfocused sprawling dinosaur. However, a machine like WFP might be more efficient then an amateuristic outfit.

The total absence of the role of the oversight bodies in the document is worrying, and the prominent role given to informal donor gangs is a bad sign for the future of the multilateral system. The 5 lenses, without an assessment of the role in the boards, mean in practice that the donor and board member does not take responsibility for the management imposed on the organisation in the board.


The Multilateral Organisations have gone through important reforms, and some of them are more efficient than ever. Some Multilateral Organisations fulfil a central role in the development of the sector where they provide operations and global public goods. It is a disgrace not to reward them with funding in line with their results.

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Sunday Paper

Some articles to remember:

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It seemed like a good idea while we were at it: coordination instead of competition

A few months ago, Owen Barder wrote a ground-breaking article: Beyond Planning, Markets and Networks for Better Aid. As a development practitioner, being confronted with the latest ideas on best practices from ODI and the daily chores of coördination, there seems to be little movement towards a more market based approach. Does the following story seems familiar?

Programming for success:
A country has retrenched its administration heavily, and when the country gets clogged up with traffic jams, mostly because of the potholes, it finds no engineers left to advise it. Something must be done.
The first step is to bring the construction firms together and ask them to propose the legal standards for road construction.The second step is to ask the same industry to prepare an annual investment plan for road construction, to be proposed to the government. An industry commission is created to prioritize when the government budget is not enough. However, if the traffic jams don’t diminish, budget will rise.
In order to keep the road building effective the following measures will be taken:

  • All companies in the industry should get a piece of the pie. No exceptions made. No strong companies sidelining weaker ones.
  • Companies should have their own technical or geographical niche. As overlap is inefficient it will be eliminated, coördination at all levels will be needed to make sure there are no gaps nor overlaps.
  • In order to be sure everything runs smoothly, all planning decisions are taking in consensus among all companies involved. Work should be coördinated at all levels.

As there could be some questions on accountability, it is agreed that the different regions of the country will be represented in the respective boards of the companies, and the same governments can delegate politicians to sit in the management.

What is illegal in business is a good idea in development

The practices described above have been used in different sectors, the energy sector and arms industry most notably.

However, it is only in the development and humanitarian sector these practices are seen as conventional wisdom. In a business environment this approach would be illegal.
An overview:

  • The government has the obligation to follow up on the expenses made, to assure the products were delivered. This cannot be done without a minimum of technical capacity.
  • An industry writing its own legal standards or its own investment plan is a clear conflict of interest. Sitting on the board and on being part of the management equally.
  • A cartel is created to cut the pie, competition is eliminated
  • Within specific niches, monopolies are created.

Perhaps we should be more active in searching for alternative approaches to the current partnerships in development.

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