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New Assessment Rates Donors on Quality of Aid

October 22, 2010

by Jeremiah Norris – Senior Fellow,  Hudson Institute

On October 5, the Center for Global Development (CGD) and the Brookings Institution jointly launched the Quality of ODA (QuODA) Assessment, a comprehensive index that evaluates each donor country or agency on four dimensions of aid quality. It compares the aid quality of 31 donor countries and multilateral agencies, as well as 152 individual development agencies.

Quality of Aid Diamond from the Center for Global Development

Quality of Aid Diamond from the Center for Global Development

The four dimensions of aid quality measure how donors maximize efficiency by spending aid in countries where it has the most potential to help; foster institutions in recipient countries by coordinating aid with their priorities and budgets; reduce the administrative burden that aid often places on recipients; and support transparency and learning by sharing useful data on aid spending. Within these four dimensions, there are 30 indicators, e.g., low administrative unit costs in maximizing efficiency, as one such indicator.

Key findings on this first Assessment include:

  • The U.S. does poorly in comparison to other donor countries and agencies, ranking 24th or below (out of 31) on each of the four dimensions. But some individual U. S. agencies, including the Millennium Challenge Corporation, score above average marks.
  • The World Bank’s concessional leading arm, the International Development Association (IDA) is the only multilateral agency and only large donor to score in the top 10 for each of the four dimensions.
  • Among bilateral donors, only Ireland scores in the top 10 for each of the four dimensions.
  • Overall, multilateral agencies such as the World Bank and The Global Fund to Fight AIDS, TB and Malaria fair better than country donors on all four dimensions, except for Transparency and Learning.
  • The size of a donor’s aid program does not significantly affect the aid quality scores. Among large donors, the European Commission, the UK and IDA score relatively well, while Japan and the U.S. perform relatively poorly.

CGD and Brookings indicate, “there is a broad international consensus about what constitutes high-quality aid, but without measurement, a lot of that is just hot air.  There’s lots of room for improvement. We hope that the QuODA rankings will spur donor countries and aid agencies to do a better job.”  Since this is a purpose of the QuODA rankings, it is worth a brief analysis of what it does not measure.

  1. First and foremost, it does not measure outcomes. The problem with government foreign aid since its inception is that it has focused on inputs, but not outputs and outcomes. How can quality of aid be considered without first knowing if it delivered a good or service or changed a life in some way? Whether aid is “coordinated” or “transparent” is inside baseball for government workers and contractors to spend money on meetings and reports. All these process indicators continue to cloud the conversation on why government aid is not focusing on what works and what doesn’t in their programs.
  2. It does not measure private aid in contrast to ODA. During the period 2004 – 2008, Hudson Institute’s Index on Global Philanthropy & Remittances cataloged ODA against non-governmental aid to the developing world from the U. S.  The five year total was $119.4 billion for ODA, and $729.4 billion for non-governmental aid.  In 2004, the percentage of ODA vs. non-governmental aid was 20%, falling to 14% in 2008.
  3. ODA mainly goes into a country’s public sector. The QuODA assumes that the four dimensions of quality only occur there, rather than also in their private sectors. For instance, even in the poorest countries, the private health sectors account for the largest share of national expenditures. In Nigeria, it is 81%; 66% in Bangladesh; 78% in Cambodia; 77% in Cameroon; 81% in Indonesia; 85% in India; and 83% in Kenya.
  4. The Global Fund to Fight HIV/AIDS ranks higher in all four dimensions than does the U.S.   However, the Fund permits the procurement of drugs that are not approved by any regulatory authority. By definition, these are substandard products and one of the leading causes of drug resistance as an outcome. The U.S. only procures drugs that have been approved by a stringent regulatory authority, greatly lessening the onset of drug resistance.  Secondly, the Fund does not follow the UN’s Universal Declaration on Human Rights and its provision for Informed Consent when providing AIDS patients with un-regulated drugs.

In the introduction to the QuODA text, it is stated that “the true test of aid effectiveness is improvements in people’s lives”.  How can improvements be measured if we don’t consider the ‘outcomes’ of aid? At this early stage of its development, the QuODA is of limited value; it measures a declining portion of the total resource flows that go into the developing world.  And its metrics are designed to capture only ODA that largely goes into a country’s public sector, when in many of the larger countries, in sectors such as health, the vast majority of national expenditures are in the private sector.

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