Cry from the field in Nepal

by Scott MacLennan, veteran NGO leader resident in Nepal A few weeks ago I was again trekking the Tamang Heritage Trail with a group of medical volunteers. We stopped for the night in the village of Thambuchet which is a short distance from Chilime. There I found a brand new government building that is supposed to be a birthing center. The government has a big push on to stop home births and get the people to use government facilities. So, it's a really nice building. Problem is that it has never been equipped with anything and has no staff.

Ward 9 in Pokhara, Nepal affords another good lesson. Under UNICEF, the municipal day care center was disgraceful. The barely six-foot high tin roof made the children's home into a sauna during the monsoons. There were no toys or resources for teaching. There was no toilet and the children defecated on the front lawn. Little in the way of funding ever made it to the center. There were too many bureaucratic mouths to feed further up the management (verification) ladder. The NGO that now helps support this day care center in partnership with local government has transformed it on a shoestring budget.

Much of the part of Nepal where I work has phantom projects. Empty health posts and newly built birthing centers without staff or equipment are not uncommon. These are all development assets on someone's balance sheet. The government counts them as part of its national health program. The international community has, at the risk of sounding too critical, for the most part been quite willing to allow this to go on. So long as the donors and the government can say they have this, or they have that, regardless of the reality of existence, everyone seems happy. The verification part of this industry thrives on the non-reality of it all.

Only small NGOs it seems are able to actually get out in the field and get their hands dirty making things happen. Past a certain size (what is that size?) the demands for official looking papers, reports, audits and the like overshadow the demand to actually provide aid. Large donors are just too caught up in the appearance of good business and good government. Form without substance.

Doing an inventory of small NGOs working in the various districts, then giving out small amounts of funding ($10,000-$20,000 a year) probably gets the most done. Skip the audits and heavy-duty report writing and verify with a small team equipped with a camera. A picture is worth a thousand words (or reports) it's there or it isn't and the camera tells you. NGOs with barely enough budget to survive have little motivation and opportunity to corrupt the process. They are community members themselves and the community can police its own quite effectively. Nearly anyone living in a small community in Nepal can tell you in short order who is working for the good of the community and who is lining their own pockets. Snap photos, ask the locals and you'll know for sure that your aid dollars did something.

That's my two cents from the field. I run The Mountain Fund, a very small NGO attempting to keep it real in Nepal. Photographic proof in my newsletters and please, stop and ask the locals about me. Oh, yes, I am taking over the empty birthing clinic and will raise the funds to equip and staff it myself. About $10,000 a year and I will send photos.

Thanks, Scott MacLennan

World Bank AIDS Drive crowds out other health programs – but fails to make progress on AIDS

A report released today by the World Bank’s own Independent Evaluation Group faults the Bank for allowing AIDS to drive out many other programs to improve health. To make things worse, the Bank’s AIDS effort itself failed to accomplish much – only 29 percent of AIDS projects (and only 18 percent of AIDS projects in Africa) had a satisfactory outcome – while other efforts were much more effective (89 percent satisfactory project rate for other communicable diseases). Despite the poor results on AIDS and better results on malaria and TB, AIDS accounted for 57 percent of Bank projects on communicable disease during 1997-2006 (the period covered by the evaluation), compared to 3 percent for malaria and 2 percent for TB.

The report notes the large share of health funding earmarked for AIDS tended to pull scarce resources in the local health system such as nurses and doctors away from other health problems. Within overall constrained donor budgets, AIDS financing tended to crowd out projects that support overall health system reform, despite the urgency of the latter issue to get any good results on any health outcome.

“A case in point is Malawi: because of constraints in the availability of Bank budget for supervision, IDA funds were available for the health {sector-wide reform} or … AIDS… but not for both. The Bank opted to drop support for the health {sector-wide reform} and continue support for HIV/AIDS.” (p. 40) The Bank did this even though a lot of other donor funding was already earmarked for AIDS.

Another victim of the AIDS emphasis was nutrition. The share of projects with nutrition objectives dropped by half; Bank support for nutrition reached only a quarter of countries with high stunting. This is particularly sad because many nutritional interventions are relatively cheap and easy to administer (for example, nutritional supplements, which had a big payoff in the PROGRESA program in Mexico).

The AIDS crowding out troubled the independent Advisory Panel that IEG asked to comment on the report. At a time when international AIDS funding was surging, the Panel said, “we were surprised that the Bank did not provide a countervailing trend…there was a fall in nearly half in the share of projects with objectives to reform the health system.” (p. xxvv)

Given what looks to be irrational behavior, my guess is that the Bank made these choices for purely political reasons. It is extremely sad that such politics caused the Bank to neglect many other treatable and preventable health tragedies, without any countervailing benefit even for AIDS victims given the poor performance of the Bank’s AIDS projects.

Does God Believe in Jeff Sachs?

I recently had a severe crisis of faith when I attended Trinity Episcopal Church in downtown Manhattan. Although I am an Episcopalian, there was one part of the liturgy the congregation was reciting in unison that caused me doubts. The problematic prayer in the liturgy was: “The world now has the means to end extreme poverty, we pray we will have the will.”

The first part is apparently meant as a statement of fact, which economists currently argue about (who is the world? Whose are the means? How does “the world” with those “means” actually end poverty?) The whole prayer seems to presume a particular approach to poverty: collective global action, which again economists argue about as being the right or the wrong approach to alleviate poverty. So why is God taking sides in a debate among economists?

This prayer was the brainchild of an Episcopal priest named Jay Lawlor, who prior to his ordination was an economist working for 10 years with – you guessed it – Professor Jeffrey Sachs. He now is the head of something called Millennium Congregations, which has an even stronger statement on its flyer:

At some point in the not too distant future benign neglect and callous disregard for the world’s extremely poor (living on under $1 a day) will become a crime against humanity and a sin against the Creator. This is the time to pray, advocate, and to take action. Promises have been made, and the time for debate is over because solutions now exist.

This is really bad news: having a debate with Jeff Sachs is now a sin against God.

Maybe this all happened after Jeff’s eloquent sermon at the Washington National Cathedral on September 11, 2005, where he was billed as “The Prophet of Economic Possibilities for the Poor.”

The 50th Anniversary of The Answer: Muddling Through

John Kay in the Financial Times today celebrates the 50th anniversary of a classic article by the American political scientist Charles Lindblom, column in the New York Times last week about agricultural aid (Sachs seems to have at least briefly returned to aid after a prolonged foray into global warming and commenting on rich country macroeconomic policy vis-à-vis the Crash). A bit of the “root” planning method seems evident:

The {aid} recipient countries should be invited to prepare plans and budgets that would be reviewed by independent experts. These plans would describe the inputs needed by the farmers, the expected increase in production, how the strategy would be put into place and how much money would be required.

So I guess Professor Lindblom’s battle is still not yet won. I salute the 92-year-old Professor Lindblom, and hope he is hearing about some of the 50th anniversary celebrations by his many fans.

The Answer to Development Ignorance: More Complicated Advice by Experts or More Freedom for Entrepreneurs?

by William Easterly in the Financial Times (extract of full review)

Alan Beattie’s new book False Economy accurately reflects the collapse in self-confidence among economists on our ability to usefully recommend how “developing” countries can rapidly develop. And he’s right about the reasons for this: both success and failure have often caught us by “surprise”, the key word in the book’s subtitle: A Surprising Economic History of the World.

Beattie’s supremely entertaining and informative book is a great reminder that the details of success are often impossible to predict or prescribe: no one can work out how to achieve each component. The best response is not to have increasingly convoluted advice by experts, but to let individuals with local knowledge roam free by trial and error to find their own successes.

So in the end, the economics profession does have more sensible things to say about achieving long-run success than Beattie allows: (relatively) free individuals, free markets, free trade, free thinking, and institutions that support all of the above.

The Secret to Successful Aid

…is that there is no secret. One approach to a successful aid project just is to immerse yourself in the local community, put local people in charge who are themselves highly motivated, be adaptive and flexible to respond to whatever the local people think about how they can help themselves, so that you customize the “standard project designs” to fit local circumstances. Most aid projects fail because there is nobody in the field making all these necessary adaptations and fixing unanticipated problems as they arise. The moral of the story is: be a Searcher and not a Planner.

All of these generalities came to mind when I visited the project Women’s Trust in Pokuase, Ghana yesterday, which I had also visited two years ago. I had a favorable impression then, and even more yesterday. An American, Dana Dakin, decided to start an NGO to help poor women on the occasion of her turning 60. The result, Women’s Trust, is a micro-credit initiative just for the medium-sized town of Pokuase on the outskirts of Accra. It seeks out female entrepreneurs and backs them with its small loans (the initial loan is less than $50, then increases with successive loans). The permanent staff is Ghanaian, led by the formidable Gertrude Ankrah, including accountants, loan officers, and computer whiz kids.

One success story is Sarah Ankrah (Ankrah is a very common name here), who received a 3000 Ghanaian cedi loan (at the time 1 cedi was equal to 1 dollar). Sarah now runs the largest bakery in Pokuase. Every day she gets up at 2am to go through 8 large bags of flour to have bread ready for her customers first thing in the morning. Women’s Trust microloans allowed her to grow by avoiding the extortionate rates charged by the flour suppliers (a 9% interest rate for a loan of only 2 weeks), which had previously eaten away most of her profits. Now she employs 8 women and 4 men. Her son Sammy became the first member of the family to go to college. Sarah perceives her market as “unlimited,” and is dreaming now of buying a delivery van to scatter her loaves far and wide. She repaid the 3000 loan and took out a new loan from Women’s Trust of 4000.

Sarah Ankrah and her workers cut up and shape the dough.

Similar success stories abound. Women’s Trust has diversified into new areas as opportunities arise. Bright kids from Pokuase whose school careers and life prospects would have ended prematurely get scholarships. Mothers bring in their babies to Women’s Trust to be weighed as a check on good nutrition. A handicraft operation crochets strips of plastic from recycled garbage bags into colorful handbags (two large orders from the US have already been received).

This kind of aid project is based on a lot of personal, face to face interaction, developing trust and a shared vision, so it is small scale, it has to let things proceed at their own pace, it can’t meet rigid pre-set output targets, it could never be judged by a rigorous “randomized controlled trial” methodology. In short, it involves the kind of tacit knowledge and individual adaptation that could never be converted into a routinized project implemented by the official aid bureaucracies. It breaks all the rules, and it works.

The Food’s Not Much, But the Lavatories Are Fabulous

I was startled during a meal at a non-luxury restaurant out in the boondocks in Ghana when my Ghanaian hostess suggested I check out the bathrooms. Lo and behold, they were indeed incredibly clean and hygienic. The reason seemed to be given by the following sign outside the lavatory. Apparently this private firm had won a lot of bathroom-cleaning contracts as a way to promote its own cleaning products for the homes of the Ghanaian middle class (I wish some entrepreneur in the US would think of this for our disgusting gas station bathrooms).

Now I’m not going to take a cheap shot and say this demonstrates the superiority of the private market to solve problems – especially when the private sector restaurant we were eating at was unable to supply most of the dishes that were listed on the menu (although those dishes that were available were fine). Maybe it’s a symptom of the information problems of a poor economy that the free market does well at supplying some goods (the frequently cited but still amazing penetration of cell phones and the internet into Ghana is another one), but misses out on others.

Of course, the “aid economy” is still much worse. Lacking any market or democratic mechanism to get feedback from the customers on what they want, there are even more extreme disparities between hits and misses on aid-supplied goods. One lightly used aid-financed road is a 4-lane highway in perfect condition, while the major Accra to Kumasi thoroughfare is a two-lane road riddled with potholes. Aid-financed buildings are always abundant, but some of the little things that make the buildings fully functional are missing. I saw a health clinic that was missing beds for the patients and tables for the nurse to work on (which was still much better than the well-documented problem of health clinics lacking medicines or health workers). The nurse’s solution was inventive – she kept moving one bed back and forth between the maternity ward, the post-natal recovery room, and the regular patient room, and she hijacked a table from the local aid-financed kindergarten. I am reminded of the old Soviet factory managers that creatively adapted to the perennial shortages in a centrally planned economy – much like the chronic shortages in an aid-financed economy.

It goes on. Food storage rooms are missing enough pallets to keep the food off the floor so it doesn’t rot. Some villages got a mass bed net distribution two years ago, but now some nets are torn, have been washed too many times because the village is so dusty, or some villagers missed getting nets altogether because they were absent on bed net distribution day. Moreover, the bed net villagers in an informal chat indicated other needs that seemed even more pressing to them than nets – they lack any reliable form of transport – to the capital, Accra, which is vital to them for business. Their only hope is to wait hours and hours by the road for some form of transport to come along. And more than anything they wanted – guess what – clean lavatories. There was not a single functioning lavatory in the village, and the villagers seemed well aware of the adverse health consequences of not having lavatories.

This is not to take away from the valiant aid efforts that did supply some critical goods, but it is clear the aid economy is a non-market system that has the same chaotic mixture of over-supply of some goods and shortages of others, common to other non-market systems. As the restaurant example above indicates, however, the free market is also uneven in supplying goods in poor economies. The difference is that we know in the long run, from the historical experiences of other countries, markets get more reliable and get wider and deeper coverage as a country develops (i.e. as transaction and information costs fall, and as markets get thicker with rising consumer demand). And for public goods, increasingly democratic systems with an active citizenry demanding services from their government create a kind of “political market” for public goods that does eventually succeed in creating better and more public services.

Unfortunately, history equally suggests that the non-market systems like the aid economy never do resolve their allocation problems of feast-or-famine. Aid may be a short-term expedient for some critical needs, but already in Ghana far more people are getting their needs met through private markets. Every visitor to Ghana or any other poor society has to be struck by the amazing number and diversity of small producers and retailers visible at every turn of the road – the “Royal Metal Works,” the “God is Able Provisions Store,” the “Urban Fashion and Business Center,” or the simple bald advertisement “Cement is Sold Here.” There is a lot more hope for the villagers and urbanites of Ghana from improved functioning of markets and of democratically-accountable public services than from the aid system. I’m willing to bet that the market will eventually compel the restaurant with the clean lavatories to have most of the items on the menu.

Can We Trust the World Bank to be a Knowledge Bank?

Unfortunately, not really, according to Brown University Professor Ross Levine’s presentation at the Aid Watch conference “What would the poor say?” on February 6, 2009. Professor Levine argues that the Bank’s incentives to keep the lending money flowing trumps any incentive to get the advice right on important issues.

The World Bank acted to suppress data collection on bank regulation because it didn’t like the findings that were emerging (not that an obscure topic like financial regulation is that important). (2 minutes, 6 seconds):

Ross Levine on a Bank Regulation Study at the World Bank from DRI on Vimeo.

Was it that the Bank could not afford to spend $50,000 to collect data on what works in bank regulation? Well they did manage to spend $4 million on a “Growth Report” whose usefulness Professor Levine regards as somewhere between that of a pet rock and a clueless bank regulator (54 seconds):

Ross Levine on How Much is A Lot of Money for the World Bank? from DRI on Vimeo.

Response to Owen Barder on UK Budget Support

Owen, thanks for responding to our piece. Open debate is an important way to clarify issues and hold us all accountable for the integrity of our intellectual positions. First off, you criticize us for getting our facts wrong on Ethiopia’s elections. We said:

Ethiopia’s autocratic government, which is inexplicably the largest recipient of UK budget support in Africa, won 99% of the vote in the last ‘election’.

And you say:

Nice point, except: a. according to the official results of the 2005 election, the ruling party won 59.8% of the votes…it is nonsense to say that the government received 99% of the vote.

I guess we really left you with a poor impression if you think we can’t even count votes! We were referring to the local elections of April 2008 (the more recent, and hence ‘last’). Human Rights Watch (the source of our original assertion) found, during two weeks of field research in the lead up to the elections, “systemic patterns of repression and abuse that have rendered the elections meaningless in many areas.

HRW concluded that the 2008 elections “provided a stark illustration of the extent to which the government has successfully crippled organized opposition of any kind—the ruling party and its affiliates won more than 99 percent of all constituencies, and the vast majority of seats were uncontested.” An Associated Press article from April 20, 2008 told the same story: “opposition parties said a systematic campaign of beatings, arrests and intimidation forced out more than 17,000 of their candidates.”

You also challenge us on another fact:

The UK does not give budget support to the Federal Government of Ethiopia… the UK Government provides finance to local government (albeit through the existing financial transfer mechanism via central government).

But wait, aren’t those the same local governments that just had the rigged elections? A recent article by Aalen and Tronvoll in the journal African Affairs points out that one of the reasons why the ruling party bothered to fix the local elections so thoroughly was precisely because international donors had cut off budget support to the federal government (in the political mayhem following the 2005 elections) and started channeling it to local government bodies instead. (Anyway, we never made any assertion about which level of government received budget support.)

You don’t think we developed our case enough that budget transfers to corrupt autocrats are bad. Fair enough, cases should always be developed more. But for now, which is more intuitive: your claim that aid to kleptocrats is “a way to make the government more accountable to its own citizens,” or our claim that aid money given directly to corrupt dictators is unlikely to reach poor people?

You continue:

The British Government's approach of giving some aid in the form of budget support (too little, in my view) is motivated by evidence that in some circumstances this is an important way of building more effective, responsive and accountable institutions.

“Effective, responsive and accountable institutions”—wouldn’t that include democracy and freedom from corruption? The “evidence” you cite in your post is from a report commissioned by the donors to evaluate themselves. While self-evaluation raises suspicions of bias, even so the support for your claims from this report is a tad on the weak side: “Where a separate governance matrix has been developed, progress is slow…or donors are not satisfied with quality of dialogue…or implementation is weak.”

As for corruption, the same study said that “corruption, and anti-corruption measures, have featured explicitly in the performance matrices and prior actions linked to PGBS. Most often, prior actions related to legal measures, policy development and administrative actions, but, even when formally complied with, such measures have not been conspicuously effective.” Not too surprising—isn’t giving aid to corrupt officials for anti-corruption strategies kind of like giving aid to burglars to install burglar alarms?

You conclude your post by stating:

If Aid Watch wants to be taken seriously as an aid watchdog, then … they need to do some proper analysis of the costs and benefits of different choices for aid delivery in different contexts, rather than simply asserting that it is wrong to give aid to and through governments of which they disapprove.

Thanks for your helpful suggestions on how to ingratiate ourselves with the aid establishment by toning down our criticism of bad aid-receiving governments. However, what really matters to us is not whether WE disapprove of a country’s government but whether the CITIZENS of that country disapprove of their own government—and have the right to express it. Judging from recent election practices by the government of Ethiopia, most Ethiopians don’t have that right.

Response to "Why Does British Aid Favor Poor Governments over Poor People"?

By Owen Barder, the Addis Ababa-based director of aidinfo.org, an initiative to accelerate poverty reduction by making aid more transparent. Aidinfo is part of Development Initiatives, a UK-based development consultancy. Bill Easterly and Laura Freschi at Aid Watch lay in to British Government aid for giving financial support directly to governments:

In 2007, the UK gave 20 percent of their total bilateral ODA in the form of budget support to 13 countries: Tanzania, Ethiopia, Pakistan, Ghana, Uganda, Mozambique, Vietnam, Malawi, Zambia, India, Sierra Leone, Nepal, and Nicaragua. Of this list, only Ghana and India were classified as “free” by the annual Freedom House ratings on democracy (according to either the 2007 or 2008 rating). For the 11 other countries that did get British budget support, how much is there “country ownership” when the government is not democratically accountable to the “country”? ... There is nothing that says you have to give aid meant for the poorest peoples directly to their governments, if the latter are tyrannical and corrupt. With the examples above, which side are UK aid officials on, on the side of poor people or on the side of the governments that oppress them?

With all due respect to Aid Watch, I don't think they have got this right. For example, they say:

Ethiopia’s autocratic government, which is inexplicably the largest recipient of UK budget support in Africa, won 99% of the vote in the last "election".

Nice point, except:

a. according to the official results of the 2005 election, the ruling party won 59.8% of the votes; the Coalition for Unity and Democracy got 19.9% and the United Ethiopian Democratic Forces got 9.5%. I have no idea if those accurately reflect how people voted, but it is nonsense to say that the government received 99% of the vote;

b. the UK does not give budget support to the Federal Government of Ethiopia. Through the Protection of Basic Services scheme, which was introduced after worries about the election, the UK Government provides finance to local government (albeit through the existing financial transfer mechanism via central government). As well as funding health and education, the project includes significant components to increase transparency and accountability of federal and regional parliaments.

Aside from getting the facts wrong, Aid Watch seem to be criticising this form of aid by slinging mud rather than by way of a proper analysis of the advantages and disadvanges. We should be asking what benefits arise from giving aid through government, and what harm may come from it. Aid Watch acknowledge the possible benefits: lower transaction costs, more coherence in development policies, building capacity of government. There is another crucial possible benefit: putting money through government budgets is also a way to make the government more accountable to its own citizens, rather than to a bunch of foreign donors.

But Aid Watch don't try to spell out what the harm might be if aid is given to governments with unpleasant records on human rights or corruption. I personally think there is a case to be made against giving money to many governments, for example if there is reason to believe that the money will not be spent on poverty reduction, or if it will sustain in power a government which might otherwise be booted out of office. But let's set out these reasons coherently, and let's try to assess their importance relative to the possible benefits. Aid Watch seems to suggest that guilt-by-association is enough to damn the whole enterprise.

As it happens, the governments mentioned in this piece (Ethiopia, Vietnam and Malawi) all make demonstrably good use of the money they have received. Here in Ethiopia the expansion of public services such as free education and publich health workers financed by Protection of Basic Services is transforming the quality of lives across the country; and Vietnam has made quite staggering progress in bringing down poverty. Personally I think there are important questions to be answered about the quality of democracy in both countries: but that doesn't mean I want to kill some of the citizens of those countries, or deprive them of basic services, by giving less effective aid. The British Government's approach of giving some aid in the form of budget support (too little, in my view) is motivated by evidence that in some circumstances this is an important way of building more effective, responsive and accountable institutions.

Developing countries don't want to receive aid forever, any more than industrialised countries want to give it forever. Building effective and accountable public services is a way of financing the delivery of public services in the short run, while at the same time making it more likely that countries have an exit strategy from aid in the long run. That is not preferring governments to poor people: it is preferring poor people to giving aid in a way which maximises the publicity you get and covering your back but doing little to build accountable and sustainable public services. Giving aid as budget support should not be promoted ideologically: it should be used where the advantages (in terms of better service delivery and the long term benefit to accountability and institutions) outweigh the disadvantages (such as the risk of sustaining a bad government in power). Equally it should not be opposed ideologically. Budget support has not been shown to be at any greater risk of corruption or of fungibility than other forms of aid (these are the two main arguments that are offered against budget support). It should be assessed case-by-case. Where it can be used, it represents a very powerful mechanism for both the short term benefits of service delivery and the long term benefits of institutional development. Where it cannot be used, donors should be focusing on what they can do to help create an environment where it can be used in future.

If Aid Watch want to be taken seriously as an aid watchdog, then (a) they'd better get their facts straight and (b) they need to do some proper analysis of the costs and benefits of different choices for aid delivery in different contexts, rather than simply asserting that it is wrong to give aid to and through governments of which they disapprove. Incidentally, last year Easterly and Pfutze ("Where Does the Money Go? Best and Worst Practices in Foreign Aid.") ranked the UK as the best bilateral donor. That doesn't mean that the UK is perfect, by any means, and it doesn't mean that they get every judgement right; but it does suggest that UK aid officials might not deserve the allegation in this blog entry that they prefer poor governments to poor people.

Declaration of interest: I used to work for the UK Department of International Development.

Why Does British Foreign Aid Prefer Poor Governments Over Poor People?

European donors are moving towards increasing direct budget support to governments of aid-receiving countries. Leading the charge is the UK, which gives the largest percentage of direct budget support of any bilateral or multilateral donor (although the World Bank, the European Commission, the US and France also give substantial budget support). Giving cash directly to host country governments for use in the general budget for public spending has a number of advantages. The donors say it gives recipient governments more predictability, and more control over the aid resources being funneled in. Rather than serving a plethora of masters in the international donor community, funds given as budget support can be corralled by the host government and spent coherently according to host government priorities, while building government capacity to do what everyone wants governments to do for themselves in the long run: competently manage their own affairs. The aid jargon for this is “country ownership.”

So how is this working out in practice? In 2007, the UK gave 20 percent of their total bilateral ODA in the form of budget support to 13 countries: Tanzania, Ethiopia, Pakistan, Ghana, Uganda, Mozambique, Vietnam, Malawi, Zambia, India, Sierra Leone, Nepal, and Nicaragua. (Source)

Of this list, only Ghana and India were classified as “free” by the annual Freedom House ratings on democracy (according to either the 2007 or 2008 rating). For the 11 other countries that did get British budget support, how much is there “country ownership” when the government is not democratically accountable to the “country”?

Moreover, Human Rights Watch (HRW) accused some of these governments of serious human rights violations. Ethiopia’s autocratic government, which is inexplicably the largest recipient of UK budget support in Africa, won 99% of the vote in the last “election.” The government army is accused by HRW of war crimes in the Somali region of Ethiopia. Nor is this brand new -- neither army officers nor civilian officials have been “held accountable for crimes against humanity that ENDF (Ethiopian National Defense Force) forces carried out against ethnic Anuak communities during a counterinsurgency campaign in Gambella region in late 2003 and 2004.” HRW also notes that today: “Credible reports indicate that vital food aid to the drought-affected [Somali] region has been diverted and misused as a weapon to starve out rebel-held areas.” Ironically, Ethiopia’s autocratic ruler, Meles Zenawi, was the Africa representative at the recent G-20 meeting campaigning for more aid to Africa during the current crisis, because, among other reasons, Meles said “people who were getting some food would cease to get it and … would die” (from an article in Wednesday's Financial Times.)

As for Vietnam, HRW reports: “In March 2008 police arrested Bui Kim Thanh, an activist who defended victims of land confiscation and involuntarily committed her to a mental hospital for the second time in two years. … In October a Hanoi court sentenced reporters Nguyen Viet Chien of Young People (Thanh Nien) newspaper to two years in prison and Nguyen Van Hai from Youth (Tuoi Tre) to two years’ “re-education” for having exposed a major corruption scandal in 2005…..”

Oh yes, and let’s consider corruption, which may affect whether aid to governments translates into aid to poor people. Another country on the UK budget support list, Malawi, had received $148 million in budget support from its donors from 2000 to 2004. It ended those four years with poorer government capacity and greater fiscal instability than it began them, according to one evaluation. Also during those four years, the Malawian president was accused of awarding fraudulent contracts, and government officials achieved new lows when they sold off all 160,000 tons of the country’s grain reserves for personal profit. In the ensuing famine, provoked by drought and floods but made worse by the loss of the grain reserves, the government had to borrow an additional $28 million to feed its starving people. Yet Malawi continues to receive British budget support today.

Elsewhere on the corruption front, British aid continues to give direct transfers to the Sierra Leonean government even though its own 2006 report found that previous support to the “Anti-Corruption Commission” had “made no progress on the overall goal of reducing corruption, had made no impact on reducing real or perceived levels of corruption, had suffered a fall in institutional capacity since the previous year.” (Quote from a 2008 Transparency International report). Sierra Leone is ranked the 158th worst country in the world on corruption (where the worst ranking is 180th).

Of course, low income countries have lower ratings on democracy, human rights, and corruption than richer countries, so poverty-alleviation aid has to face the tricky tradeoff of directing aid to the poorest countries while trying to avoid the most corrupt and autocratic ones. Unfortunately, a recent article found that the UK was one of the best (least bad) official aid agencies in doing this, so most of the others are apparently even worse.

This study did not consider the issue of direct budget support. There is nothing that says you have to give aid meant for the poorest peoples directly to their governments, if the latter are tyrannical and corrupt. With the examples above, which side are UK aid officials on, on the side of poor people or on the side of the governments that oppress them?

"If You Don't Trust People You Know, It's Over!"

It would be so much easier for economists and aid workers to sidestep discussions of the role of culture in economic development. It's so hard to quantify, so slippery to define, and nearly impossible to graph. In this clip from the Development Research Institute's recent conference, NYU Professor Leonard Wantchekon talks about a cultural challenge to development in the country where he grew up, Benin.
Leonard Wantchekon on the Lack of Intra-Community Trust in Benin from DRI on Vimeo.

Wantchekon has traced this lack of trust to the historical legacy of the slave trade, in a research paper he co-authored with Nathan Nunn.

Stories like these point to the importance of bottom-up approaches to development. One-size-fits-all grand plans inevitably lack the cultural specificity to tease out and cope with these potential barriers. Are there other examples of unexpected cultural challenges to development that you've come across?

Thieves and Donors: Agencies Struggle to Respond to a Little Constructive Criticism on Tajikistan

Last month, the International Crisis Group came out with a report describing the "profound and all-pervasive nature of corruption in Tajikistan," and recommending that the international donor community "institute a totally new framework for the provision of aid to Tajikistan." Since "most" of the substantial amount of money provided by international donors (some $300 million in 2006) "is believed to be lost to corruption before it gets anywhere near its intended recipients" the ICG reasonably recommended that donors take another look at whether it is good idea to give Tajikistan direct budget support (that is, provide cash directly to the Ministry of Finance to go into the budget for public spending). If the government doesn't get into shape, they said, donors should keep on funding humanitarian relief but cut off direct budget support.

We wondered what Tajikistan’s donors would say about these recommendations. In an ideal universe of flexible, accountable aid, surely donors would welcome impartial, externally-funded research. They would have in place some mechanism to evaluate the recommendations and determine whether existing aid programs should be tweaked or even discontinued in light of new findings...right?

To their credit, the donors we spoke with were aware of the ICG recommendations, and all responded (though some more slowly and reluctantly than others) to our questions.

The IMF told us that the majority of the ICG findings didn’t apply to them: the IMF doesn’t give direct budget support, and it doesn’t fund specific projects. As it happens, though, a new IMF loan of $120 million was announced the same week the ICG report came out. The loan will go the central bank to bolster Tajikistan’s foreign currency reserves. "As is the case in all IMF programs, we will also conduct a safeguards assessment that seeks to confirm that IMF resources are used as intended" said the IMF rep in an email message. We just wonder if this is the same safeguards assessment that was conducted before the last six misreporting incidents between Tajikistan and the IMF, the most serious of which required Tajikistan to give back some $50 million dollars and hire Ernst and Young to conduct an independent audit of the National Bank.

So who is giving direct budget support to Tajikistan? The World Bank’s portfolio for 2006 to 2010 includes $30 million in direct budget support. A new agreement, also reached the same week that the ICG report came out, will add $20 million to that figure, bringing budget support to 30 percent of the World Bank’s total grants in Tajikistan.

Reached via email in Dushanbe, the World Bank rep said of the ICG report: “We do not find ourselves in a position to comment on those recommendations…what we can say though is that the World Bank is aiming to support the people of Tajikistan…and the monitoring and audit systems in World Bank-funded projects are carefully designed to ensure that the funds reach those whom they were intended for.”

At the same time, though, the World Bank rep sent us a case study commissioned by Brookings (forthcoming) on aid effectiveness in Tajikistan. This report’s key conclusions are worth quoting at length:

The existing aid coordination architecture and interaction mechanisms between the Government and development partners are unable to ensure efficient use of foreign aid resources being provided to Tajikistan. As a result, planned (or expected) results and impact are substantially different from those realized on the ground. External assistance...has resulted in the perverse situation of a lack of incentives and inability to focus on and pay attention to the long-term determinants of domestic growth and appropriate political and economic institutions.

What do you think? Are donors in Tajikistan and elsewhere doing enough to safeguard aid funds and make sure they reach the poor? Or are they taking the path of least resistance, responding to strong institutional incentives that require donor organizations to keep the money flowing? What more do you think can be done?

NYU’s Aid Watch Initiative Held Conference on “What Would the Poor Say? Debates in Aid Evaluation”

By William Easterly During last Friday's conference, participants and speakers leveled a variety of criticisms at aid agencies for lacking accountability and transparency, but also suggested new ideas and expressed hope for a new way forward. Here are some highlights; check back soon for more details and some video footage. Click here for the full conference agenda.

Yaw Nyarko (NYU): “No nation has ever developed because of aid and outside advice.”

Esther Duflo (MIT): “Field experiments have a subversive power.” Find her presentation here.

William Easterly (NYU): The institutions of a free society make it possible to answer "what would the people say?" Can we imitate this in aid to know "What would the poor say?" Full presentation here.

Laura Freschi (DRI) on Aid Watch: “We want to act as ONE OF MANY catalysts in the open marketplace of ideas about aid evaluation: inspiring connections, and helping to convert good ideas into opportunities.” Find the text of the Aid Watch launch announcement here.

Andrew Mwenda (the Independent): “Aid money makes African governments accountable to the aid agencies rather than to their own people.”

The power of accountability for African governments is shown by some examples when political elites faced a threat to their very existence, like in Rwanda after the genocide or Uganda after Musevni’s takeover in 1986, when both governments instituted pro-development policies.

Nancy Birdsall (Center for Global Development): Cash on delivery aid “traps the donors so they are forced to have poor country governments accountable to them and accountable to their own people.” Find her presentation here.

June Arunga (BSL Ghana Ltd.): "Aid money is diverting African skilled professionals away from private enterprise to writing proposals for NGOs.”

When June pitched her idea of using cell phones to facilitate financial transactions to Western investors, one well-known philanthropist expressed disbelief that poor Africans (whom she had seen mainly in pictures begging and starving) had cell phones: “Who do they call?” she asked.

Dennis Whittle (GlobalGiving): “Put up a billboard in each community saying what aid money is supposed to be going towards.” Click here for his presentation.

Lant Pritchett (Harvard University): "Is this information you are gathering from us just to help you write your report or can you really be helpful to us?" - a woman in South Sudan.

Evaluation can help make politically successful development movements into effective ones. Find his presentation here.

Ross Levine (Brown University): “Aid agencies are insufficiently evaluated on advice…financial survival depends on distributing money.” The right advice often violates the imperative: “Don’t interfere with lending!” Click here for more.

Leonard Wantchekon (NYU): "We African professionals want to be the ones advising our own governments rather than foreign aid professionals!" Find his presentation here.

Karin Christiansen (Publish What You Fund): “In Afghanistan, the government does not know how one-third of all aid since 2001 – some $5bn – has been spent…Liberian civil society organizations couldn’t get basic information [which foreigners could.]” Find her presentation here.

William Duggan (Columbia School of Business): “I wasted 20 years of my life on aid efforts, but now I see some hope for change.” Click here for his short paper (co-authored with Lynn Ellsworth) on "Evaluation, the Poor, and Foriegn Aid."

Everyone Should Be Responsible...(except the aid agencies)

Today, I foist a new blog called Aid Watch on the blogosphere. The objective is to be brutally honest when aid is not helping the poor, but also praising it when it is. Alas, there is far to go. Take World Bank President Robert Zoellick’s oped (A Stimulus Package for the World) in last Friday’s New York Times and another one in today’s Financial Times (It is Time to Herald the Age of Responsibility).

The more you promise, the more you are telling us you don’t expect to be accountable for promises

In the NYT, President Zoellick requests an additional $6 billion from the US in foreign aid, which will “speed up global recovery, help the world’s poor and bolster [America’s] foreign policy influence…facilitate fast and flexible aid delivery…create jobs while building a foundation for productivity and growth…increase demand for American-made equipment...[and] limit the depth and length of the international downturn, prevent the contagion of social unrest and help save a generation from a new poverty trap.”

The more actions you list, the less you are serious about each action

Right after saying “priorities” for actions in poor countries (NYT), President Zoellick manages to touch on agriculture, health, education, nutrition, infrastructure, banking systems, small-and-medium-enterprise development, microcredit, global warming, and private sector development. Mr. Zoellick (FT) also wishes for international action on the Millennium Development Goals, the Doha trade round, the Copenhagen climate change agreement, humanitarian food supplies, energy conservation, and more G20 meetings to agree on fiscal expansion and reopening credit market agreements.

It’s not about aid money to reach objectives, aid money IS the objective

NYT: “The United States could begin by pledging some $6 billion…0.7 percent of its stimulus package.” FT: “How we respond to the crisis…will set the course.” The “first step” is to give more aid.

President Zoellick does mention briefly the critical issue in both the NYT and FT: some “safeguards to ensure that the money is well spent,” which don’t currently exist. In the FT, he makes the inspirational call for an “Age of Responsibility,” but the Responsibility seems to apply only to rich donors, there is nothing about holding the World Bank responsible.

If you are not accountable for promises, if you try to do everything and focus on nothing, and if you obsess about aid money raised rather than results achieved, haven’t you already told us that the money will not be “well spent”?