The development aid system has the potential to help countries achieve the Goals, but it needs a much more focused approach to do so. Here are the 10 main problems with the system today ( table 4 ).
Lack of MDG-based aid processes
The system lacks a coherent MDG-based approach to reducing poverty. For example, the Bretton Woods institutions should do much more to help countries design and implement MDG-based poverty reduction strategies. Inter-national Monetary Fund (IMF) program design has paid almost no systematic attention to the Goals when considering a country's budget or macroeconomic framework. In the vast number of country programs supported by the IMF since the adoption of the Goals, there has been almost no discussion about whether the plans are consistent with achieving them.
In its country-level advisory work, the UN Millennium Project has found that multilateral and bilateral institutions have not encouraged the countries to take the Millennium Development Goals seriously as operational objectives. Many low-income countries have already designed plans to scale up their sector strategies, but due to budget constraints could not implement them. In other cases, countries are advised not even to consider such scaled-up plans. Fortunately, the Bretton Woods institutions are now showing more interest in basing the country programs that they support on the Millennium Development Goals, and it is important for them to follow through on that expressed interest.
Table 4: Recommendations for reforming development partnership
Development partners do not approach country-level needs systematically
Since development partnership is not driven by a coherent set of operational targets, there are no clear criteria for evaluating the types or amounts of development assistance required by individual countries. There is no established framework, for instance, for differentiating support to countries with corrupt governments as opposed to those that are weak but willing.
Most development processes are stuck in the short run
Development is a long-term process, but the key processes for international partnership are short term in their orientation. Most important for low-income countries, PRSPs are typically three-year strategies, tending to take many constraints as given rather than identifying ways to overcome them over time. In many cases the actual planning cycles are even shorter, dictated by the annual meetings of Consultative Groups.
Technical support is inadequate for MDG scale-up
Most low-income countries require technical support from the international system to put forward scaled-up investment plans to achieve the Goals. Yet the international agencies that are the global repositories of sector-specific knowledge—such as FAO or IFAD for agriculture, UNICEF for child health, UNIDO for industrial development, or WHO for health systems and disease control—are usually asked instead to focus on small pilot projects. In general, the technical UN agencies on the ground are not prepared to help countries scale up national programs.
Multilateral agencies are not coordinating their support
Multilateral organizations frequently compete for donor government funding to implement small projects, instead of supporting country-scale plans and budgets. The various UN agencies, programs, and funds have begun to coordinate their efforts through the structure of the UN Development Group at headquarters and the UN Country Teams at country level, but this is still often more a forum for dialogue rather than real coordination. Moreover, the UN agencies are frequently not well linked to the local activities of the Bretton Woods institutions and regional development banks, which tend to have the most access in advising a government since they provide the greatest resources.
Development assistance is not set to meet the Goals
As the IMF Managing Director has recently written, it is the developed world that has the greatest responsibility for ensuring the achievement of the Goals (box 7). Public investments cannot be scaled up without greatly increased official development assistance. This is particularly important in low-income countries where assistance levels are generally set more by donor preferences than by developing country needs. Although long-term sustainability and capacity building in the poorest countries require support for recurrent costs—such as salaries and maintenance—donors have historically refused to support them, thus preventing any hope of true sustainability. Similarly, even though worker shortages are often the major bottleneck for countries trying to deliver basic social services, donors do not systematically invest in preservice training of health, education, and other key workers. Aid flows are also not growing as fast as promised. Since even the much-heralded Monterrey commitments have not fully materialized, developing countries wonder whether developed countries are genuinely committed to the Goals.
Debt relief is not aligned with the Goals
The targets for debt relief are based on arbitrary indicators (debt-to-export ratios) rather than MDG-based needs. Many heavily indebted poor countries (HIPCs) retain excessive debt owed to official creditors (such as the Bretton Woods institutions) even after relief. Many middle-income countries are in a similar situation and receive little or no debt relief.
Development finance is of very poor quality
The quality of bilateral aid is often very low. It is too often:
Box 7: What advanced economies can do to achieve the Goals
- Highly unpredictable.
- Targeted at technical assistance and emergency aid rather than investments, long-term capacity, and institutional support.
- Tied to contractors from donor countries.
- Driven by separate donor objectives rather than coordinated to support a national plan.
- Overly directed to poorly governed countries for geopolitical reasons.
- Almost never evaluated or documented systematically for results.
In a recent opinion piece published throughout Africa, IMF Managing Director Rodrigo de Rato y Figadero described how developed countries bear the greatest responsibility for supporting developing countries to achieve the Millennium Development Goals.
“If we are to achieve the Millennium Goals, the heaviest responsibility inevitably must fall on the advanced economies, which have a dual task. First, they must meet their commitment to provide higher levels of aid, whenever possible on grant terms. Current aid flows are insufficient, unpredictable, and often uncoordinated among donors. Better coordination and multiyear commitments are keys to making development assistance more effective.
“Second, the developed countries must improve access to their markets for developing country exports and dismantle trade-distorting subsidies. The framework agreements reached at the World Trade Organization last July are welcome, and place the Doha Round back on track. This needs to be followed by determined progress to maintain the momentum and achieve the goals of the Doha development agenda. In doing so, both rich and poor countries carry responsibilities in promoting the fuller integration of developing countries into the global trading system.”
Low-quality official development assistance has fostered the serious misperception that aid does not work and has thereby threatened long-term public support for development assistance. Aid works, and promotes economic growth as well as advances in specific sectors, when it is directed to real investments on the ground in countries with reasonable governance (box 8). The problem is not aid—it is how and when aid has been delivered, to which countries, and in what amounts. For low-income countries, only 24 percent of bilateral aid can actually finance investments on the ground ( table 5 ). The proportion for multilateral aid is better, at 54 percent, though still well short of ideal.
Major MDG priorities are systematically overlooked
Development programs routinely overlook needed investments in regional integration, environmental management, technological upgrading, efforts to promote gender equality, and even such core investments as roads, electricity, adequate shelter, disease control, soil nutrients, and sexual and reproductive health.
Policy incoherence is pervasive
Many developed countries have identified incoherence as a core problem in their policies. For instance, a government might provide aid to support agriculture in a food-exporting country while also applying market access barriers to the same agricultural exports. Similarly, a finance ministry might collect debt payments that negate the benefits of aid being disbursed by the development ministry. Incongruous policies highlight the need for a clear set of measurable objectives to align developed country policies.