Canada: Leader, supporter, or slacker in aid effectiveness?

This article was published in Embassy Magazine, July 24, 2013: http://www.embassynews.ca/opinion/2013/07/23/canada-leader-supporter--or-slacker-in-aid-effectiveness/44249

Canada: Leader, supporter, or slacker in aid effectiveness?

While it’s not doling out the most money, Canada measures up to its peers.

Over the past couple years, a number of media headlines have implied that Canada’s aid effectiveness record is poor and that “CIDA is breaking Canada’s promise to the world,” while others suggest that “new aid policies are eroding Canada’s image.” Some development experts have similarly claimed that the “effectiveness of Canadian aid has been eroded” and our “visibility and influence in foreign policy and aid spheres has ebbed considerably” as a result.

Unfortunately, quite often these media articles lack references to relevant data. Therefore, the arguments often seem to be more of a reflection of domestic politics rather than based on empirical evidence.

As an aspiring international development professional keen on evidence-based policy-making (vs. policy-based evidence making) I undertook a research project at the University of Ottawa to contribute with data and analysis to these debates.

Thankfully we have the benefit of an aid effectiveness definition provided by the Organisation for Economic Co-operation and Development. The OECD’s 2005 Paris Declaration on Aid Effectiveness, with more than 100 signatories, brought forward a global consensus and continues to serve as a global norm for aid delivery. The OECD also provides baseline principles and indicators for aid effectiveness as well as a range of surveys of donor compliance to enable comparative analysis.

One of the main reasons for the OECD to adopt a new global norm on aid delivery in 2005 was a widely agreed understanding that donors were then doing a poor job in lifting people out of poverty. It is important to note that the biggest conceptual change the Paris Declaration brought about was an attempt to make aid more altruistic, transparent, and free from politics.

In support of the goal of altruism, the Paris Declaration elevated partner governments to the fore, leaving less room for rich-country donors to dictate their policy recommendations on the recipient countries. 

The follow-up forum in Busan, South Korea in 2011 went even further by including private sector and civil society players to the development playing field. The introduction of multiple players and their development tools (foreign direct investment, trade, remittances, charity, etc.) means that the role of donors in poverty alleviation has been diminished. Simply put, donor states today are less able to claim visible leadership positions in poverty reduction. It is therefore not fair to compare the donors of today with their predecessors of some decades ago.

Canada performs largely mid-range

Turning to the numbers, a survey, conducted to measure donors’ compliance with OECD aid effectiveness principles and indicators, offers plenty of data to suggest that among 22 rich country donors, Canada performs largely mid-range. The OECD’s 2011 Survey on Monitoring the Paris Declaration indicates that Ireland is a top donor outperforming others in several indicators, while the United States ranks the lowest together with South Korea.

Borrowing from a European foreign policy scorecard vocabulary, we can call Ireland “the leader,” the US and Korea “the slackers,” and Canada “a supporter” of aid effectiveness. 

The survey results further suggest that Canada performs slightly above the donor average when its aid is allocated to least developed countries, and about average when assessing all recipient countries together.

Breaking down the data even further shows that Canada performs much better than the donor average in the ‘alignment’ principle. This means that Canada tailors its aid programs to the recipient country needs more so than other donors, on average.

But Canada lags slightly behind the donor average performance in the ‘harmonization’ principle, which obliges donors to co-ordinate their aid programs. Again, the data does not support the argument that Canada is breaking its promise to the world, especially if by “the world” we mean the developing countries.

While all donors have made progress towards more effective aid since 2005 and improved their overall scores (Canada included), not all met the performance targets set by the Paris Declaration. In fact, among 22 donors, only three donors did. This suggests that missing the targets is a norm rather than an exception. Compared to the donor average performance gap—again, Canada does not stand out in a negative sense. Canada’s record in aid effectiveness performance does not therefore seem so eroded.

Which donors are leaders? 

The next interesting question is what explains aid effectiveness performance? And which donors become leaders—those that are more altruistic and transparent, just as the Paris Declaration strived for? More interestingly, how do donor qualities like generosity and ideology relate to aid effectiveness outcomes?

Using OECD data, it seems that generosity explains leadership in aid effectiveness the best. The correlation between generosity and effectiveness is positive and quite strong but only up until the point where aid budgets reach 0.5 per cent of gross national income. After that point the relationship seems to invert. Ireland for example has achieved the most effective aid while its aid budget has been only slightly over the donor average level. Luxembourg, which has been often praised for its generous aid budget that dedicates around one per cent of GNI to foreign aid (almost three times more than Canada), is a slacker when it comes to its effectiveness. Canada has reached mid-level effectiveness despite its small aid budget. While it’s the strongest determinant, generosity therefore does not necessarily go hand in hand with aid effectiveness.

Surprisingly, donors with effective aid also tend to be rather conservative in their ideology. That can be partially explained by the changes in the Nordic countries, which voted more for centrist and fiscally conservative governments between 2005 and 2010. The positive correlation between ideology and aid effectiveness might also mean that the donors’ self-interested demand for more “efficient” aid might have an impact on its “effectiveness” as well.

It’s surprising that donor transparency and altruism (if measured by the amount of aid allocated to least developed countries) does not seem to explain the outcome in aid effectiveness very well. Yet, this is what the Paris Declaration attempted to achieve: more altruistic, transparent, and less political aid.

So it seems possible that donors progress towards global norms without necessarily adopting the values of these altruistic international declarations. Rather, what seems to matter is their political values: idealist demands for more aid (“double the aid!”) and their self-interests (“more bang for the buck!”).

Canada could perhaps find a balance between those factors in order to be “a leader” in aid effectiveness. 

Marje Aksli is a recent graduate of the University of Ottawa’s master’s program in globalization and international development. She has 10 years of experience working on international relations and development projects.