UNU-WIDER State Fragility and International Development Cooperation

Over the past few years addressing state fragility in the third world has become an important priority in international development cooperation. However, it seems that the international donor community has so far not been able to develop adequate instruments for dealing with the problems posed by state failure. We see two reasons for this: (i) there is growing recognition within the donor community that the lack of absorptive capacity, or bad economic policies in the partner country can actually make aid counterproductive, even harmful; and (ii) it is very difficult to manage effective development cooperation with weak governments. Channelling aid through NGOs, or giving limited aid in the form of capacity-building is clearly not sufficient to solve the problems fragile states face. In order to minimize distortions caused by aid, the literature advocates a policy based selective approach, i.e., limiting aid funds to recipients with 'good policies'. However, failed states (and many weak states for that matter) do not have the capability to formulate good economic policies, and some countries face serious challenges in ...