Effectiveness of Development Cooperation

by Pertti Majanen and Riitta Oksanen

Effectiveness for poverty reduction and the MDGs​

he Finnish Government adopted a new development policy in 2004. The white paper links Finland's development policy and development cooperation to the framework of the Millennium Development Goals and the Millennium Declaration. The main goal of Finland's development policy is to contribute to the eradication of extreme poverty from the world. In striving towards this goal, Finland emphasizes the rights-based approach and the principles of sustainable development. The 2004 development policy defines three main strategies for implementation: (i) promotion of policy coherence for development; (ii) improving the quality and effectiveness of development cooperation; and (iii) strengthening of partnerships for development. More than one year into the implementation of the new policy, interesting experiences can be shared from all three areas. In this article, the focus is on Finland's efforts to improve quality and promote effectiveness in development cooperation. 

Doing more and better to implement the MDG # 8

In the 2004 development policy, Finland made an explicit commitment to implement the Millennium Development Goal number 8. This goal focuses on the establishment of a global partnership for development, and particularly on the responsibilities of the donor countries. Finland is committed to do both more and better to implement the MDG8.

The MDG8 is related to increasing the finance for development, including more ODA, development of a non-discriminatory trading system and dealing comprehensively with the debt problems of developing countries. In terms of volume, Finnish ODA will be increased to achieve the 0.7 per cent GNI share. The growing ODA will be allocated according to criteria that reflect the priorities of the development policy. This means increasing financing for LDCs, for sub-Saharan Africa and for NGO-cooperation.

But resources are scarce even if they are increasing. Best use must be made of them through improving efficiency and effectiveness. Parallel to the quantitative commitments, Finland strongly emphasizes the importance of quality. Systematic work has been on-going already since the 1990s for quality improvements in Finland's development cooperation. 

Finland's quality agenda for increased effectiveness of development cooperation

Finland's development policy establishes a 'quality agenda' for increasing effectiveness. Efforts focus on the following priorities:

Strengthening ownership and poverty-locus through alignment: Finland's support to partner countries is always channelled in the framework of the partner 's  own priorities. During the past years, the poverty reduction strategies of the poor countries have become the basis for aligning Finnish contributions.  All new bilateral support is identified in the context of PRSs.    Programme-based modalities with joint financing arrangement (e.g. budget support and pooled funds for sector programmes) are increasingly used. Stronger ownership and increased poverty-focus are the prerequisites for sustainable results and effectiveness.  Finland promotes the same principles also when contributing through the EC and multilateral institutions.

Harmonization:  Harmonization has been high on the international agenda since the Millennium Declaration and the Monterrey conference on development finance.  The OECD- DAC is the key forum to follow-up the commitments made.  Finland's national harmonization action plan was approved in 2004.  The challenges and priorities have been identified using the DAC Good Practice Papers on harmonization as a frame of reference.

Finnish priorities include e.g.: Finland participates in partner country-led harmonization processes for practical results.  In some countries harmonization efforts are integrated in the implementation of PRS-processes and sector programmes (e.g. Mozambique), in others the governments have launched specific harmonization processes (e.g. Vietnam). Revision of the administrative and management guidelines for Finnish development cooperation has been started to accommodate the principles of harmonization.  An example is the development of the financial  management  system to  improve  the  predictability of Finnish funding.  An inter-departmental harmonization team has been established in the Ministry for Foreign Affairs to coordinate, facilitate, and monitor implementation.  One challenge that was recently highlighted is to strengthen communication between the country teams that are responsible for implementation and the policy teams.

Focusing on fewer but bigger cooperation programmes:  Concentrating Finland's  relatively limited contributions in a strategic way on fewer but bigger well-selected entities is one of the keys for improved effectiveness and impact. Major efforts have been put into this process since 2001. It takes time since existing commitments need to be completed in a responsible manner.  The objective is to focus Finland's bilateral cooperation increasingly on eight long-term partner countries (Ethiopia, Kenya, Mozambique, Tanzania, and Zambia in Africa; Nicaragua in Latin America; and Nepal and Vietnam in Asia).  In these countries Finland's support will be focused on three sectors or development programmes (and budget support may be used to complement this).

Complementarity and division of labour based on strengths and comparative advantage: Finland's involvement will increasingly be based on an analysis of the value that our participation adds. This approach combined with the strategy of focusing on fewer cooperation programmes is the basis for establishing complementary cooperation relations with other development partners. Reducing the number of actors involved at sector or programme level in partner countries, and doing this based on an analysis of comparative advantages, is one of the obvious challenges of the next few years. Finland welcomes the initiative and leadership taken by some partner countries in the form of establishing joint assistance strategies (e.g. the JAS in Tanzania) to facilitate the process.

Results- and outcome-based management: A shift of focus is necessary in the management of development cooperation. The tradition has been to emphasize the resources and the input side, and to micro-manage activities and operational details. Quoting the discussions on management for development results in the Paris High-level Forum on Aid Effectiveness this spring: Two simple guiding questions must increasingly complement the traditional emphasis. These are: 'Are we being effective?' and 'How do we know?'. In Finland, too, work is on-going to improve our results-based management systems. Major efforts are put into develop- ing the state budget, including a budget for development cooperation that uses result indicators. At the same time, the Ministry has introduced a new annual reporting mechanism emphasizing the follow- up of outcomes and results. This mechanism is based both on internal monitoring by the Ministry and external evaluation by the national Development Policy Committee.

In results- and outcome-based management we have a shared interest with the governments of developing countries. The partner governments are accountable to their parliaments and people for the correct and effective use of national and external funds. To justify the continued use of public funds and to maintain tax payers' support, the donor governments have to provide open information on the results and secure the good quality of development cooperation. It is, therefore, in our common interest to strengthen the poverty-monitoring systems in the partner countries. This is an important governance issue.

Decentralization of the management of development cooperation: Compared to many peer institutions, Finland's development cooperation management is still centralized and Helsinki-based. Decentralization will be piloted in four embassies in 2005. A mapping of experiences of our peer institutions has just been finalized. A clear message that we get from colleagues is that for the effectiveness of development cooperation, decentralization of its management to the embassies is the right solution. Decisions need to be taken as close to the reality of implementation as possible. This is particularly important in the context of programme-based cooperation (budget support, pooled funding of sector programmes).

Working in close cooperation internationally to promote effectiveness

For Finland, close international cooperation for the promotion of effectiveness has been very important. The OECD-DAC has been the leading forum in this area during the past years. Close involvement of representatives of partner countries as well as multilateral institutions in the DAC-work has been an important resource and very obviously contributed to the quality of results. Good practice papers on harmonization and alignment, work on budget support, sector programmes and strengthening of public financial management capacities are examples of the results of the DAC work that Finland finds particularly useful. The OECD-DAC also provides the framework to finalize the mechanism for future monitoring of progress in effectiveness before the UN Millennium Event in September 2005.

Effectiveness is also high on the EU agenda in the discussion on achieving the MDGs. The EU made eight commitments when preparing for the Monterrey conference in 2002: increasing ODA levels to achieve the 0.7 per cent target; promotion of harmonization; further work on untying of aid; increased trade related technical assistance; further work to identify relevant Global Public Goods; further exploration of innovative sources of financing; influence on the reform of the international financial system; and efforts to restore debt sustainability in HIPCs. The EU is now preparing for the UN Millennium Event 2005 by taking stock of progress made and by discussing new commitments for accelerated progress.

In addition to the formal cooperation, Finland is actively involved in the informal cooperation in the so-called Nordic+ group (Denmark, Iceland, Norway, Sweden, Ireland, the Netherlands, UK). Sharing of views and experiences is particularly useful in effectiveness issues for peer encouragement - and when needed, also for peer pressure.

Development cooperation efforts will only be effective if complemented by coherent policies and actions in other sectors that are relevant for poverty reduction in developing countries. Promotion of policy coherence for development is an enormous challenge that calls for new kinds of partnerships both at home and abroad. In its development policy, Finland is on this road.

Pertti Majanen, is the Under-Secretary of State, Ministry for Foreign Affairs, Finland; Riitta Oksanen, is an Adviser on development policy and management at the Ministry for Foreign Affairs, Finland.