Editor’s note: As AidData looks ahead to the next wave of our Listening to Leaders survey later this year, we want your support to make sure that we are asking the right questions and amplifying diverse voices to inform this crucial dialogue. For more information on the 2023 survey and how you can get involved, contact Alex Wooley, AidData’s Director of Partnerships and Communications at awooley@aiddata.org.
“Business as usual is not enough…systemic change is required…[so] how do we do this better,” reflected Susanna Moorehead, Chair of the OECD’s Development Assistance Committee (DAC), at the launch of the 2023 Development Cooperation Report, Debating the Aid System.
The new publication, which AidData was invited to contribute to, calls on aid donors to deliver on past commitments and adapt to the changing needs of partners in the Global South. Two AidData surveys conducted in 2020 and 2022 offer a practical roadmap for action as policymakers in the Global North and South rethink the aid system to navigate a new era of cooperation amid crisis and competition. Nearly 8,000 leaders from 141 low- and middle-income countries weighed in on top reform priorities, key constraints to progress, and entry points to support locally-led development. I preview a few key insights below, but encourage you to read our chapter in the OECD report on “Responding to Global South views on development priorities, progress and partner performance” to learn more.
A new normal: adaptability is key to help countries manage crises and protect gains
To say that the last few years have been a turbulent time for development cooperation is an understatement to say the least. COVID-19 was a universal shock to the international system, affecting countries across geographies, ideologies, and income levels. The war in Ukraine placed a nation's sovereignty and well-being in jeopardy, with ripple effects across the globe in terms of energy security, rising fuel prices, and the availability of essential supplies. Last year, we debated whether the next international crisis would be a financial one, as countries pursue debt-financed development at unsustainable levels at risk of default. All this is on top of episodic crises more familiar to us: natural disasters, climate change, conflict, and fragility.
These overlapping crises compel policymakers in the Global North and Global South to weigh trade-offs of emergency response and long-term development. In this new normal, aid must be nimble, responsive, and adaptable in the face of rapidly changing circumstances. In this vein, our surveys have shown that when it comes to choosing partners, Global South leaders most valued donors that flexibly adapted strategies to fit local needs—aligning efforts to the national development strategy, ensuring projects were contextually appropriate, and iteratively adapting approaches in consultation with key stakeholders inside and outside of government.
A crowded field: to stand out, leverage strengths and work with the grain of local reforms
Leaders in the Global South have a wider choice of prospective partners and sources of capital to bankroll their development than ever before. This includes concessional development assistance (grants and no interest or low-interest loans) to increasingly accessible private sector capital markets and less concessional assistance, such as higher interest loans and equity investments by sovereign creditors like China, among others. Yet, even as there are more choices of partners, countries still grapple with a formidable funding shortfall, estimated at USD $3.9 trillion as of 2020, to realize the Sustainable Development Goals.
Our recent surveys underscore that even as the development finance landscape evolves, one thing endures: leaders in the Global South value their cooperation with DAC members. This is particularly true in areas of comparative strength versus alternative partners: promoting good governance and rule of law, building human capacity (e.g., education, health and social protection), and protecting the environment. However, to position themselves as preferred partners in a crowded marketplace, DAC providers should keep several additional insights in mind to maximize their influence and impact.
First, the views of leaders in the Global South are in lockstep with many of the principles of aid effectiveness to which DAC members aspire but sometimes struggle to achieve in practice. Our survey respondents report that the most influential and helpful donors were those that respected the self-determination of countries to set their own priorities, supported locally identified rather than externally imposed reforms, and ensured that their efforts were in step with those of other actors on the ground. Respondents also emphasized the importance of contributing expertise.
Another attribute leaders looked for in their preferred partners was a commitment to long-term sustainability. This included building local institutional capacity, prioritizing long-term impacts over short-term gains, and planning a transition to ensure project continuity after external assistance ended. Recognizing the volatility of aid as donors face shrinking budgets, increased scrutiny from taxpayers and shareholders, and shifting priorities, leaders in the Global South shrewdly recognize that their best chance to preserve hard-won development gains is to ensure that they have the capacity to independently sustain and build on the foundation laid with external partners whose engagement is time-limited.
Third, leaders also had strong preferences as to how development cooperation projects could be structured in ways that would be most conducive to supporting locally led reforms. Survey respondents gravitated to projects that were transparent in the terms of assistance and expressed a preference for grants and low-interest loans compared to higher interest rate lending. They disliked tied aid and instead preferred projects that required procuring services and inputs from companies in the donor country. Although DAC donors have been reluctant to tie assistance packages to policy reforms in recent years, survey respondents indicated that they would welcome these conditions in some instances.
For example, leaders were 1-2 percentage points more likely to choose projects with social, economic or democracy-related conditions than those with no conditions at all. They also expressed a greater preference for aid projects with regulations to reduce corruption, minimize environmental damage, or protect workers from unfair labor practices than projects that did not require such reforms. It could be that leaders favor constraints that push forward reforms they were predisposed to support and for which they now can access new resources to motivate allies or undercut vocal detractors. In this respect, DAC countries have an opportunity to work “with the grain” of reforms that partner countries see as in their interest to pursue but also need the promise of additional resources as political leverage to offset domestic resistance to change.
The evidence also points to a strong demand signal for DAC donors to help countries address systemic barriers to progress in the form of corruption and poor financial management, as well as navigate negative spillover effects associated with debt-financed development. This could involve doubling down on public financial management, anti-corruption, and open government programming which build the capacity of government agencies to source, use and monitor public sector finances from various sources responsibly. DAC donors could also build on existing networks of relationships with parliaments to promote legislation related to budget transparency and sustainable borrowing. Another complementary focus would be to strengthen the capacity of non-governmental actors to play an important watchdog function through investigative journalism and participatory budgeting.
In the coming months, I hope that the Debating the Aid System report provokes candid conversations and constructive reforms to how we architect the future of financing for global development. But rather than this being a discussion limited to the capitals in the Global North, DAC donors would do well to heed the feedback from their counterparts in the Global South for two reasons. Not only is it the right thing to do from an aid effectiveness perspective. It is also the smart thing to do for savvy donors that want to maximize their standing with the leaders who will shape how their countries engage with foreign powers and aid institutions for years to come.
