Spain is to be commended for the notable progress made in development co-operation since the last Peer Review. Important achievements include the adoption of a comprehensive Law on International Development Co-operation and a four-year Master Plan (2001-2004), improved annual plans, and reinforced or new co-ordinating bodies. The purpose of the reform was to enhance consistency and co-ordination within the diverse Spanish aid system, which includes many ministries, autonomous regions, local authorities, and civil society organisations. A significant achievement of the new policy is that it establishes poverty reduction as the overarching goal in development co-operation. Gender equality and environment are also determined as mainstreaming priorities. Spain seeks to focus its poverty reduction efforts on basic social needs and a new micro-finance programme is an important addition.
Spain has a comparative advantage in its assistance to Latin America with strong linguistic, historical, and cultural ties. Spain has had recent experience of building a democratic state and can add value by sharing lessons-learned with partner countries in innovative and risk-taking areas of good governance. In this respect, it can conduct dialogue with developing countries in areas that are difficult for other donors. Major activities through institutional development include judicial reform, decentralisation, tax administration, and police force training. These are areas in which Spain could take on a lead role in pursuing a sector approach with other donors.
In assessing Spain's development programme, it is important to bear in mind that Spanish development co-operation is relatively young. Spain was an aid recipient until 1977 and joined the DAC in 1991. In a short time, Spain has established a comprehensive binding law on development co-operation and multi-annual planning for the entire aid system. In this respect, Spain has set an example for the DAC, particularly among Members that have diversified aid systems. At the same time, Spain should improve the focus of its activities by sharpening the Master Plan to include a clearer hierarchy of principles and objectives with poverty reduction as the overarching goal across the entire aid system. Spain should establish a more results-oriented approach to programming and implementation to inform lesson-learning and consider integrating the Millennium Development Goals (MDGs) and indicators as a framework for assessing performance. The link between poverty reduction and loans of the Development Aid Fund (FAD), debt conversions, and the Scholarship and Culture Programmes could also be strengthened. Given the strong links with the MDGs, Spain's commitment to fulfil the Copenhagen 20-20 Initiative is welcome. This should be reflected in increased spending on basic social services.
In 2000, with Official Development Assistance (ODA) of USD 1.2 billion, Spain's ODA/Gross national income (GNI) ratio was 0.22%, ranking 19th out of the 22 DAC countries, in line with its per capita income ranking. ODA quadrupled between 1988 and 1994, peaking at 0.28% ODA/GNI, but the ratio has subsequently decreased. Meanwhile, the Spanish economy has performed well in recent years with growth of over 4% since 1997. Furthermore, public support for development co-operation appears to be strong. In line with the commitments made at the European Council meeting in Barcelona in March 2002 and announced at the International Conference on Financing for Development in Monterey, Spain is expected to reach an ODA/GNI ration of 0.33% by 2006. Combined with the growing trend of Spanish GNI, this implies a rapid increase in ODA.
Given its clear advantage in Latin America, Spain has a high concentration of aid in the region, particularly the poorer countries of Central America and the Andean Community. In 2000, 40% of Spanish bilateral aid was directed towards low-income countries (LICs), which was less than the total DAC average of 59%. In fact, more than half of its disbursements went to lower middle-income countries (LMICs). This raises interesting questions for Spain and the DAC about the role of donors in MICs; a key question is how effectively such aid is targeted at poverty reduction and creating a pro-poor environment. Spain could review its mix of grants and loans to LICs and MICs to ensure that scarce resources are allocated to where they are most needed.
Although Spain has started to focus on 29 programme countries, it does not sufficiently elaborate on selection criteria, resource allocation or how priority status will be applied. Spain also needs to guard against spreading itself too thinly. Loan disbursements have considerably declined from 80% of bilateral aid in 1993, but the proportion remains high at 34%. It is noted, however, that grants have increased, due to active decentralised co-operation through autonomous regions and local authorities, accounting for 25% of bilateral ODA. Most of these funds are channelled through non-governmental organisations (NGOs), which play a substantial role here and with co-financing from the Spanish Agency for International Co-operation (AECI). For multilateral co-operation, Spain focuses on the European Commission (EC), but has reinforced its contribution to the international financial institutions (IFIs) in order to increase its influence and co-operation.
Spain has integrated policy coherence for development into its legal framework. The Law states that the principles and objectives of Spanish development co-operation should be reflected in all other policies affecting developing countries. It emphasises consistency with the objectives of sustainable development and poverty reduction in the promotion of political, economic and cultural relations with developing countries. However, the debate in Spain on policy coherence appears less advanced than in some other DAC Members. The Ministry of Foreign Affairs (MFA) should be given a stronger role and the necessary analytical capacity to engage in policy debate with other ministries and actors, including civil society and regional governments in areas such as trade, technology transfers, agriculture and fisheries (e.g. EC international fisheries agreements), where development objectives may conflict with domestic interests.
The collaboration between the Ministries of Foreign Affairs and Economy has improved, including the preparation of joint country strategies. The MFA has been assigned the central responsibility in development policy. However, it is recommended that MFA should be accorded a clearer lead role in providing directions to all actors in development co-operation. MFA's role in this regard would include ensuring consistency and synergies between the growing decentralised co-operation and overall aid policy.
Spain has reduced the importance of FAD loans and made improvements in their management, including the strengthening of project identification, monitoring and evaluation. However, Spain should continue its review of FAD loans in a comprehensive manner to reinforce their poverty reduction orientation. The policy of providing loans as opposed to grants to poor countries should be further reviewed in light of the Heavily-indebted poor countries (HIPC) Initiative. At the project level, sector strategies, clearer objectives, improved targeting of beneficiaries, and more detailed reporting for individual projects would be useful and could increase transparency. Moreover, since the FAD loans to non least-developed countries are tied to Spanish procurement, Spain may wish to review the limitations this places on partnership, ownership and aid effectiveness.
Field offices benefit from a significant degree of autonomy in conducting dialogue with partner countries and in aid management. Spanish co-operation appears to be flexible and quick in responding to partner countries' needs, particularly in case of emergency assistance. Spain is committed to country-led poverty reduction strategies, but like other donors, needs to ensure that they are effectively integrated into its country strategies. Furthermore, country strategies for Spain's 29 programme countries could be more selective in sector focus and specific on the appropriate mix of channels and instruments. Spain is cautious in transferring management responsibilities to partner countries but might further strengthen ownership by delegating responsibility to local counterparts. In addition, Spain could consider the possibility of adopting sector approaches in collaboration with other donors as a way to further strengthen ownership and sustainability. The significant involvement of NGOs, while a strength of the Spanish system, equally requires attention be paid to transaction costs as well as to efficiency and co-ordination issues.
MFA's efforts to establish effective evaluation are welcome. However, evaluation systems need to be further developed and strengthened across the aid programme, particularly for FAD loans, decentralised co-operation and NGOs. MFA's management of human resources could also be more strategic, based on a long-term needs assessment, including skills development. In particular, MFA could explore opportunities for staff mobility between the field and headquarters in order to better integrate development expertise into its strategic policy work.
Based on the above findings, the DAC encourages Spain to:
Pursue all possible means to reach 0.33% ODA/GNI ratio by 2006.
Ensure that assistance to MICs is effectively targeted on poverty reduction in support of the MDGs.
Clarify policies on loans vs. grants, taking into account debt sustainability of recipient countries and country income levels.
Establish a more results-oriented approach to programming and implementation to inform lesson-learning and consider integrating the MDGs and indicators as a framework for assessing performance.
Ensure that the Scholarship and Cultural Programmes reinforce the overarching goal of poverty reduction.
Increase resource allocation to basic social services.
Enhance policy coherence for development by encouraging a wider public debate and strengthening the MFA's analytical capacity in areas which have an impact on developing countries, e.g. trade, agriculture, and fisheries.
Assign MFA a clearer leading role in providing directions to other ministries and actors to further increase synergies. Given the growing resources mobilised through decentralised co-operation, autonomous regions and local authorities are encouraged to enhance synergies with Spain's national policies, especially regarding country and sector strategies.
Continue the comprehensive review of the poverty reduction impact of FAD loans to reinforce ownership and effectiveness.
Increase partner countries' responsibility in aid management, improve the links between individual projects and country-led poverty reduction strategies and move towards working on sector approaches with other donors.
Ensure that NGO activities cofinanced by the national and regional governments are consistent with country and sector strategies of Spanish development co-operation.
Continue to develop and strengthen monitoring and evaluation across the Spanish aid system, particularly for FAD loans and decentralised co-operation activities.
This review is available in The DAC Journal 2002, Vol. 3, No. 2.