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Summary and Conclusions
Overall policy framework and new orientations
Overview of the Strategy 2000
Denmark's aid effort is one of the strongest among Development Assistance Committee (DAC) Members. Its official development assistance (ODA) volume has fluctuated slightly around 1 per cent of gross national product (GNP) since 1992. It grew by 3 per cent in real terms in 1997, to reach United States dollars (USD) 1 637 million, i.e. 0.97 per cent of GNP. Moreover, Denmark provides this high volume of aid within the framework of a strong strategy. Denmark's A Developing World, Strategy for Danish Development Policy towards the Year 2000, adopted in 1994, set directions very similar to those in Shaping the 21st Century: The Contribution of Development Co-operation agreed upon among all DAC members in 1996. It places a central emphasis on poverty reduction, with growth being seen as an indispensable ingredient. The strategy is well known and used throughout Danida, where it already guides a wide range of activities and procedures. The strategy has been subjected to a mid-term assessment in 1997, with no major change proposed as a result, but more stress on the necessity of partnership and dialogue with the recipient countries on national policies for poverty reduction.
There appears to be a sound basis for Denmark's exceptionally strong aid effort to be maintained in the years to come. Although there has been more criticism and public debate of the aid programme in recent years, it has not triggered any marked erosion of the strong consensus in favour of development assistance. On the contrary there is good prospect that the programme will be maintained in the years to come -- both in volume and as a share of gross national product (GNP) -- with some further supplementation by the ODA share of the new Facility for Environment, Peace and Stability (FEPS) (half of this should be ODA), which should reach 0.5 per cent of GNP by 2005.
Responsibility and coherence
Denmark offers a long standing and positive example of the integration of the aid system with the handling of other aspects of foreign relations. Since 1991, policy responsibility for all matters relating to development co-operation, foreign policy, trade and other policy aspects have been integrated under the responsibility of the Ministry of Foreign Affairs (MFA). In Denmark's case, this integration appears to have helped achieve greater policy coherence in Denmark's relations with aid recipients while maintaining professionalism in the aid programme. The other side of this integration is the continued involvement of the Danish business community, through a system of "informal tying" in place since 1989, aiming at a 50 per cent return on bilateral ODA in favour of Danish procurement. Danish development assistance (Danida) seems to operate on an equal footing with other ministries' interventions, although there can be some overlapping areas, and the ways of dealing with frontier coherence issues might be better clarified, as can be seen for instance from the sharing of competence with the Ministry of Environment for the management of the new FEPS.
The large decentralisation of decision making authority on aid issues to Danish embassies in the field seems to be working well, and to have proved compatible with the relatively swift implementation of projects, allowing Danida to achieve high disbursements/commitments ratios.
Bilateral assistance
It was decided in 1994 to concentrate Danish bilateral aid on 20 programme countries. By 1995 this group had all been selected, out of the 60 regular recipients which existed at the time. This approach involved a full political process, but gave much weight to the poorest countries and to Africa. It is indeed noteworthy that 18 of these countries are low-income countries (LICs), including 11 least-developed countries (LLDCs), with only Bolivia and Egypt classified as lower middle-income countries. Thirteen countries are located in Sub-Saharan Africa.
The decision to concentrate on 20 countries implied that direct official aid would have to be gradually phased out in a number of other partner countries. This difficult process has been carried out remarkably well, in close consultation with the governments of the countries concerned, and without disruption of the ongoing projects, for which implementation has continued up to completion. The concentration process should be completed by 1999, at which point the 20 programme countries will receive -- through direct bilateral aid -- around 50 per cent of total Danish bilateral assistance, which is the stated objective. These figures do not include aid allocated via Danish and local non-governmental organisations (NGOs), nor through mixed credits, the Private Sector Programme, "personnel assistance" or as regional assistance.
For each of the programme countries, apart from Kenya and Niger (for political reasons), a country strategy has been formulated at the outset, in close consultation with local partners. The latter include not only the government but also representatives of the civil society, the objective being to have as much local ownership as possible. The process also involves the Danish "resource base", i.e. the interlocking networks of suppliers of goods and services, employers' and workers' organisations, academics, churches and other NGOs. This input takes place in particular through participation in the Board of Danida, and the strategies are finally approved by Parliament. The strategies are now in the process of being revised, the main challenge being for each country to have a well differentiated strategy, tailored to its particular features. For each country there is also a five-year rolling plan with indicative figures for annual envelopes, and a breakdown between the main sectors. These plans and figures are updated on the occasion of yearly consultations in the recipient countries, which also help to strengthen local ownership of the programme. Like other donors, Denmark needs to develop further its approach to managing the relationships between country performance and the allocation of ODA. Performance regarding democracy and human rights is considered carefully by the Danish authorities, but in a long-term and dynamic perspective, and "stop and go" conditionality seems to be avoided except in extreme cases.
Multilateral Co-operation
Since 1996, Denmark has embarked on the implementation of an innovative plan of action for "active multilateralism", with the stated objective of maximising the efficiency of Denmark's contribution to multilateral organisations. This approach -- which asserts Danish development policy priorities, efficiency standards and national influence -- was adopted as a necessary complement to the Danish commitment to devoting a substantial share of ODA to multilaterals. In 1997, this share represented 38 per cent of total Danish assistance, or USD 627 million. The amounts contributed are often larger than what would be Denmark's normal share, with the result that the country is for instance the fourth largest donor of the United Nations Development Programme (UNDP), with USD 90 million in 1997.
In accordance with the plan of action Denmark has tried to influence the policy of international organisations by increasing or decreasing the level of its contributions, by earmarking resources through trust funds and by making alliances with other like-minded countries to push for policy changes if needed, with a view to encouraging these organisations to conform to Denmark's view of their mandate. One element of the policy is to encourage the use of Danish resources and expertise, e.g. through more procurement for Danish companies and recruitment of Danish employees by the multilateral institutions. Some organisations have been evaluated, and annual consultations have been organised, starting in 1997 with UNDP, the United Nations Children's Fund (UNICEF) and the United Nations Fund for Population Activities (UNFPA), since 1998 with the World Bank and regional banks and continuing with the International Labour Organization (ILO) and the United Nations Educational, Scientific and Cultural Organization (UNESCO) in line with established procedures. Although the objectives of this policy are quite clear, it is not yet certain that this method, reflecting a mostly unilateral approach, has greatly advanced the intended results.
Aid management and implementation of policies
Project cycle
Danish assistance applies high-standard practices regarding project preparation and implementation. Together with capacities in Embassies, there is in Copenhagen a team of 60 technical advisers in charge of project preparation and supervision. In addition, a sizeable budget of USD 30 million a year is available to hire consultants. Consultancy firms are well integrated within the system, as part of the Danish resource base. Intervention in a given sector usually starts with the establishment or review of a master-plan for the sector, with the participation of the local administration, which provides a solid basis for further project or programme design and for co-ordination with other donors.
Sector concentration
As a deliberate policy, Danish development assistance in the 20 programme countries is concentrated in three or four sectors in each country. These sectors are often the same from one country to another, and from the most to the least frequent are: agriculture, health, water and sanitation, transport, energy, education, and environment (considered as a sector for this purpose). This concentration, together with the fact that the sectors correspond to areas of traditional Danish expertise, both in Danida and in the resource base, help to maximise the efficiency of aid. The prominence of agriculture among the sectors is in line with the poverty reduction strategy, given the concentration of the poor in rural areas, in particular in LLDCs. A further form of Danish concentration which also fits into the strategy is an effort at geographical concentration of Danish aid in the poorest areas of each recipient country.
While this concentration is heavily influential, it is still applied flexibly. There are in each programme country some interventions outside of the agreed sectors, for instance in areas like good governance, democratisation and human rights. This is often achieved at field level through the implementation of so called "minor" projects, for which embassies dispose of an envelope of 10 per cent of their annual programme, and can commit directly up to Danish kroner (DKK) 3 million by project.
Sector programme support
Strategy 2000 called for the implementation in programme countries of sector programme support (SPS), as a new and more appropriate way of providing assistance. SPS is considered as a meaningful tool to address problems frequently encountered by project assistance, such as absence of sound sectoral policies, unco-ordinated and sporadic donor support and lack of recurrent financing for maintenance. Ideally, SPS should help to put greater emphasis on co-ordination, and to achieve better ownership, sustainability, and therefore progress towards poverty reduction.
Considerable efforts and human resources have been devoted to SPS since 1994. Guidelines for SPS were issued in 1996 and revised in May 1998. Although progress has been slower than initially envisaged, a number of sector programmes have now been prepared, and implementation had started for 20 of them at the end of 1998. Some of these programmes are essentially an assemblage of project-like components, but this mainly results from the sheer complexity of the effort required and perhaps over-ambitious Danish aims, without assurance of solid co-operation with other major donors. Other real constraints come from the inability of partner governments to formulate or to accept appropriate sectoral policies, or their unwillingness to involve donors in sensitive political issues or to deal with a consolidated donors' front, the need for accountability in the implementation phase, and the fact that not all donors are yet prepared to move in these directions.
Local partnership and donor co-ordination
Clearly the Danish system for consulting and working with partners is a relatively strong one, both at government level and at more decentralised levels, at the various stages of project or programme preparation, implementation and evaluation. Local partners have substantial opportunities to influence strategy formulation -- at country and sector level -- when the country or sectoral strategies are being prepared or revised, or during annual consultations. Activities not directly linked to the sectors of concentration frequently include support for capacity building and assistance to good governance (including public administration reform), most often in the same sectors which facilitate policy dialogue and local ownership.
Donor co-ordination is also considered as a key element for efficiency in aid delivery, which Danida is both willing and able to develop. This is favoured by a policy of great transparency regarding Danish ODA at large and Danida's activities and by active efforts for better local co-ordination in the field. Thus most of the documents produced by Danida are translated in English, and almost no document is regarded as confidential: for instance the minutes of the annual consultations with partner authorities are distributed to other donors, who generally rate highly Danida's openness to donor co-ordination, especially those who participate in SPS with Danida.
Private sector programme
Business and industry are an important element of the Danish resource base, and a range of instruments are available to help promote the development of the private sector. A Private Sector Development Programme (PSD), initially tested in three pilot countries, has been expanded to six in 1996, with a view to creating long term business linkages between companies in Denmark and companies in the six selected countries. A relatively modest mixed credit scheme, managed by Danida, provides subsidised export credits to a few eligible countries and projects, and operates within the framework of the Helsinki package. Finally, the Industrialisation Fund for Developing Countries (IFU) provides risk-capital, and also loan financing and guarantees, to projects where there is a Danish co-investor. After having managed without State funding since 1979, the Fund is being replenished, to the tune of USD 22.7 million a year, for the period 1996-2001, to support projects in Sub-Saharan Africa. Synergies and consistency between these instruments should be strengthened, but they provide a good basis for Danish small and medium-sized enterprises (SMEs) to invest in developing countries, with the involvement of the Confederation of Danish Industry. The trend is now moving from a contracting and trade approach towards a more long term partnership with recipient countries, but by this stage there should have been a rigorous assessment of this PSD.
Procurement and untying
It is clear that the consensus in Denmark on maintaining a very high relative volume of development assistance has been built in part on the direct benefits of involvement to various sectors of Danish industry and society. Since 1989 Danish co-operation has been functioning under a system of "informal tying" to procurement from Danish suppliers. On the basis of their high ODA/GNP and heavy concentration on LLDCs, the Danish authorities are proposing to delay their implementation of any Recommendation on untying of aid to the LLDCs, until other donors have made effective progress in implementing such a Recommendation. This position puts at risk a major initiative to improve the conditions and quality of aid to LLDCs, in line with the DAC Partnership Strategy.
NGOs
NGOs play an essential role in Danish development assistance, and some 13 per cent of total Danish bilateral assistance in 1997 was channelled through them. As part of the resource base NGOs are represented in the board of Danida and are closely associated in the process of policy formulation, on general strategy as well as on country strategies or on sector programmes. They add elements of flexibility to the system, since they are not confined to the programme countries or to the sectors of concentration and intervene on issues regarding human rights and democracy, which are essential but not often a part of the core bilateral programmes. They work in areas and countries where government to government co-operation is not possible.
As far as aid implementation is concerned, NGOs are administering the volunteers' programme, and most of Danish humanitarian assistance, but beyond these areas have their own projects and programmes, which they carry out with their partners at grass roots level. More than 50 per cent of the official financing going to NGOs is channelled through framework agreements signed by the government for four-year periods with the five major NGOs, whose capacity to administer the funds has been judged to have been clearly demonstrated. A major impact study of NGO assistance is currently underway.
As part of the "Strategy for Danida's co-operation with NGOs", policy changed in 1995 in such a way that NGOs are no longer required to fund part of project expenses. Danish NGOs receive most of their financing from the government, with little coming from traditional fund-raising activities -- self-financed activities make about one quarter of the NGOs' government funded programmes. While this is perhaps understandable in a national context where rates of taxation are high, comparative DAC experience suggests a question as to whether 100 per cent government funding of NGOs' projects is a healthy situation. In the field Danida also finances local NGOs, essentially through the programme of "minor projects" directly run by the embassies.
Public opinion, information and development education
Danish action in this area has to be rated as one of the strongest among DAC Members. The challenge is to maintain the high degree of support which Danish development assistance enjoys. Although there is less coverage than previously in the national press, and it is now more often prone to focus on failures rather than success, the local press in Denmark is still quite supportive of Danida's work. Public support seems to be related to a good policy of transparency regarding all development activities, with the publication of a number of documents which are usually well presented and most readable, with solid content. The educational sector is an important target and an ally, and is provided with substantial statistical material. The press and culture department of the MFA is also involved in many activities like the publication of books, including school books, the organisation of courses and of exhibitions. It collaborates with the radio and television systems. All this, combined with the Christian humanitarian tradition and the solidarity concept, help explain why support in the Danish public is so strong, in spite of increased criticism in the recent past, and the declining trend of ODA in other countries.
Selected priority concerns
Poverty reduction
As indicated above, poverty reduction is the overarching goal of the development strategy. The poverty reduction strategy, as outlined in A Developing World seeks to ensure the promotion of sustainable and socially balanced growth, and the development of the social sector (education and health services in particular), whilst promoting popular participation and the development of societies based on the rule of law and good governance.
The priority given to poverty reduction by Danida is well exemplified by:
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The selection of the 20 programme countries, which are essentially low-income and least-developed countries.
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The concentration on a few sectors which are of particular relevance for the poor, and frequently include the health and education sectors (with emphasis on primary health care and primary education).
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The geographical location of projects and programmes in the poorest areas.
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The requirement that assistance be both gender specific and focused on the sustainable use of natural resources.
The necessity of dialogue with recipient countries on a national policy for poverty reduction has been recognised, and should help encourage a harmonized approach to poverty reduction between donors. Moreover, considerable efforts have also been devoted to mainstreaming the poverty reduction objective in Danida's other activities. In particular the Guidelines for Sector Programme Support, as revised in 1998, aim inter alia to secure integration of cross-cutting issues at all stages of the SPS process. The need for continuous training of staff and facilitation of exchange of experience on the poverty orientation has been addressed.
Gender
It has been a long standing policy of Danida to attach importance to issues of women in development (WID). This was reinforced with the policy paper Women in Development - Danida's WID Policy towards 2000 from 1993. However the perspective has changed over the last few years. The emphasis has shifted from a project approach, targeting women as a separate group, to a strategy of mainstreaming and agenda setting, implying that gender considerations have to be taken into account and acted upon in overall policies, in every project, and at all stages in the project cycle. But it has taken some time for the new strategy to be operationalised, as outlined in the follow-up to the Platform of Action adopted by the Beijing Conference on Women in 1995.
The process seems now to be nearing completion. It has been centred on training Danida staff with a view to develop its ability to effectively mainstream, i.e. to consider gender issues in all activities. The shift to SPS has opened up new possibilities in this respect, and practical guidelines have been devised on how to integrate gender perspectives in SPS as well as in institutions or in terms of reference. Danida have been drawing on DAC Guidelines in the attempt to mainstream gender into the whole aid programme, focusing on operationalisation and implementation, without abandoning specific projects. The issue is systematically addressed during annual consultations, also with governments which are not very sensitised to gender issues.
Environment
Environment is a cross-cutting issue which is closely linked to poverty, and Danida has made increasing efforts to integrate environment in development assistance, in particular since the Rio conference in 1992. Environment is well integrated in all parts of Danida's activities, and data from the DAC Creditor Reporting System shows that approximately one quarter of all Danish projects in 1997 had "Aid to Environment" as a significant or principal objective. Moreover, an evaluation of environmental considerations in Danish co-operation was carried out in 1995-96, with very positive results.
Furthermore, Denmark has set up a special FEPS which is a special feature among the donor community and ultimately, in 2005, will amount to 0.5 per cent of GNP (additionality will not be 100 per cent). Danish environment assistance is implemented in co-operation between Danish Co-operation for Environment and Development (Danced) of the Ministry of Environment, and Danida of the MFA. The FEPS resources are to be used for environmental projects carried out in the poorest developing countries by Danida and in the richer developing countries by Danced (e.g. projects carried out in South-East Asia and Southern Africa). To assist in the implementation of the co-ordinated activities a joint advisory board was established.
Human rights and democracy
Denmark is a strong supporter of human rights and democracy, on the premise that experience demonstrates that they are of major importance to political and economic stability, and to poverty reduction in the longer term. Thus these questions are raised in a systematic way with the recipient country government at the annual consultations. On these occasions, the Danish Delegation also meets with representatives of the civil society. This has raised a number of difficult problems when it turns out that some countries are going in worrisome directions in this important area. Danida has tried to resolve these issues in a pragmatic way and considers democratisation as a long-term process that must be supported in some cases through supporting NGOs instead of governments. This is why the attitude so far in some problem countries has been to stay in place but to suspend or slow projects or programmes in preparation and to progressively phase out the aid programme when projects come to completion. At the same time assistance is often at least partly redirected to civil society, notably in support of democratisation.
Evaluation and effectiveness
Danida's evaluation unit started in 1982 as a subdivision in the research division, but in 1997 it has been become an independent Secretariat, reporting directly to the State Secretary of the South Group in the MFA. It is a small unit, but all evaluations are carried out by external independent professionals, half of them non-Danish. The Secretariat prepares the evaluation plan for each year in consultation with the operational departments and the board of Danida, and has total independence in awarding contracts to consultants, for which it has a budget of DKK 15-18 million a year. Participation of recipient countries, although it exists at various levels, was not considered as systematic until recently, but new guidelines stress the need to involve recipients representatives. Danida is working on a new system of output and outcome indicators, as well as performance indicators, with a view to developing a performance monitoring system. As far as learning from evaluation is concerned, there is a very systematic follow-up to each evaluation, with a post-evaluation enquiry, one or two years after, to check what has been done on the recommendations.
Danida's evaluation work has gone through a transition period from traditional project evaluations to the more challenging approach, which is under way, of evaluating country programmes, or sectors, like the health sector across countries. The evaluation of SPS is not yet on the agenda, because implementation is at an early stage and since it would be very difficult to isolate Danida's influence: the need would be to have joint evaluations with other donors and the government. However there is no doubt that Danida's evaluation unit and evaluation systems are among the best in terms of compliance with the DAC's Principles for Evaluation of Development Assistance.
A major evaluation report on Poverty Reduction in Danish Development Assistance was published in November 1996. Its conclusions show that the impact of Danish aid has been quite significant in terms of livelihoods, resources and knowledge for the beneficiary groups, although the impact on rights has been of a more limited nature. The evaluation also identified a range of opportunities in the areas of mode of operation, programme design, poverty-monitoring systems, etc., whereby the impact of Danish bilateral assistance can be enhanced.
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