Main Findings and Recommendations
|See also New Zealand's aid-at-a-glance.|
Development co-operation is an important dimension of the New Zealand government’s commitment to being a good international citizen and neighbour and to fostering a peaceful and stable environment in the Pacific and beyond. New Zealand’s Pacific Islands neighbours are grappling with diversification of narrowly based economies and some are in the midst of major governance challenges ranging from consolidation of fragile democracies to civil strife and open conflict which undermine development achievements and threaten regional stability. Most of them face serious challenges in achieving the Millennium Development Goals (MDGs).
While the last Development Assistance Committee (DAC) Peer Review of New Zealand’s development co-operation, held in 2000, concluded that New Zealand had a serious and credible aid programme, it pointed out fundamental dysfunctions which would need to be resolved. Two problems were particularly clear: first, the programme suffered from a profusion of small unrelated projects and a lack of strategic focus; and second, the staffing structure, based largely on short-term rotation of diplomatic personnel, could not generate the corporate capacities and professionalism needed for New Zealand to function as a development partner in the new results-based international aid effort. The government subsequently commissioned an independent review of its official development assistance (ODA) which carried this diagnosis further and recommended the establishment of an independent agency - at that point, development co operation was administered by a division of the Ministry of Foreign Affairs and Trade (MFAT). On the basis the independent review’s recommendations, the government decided in 2001 to build a programme with a distinctive profile and new focus on poverty elimination.
In 2002, this review process resulted in the creation of the New Zealand Agency for International Development (NZAID) as a semi-autonomous body attached to MFAT. The reorientation of New Zealand’s development co-operation has been impressive:
These significant changes result from intensive consultations within and outside the government. Opinions have been divided whether this was the way to go. One question has been whether the poverty elimination mandate was broad enough to encompass the whole range of objectives that New Zealand seeks in its relations with developing countries. The poverty reduction agenda adopted by the international community is indeed broad. It includes trade and private sector development, peace building and conflict prevention and the wider aspects of governance. Hence there is no inherent restriction on the scope of donor activities apart from the requirement to shape aid programmes around poverty reducing development outcomes, which provides a discipline on aid priorities and delivery modalities. The Paris Declaration on Aid Effectiveness adopted by over one hundred major donors, international organisations and developing countries at a High-Level Forum in March 2005, illustrates the new degree of discipline and co-ordination being demanded of both donors and developing countries today. NZAID, which was part of the preparation process leading to the adoption of this declaration, enables New Zealand to be a constructive player in this process.
The relationship with MFAT remains close. NZAID’s chief executive is appointed by and reports regularly to the ministry’s chief executive, while having direct access to the Associate Minister of Foreign Affairs and Trade who is responsible for ODA and has the authority to send papers to Cabinet through the minister. In practice, the two chief executives meet weekly as a rule and consultation between NZAID and MFAT continues down the line. With the creation of NZAID, there are now two distinct cultures and policy development processes, so that the foreign policy/development policy relationship is subject to more debate. MFAT, however, plays the primary role in key political relationships such as the participation of New Zealand in the strategic direction of the Regional Assistance Mission to Solomon Islands (RAMSI). It is therefore important that close consultation between NZAID and MFAT continues at all levels.
The political momentum that has been generated with the establishment of NZAID will need to continue as the agency confronts the challenges involved in carrying its programme forward. These challenges, which are well recognised by the New Zealand authorities, include:
Overall framework and new orientations
A new agency with a distinctive role and focus
NZAID has the mandate but also the ambition to be more than just an aid delivery organisation. As a semi-autonomous body, NZAID reports directly to ministers on policy and operational matters related to ODA. It has demonstrated its capacity to influence the broader government agenda in the area of trade policy. It engages with partner countries on policy dialogue as well as programme management. At the global level, NZAID seeks a more strategically focused engagement with international organisations. NZAID is playing a key role in promoting harmonisation of donor procedures and practices in the Pacific in support of the international community’s efforts to increase the impact of aid, as reflected in The Paris Declaration on Aid Effectiveness.
NZAID has its own budget vote and the head of the agency is responsible for its staff and human resources policies. Its capacity has been established through an intensive recruitment process of personnel with extensive development expertise and experience. The involvement of the entire NZAID staff in the process of policy development has contributed to enhance the agency’s capacity and create ownership. Management processes have been streamlined and some of NZAID’s practices have become models within the government as a whole, notably for the management of relationships with civil society organisations.
The creation of NZAID can be considered a success. In practice, its semi-autonomous status has been appropriate, allowing the agency to focus on poverty reduction and ensuring that the development programme is separate from - albeit coherent with - the foreign policy agenda. Because of impressive achievements in a short period of time, the agency benefits from strong support within the government and among the various non-governmental organisations (NGOs) involved in development co operation.
Focusing on poverty elimination
The government’s decision to create NZAID constitutes an unequivocal commitment to poverty reduction and is reflected in the agency’s overarching policy framework Towards a safe and just world free of poverty. Emphasis on basic education is an important result of the policy overhaul around the poverty elimination objective. New Zealand’s commitment to achieve development outcomes has led to a major shift in aid implementation modalities from projects to programmes. In the health and education sectors, for example, NZAID contributes to the overall strengthening of policies and systems in developing countries.
Whether, when and how New Zealand may be able to respond to the growing international consensus that additional ODA is required to support the achievement of the MDGs are questions that remain unanswered. New Zealand is among the few DAC member countries that did not make any commitment to increase ODA during the International Conference on Financing for Development held in Monterrey in 2002, despite its commitment to achieving the MDGs.
NZAID considers that growth is important for poverty reduction but that it is necessary to see this translated into improvements in the lives of poor people. The social statistics for many of New Zealand’s Pacific Islands neighbours indicate that poverty is a reality of growing concern in a number of them. NZAID’s growth and livelihoods policy, currently under preparation, suggests a holistic and people-centered approach. The policy will encompass economic growth, private sector development, food security and trade. NZAID has yet to decide how to focus these activities - at the community level, on government policy and delivery or on the private sector itself. Too much of a micro-focus could lead to a wide range of distinct activities, in contradiction with the agency’s overall commitment to more programmatic approaches in aid delivery. NZAID will also need to consider how it can best contribute to the promotion of policy and institutional reforms conducive to private sector development, as part of a consultation process - ideally within the framework of partner country-led poverty reduction strategies - between state, private sector and civil society stakeholders.
Contributing to aid effectiveness in fragile states
NZAID shares with other development agencies the challenge of finding effective ways to remain engaged in countries where institutions and policies are weak. Valuable lessons learned are emerging from New Zealand’s experience in the Pacific, where several countries face cumulative stress arising from population growth, ethnic tensions and widening socio-economic disparities.
RAMSI is innovative because of its comprehensiveness in addressing security, economic reform and delivery of services through a whole-of-government approach in close co operation with members of the Pacific Islands Forum. New Zealand’s support, in coalition with the European Commission, for education in Solomon Islands builds local capacity to manage the processes involved in implementing a comprehensive national sector plan, working to improve planning and accountability systems as part of this process. This commendable approach involves a learning process which creates capacity among Solomon Islanders and in their institutions. NZAID’s experience in this context could usefully contribute to good practice emerging from current DAC discussion on development effectiveness in fragile states.
New Zealand has adopted a pragmatic but comprehensive approach to peace building and conflict prevention through its involvement in several crises in the Pacific. The challenge in the future will be to achieve the same level of engagement in conflict prevention as in conflict resolution and stabilisation. As other ministries get more directly involved in aid delivery to fragile states in the region in the context of a whole-of-government approach, it could be useful to consider a more structured inter-government co ordination process on aid management so as to ensure a common understanding and adoption of good development practices.
Strengthening public information
New Zealand’s development co-operation programme has benefited from increasing public support in recent years. According to a public opinion survey conducted in 2004, 76% of New Zealanders supported the government giving aid and 61% of them were in favour of increasing the aid budget to 0.7% of gross national income (GNI). Despite this favourable environment, NZAID’s objectives, approaches and achievements are not well known nor understood by the public: 30% of respondents knew what NZAID actually does and 60% of them had doubts about the effectiveness of the government’s programme.
In order to encourage public knowledge of and support for its work, NZAID has updated its communication strategy to make it more effective. Key messages highlight two aspects of New Zealand’s aid programme: aid is given for New Zealand to be a good global citizen; and the focus lies on the Pacific, where New Zealand can be most effective. The agency plans to make better use of concrete examples of achievements. NZAID’s efforts to strengthen the evaluation and measurement of results are useful in this context. NZAID’s communication should also cover New Zealand’s contributions to multilateral organisations which deserve greater support given the role that these organisations can play in achieving the MDGs worldwide and in supporting the country’s ambition of being a responsible global citizen.
Aid volume and distribution
Underperforming on ODA volume
Over the past 15 years, the ODA/GNI ratio of New Zealand - which was at 0.23% in 2004 - has never been higher than 0.27% nor has it been on a clear upward trend. This has to be seen in line with New Zealand’s longstanding commitment to the United Nations ODA/GNI target of 0.7%, which is reiterated in NZAID’s overarching policy statement Towards a Safe and Just World Free of Poverty. In 2004, the ODA/GNI ratio was slightly below the total DAC ratio (0.25%) but was lagging behind the DAC average country effort (0.42%). With 210 million USD in 2004, New Zealand had the smallest programme within the DAC but remains an important donor in the Pacific.
As in most other DAC member countries, the logic for an increase in ODA volume has become inescapable and New Zealand needs to match its ambitions with more adequate funding for development. The establishment of an effective agency, the declared aspiration by government and the population for global citizenship and commitment to the MDGs, have raised expectations domestically and internationally. However, the government has not adopted a medium-term expenditure framework that would enable progress in this respect. A significant improvement was the introduction during the fiscal year 2003-04 of a multi-year appropriation for the ODA budget vote, which enables NZAID to provide more predictable and long-term commitments on aid flows to partner countries. New Zealand could be seen as capable of a significantly larger fiscal effort for ODA. Raising New Zealand’s aid over time to meet the current DAC average country effort (0.42%) as an intermediate target would imply that ODA becomes New Zealand’s fastest growing budget line. This would require establishing a strong political consensus.
New Zealand’s official response to tsunami relief and reconstruction efforts in Indian Ocean countries has been generous - about USD 48 million, nearly a quarter of its current ODA level. Three-quarters of the funds are to be spent in 2005 as a one-off appropriation of additional funding to the existing annual budget. The DAC encourages New Zealand to seize the opportunity of considerable mobilisation for tsunami relief and reconstruction as a basis for a sustained and significant increase in ODA as part of this year’s budget approval process.
Towards a strategically more selective and active multilateral engagement
Recognising the important contribution of multilateral organisations to global debates about development, New Zealand intends to engage more strategically with selected international agencies. To this end, NZAID has adopted an evaluative framework, the Multilateral and Regional Agency Assessment Framework (MARAAF) and is preparing a multilateral engagement strategy. In this context, NZAID conducts regular assessments of agencies receiving its funding in order to inform its allocation decision-making process. NZAID has started to reprioritise its engagement with several organisations, a process that has led to increased core-funding to agencies like the United Nations Development Programme (UNDP) and the United Nations Population Fund (UNFPA). NZAID is also strengthening links between its engagements at national, regional and global levels with a view to ensuring that the field performance of international agencies can be influenced through New Zealand’s participation in global forums and decision-making bodies of these agencies.
NZAID should reflect on the desired level of its multilateral assistance. On average, about a quarter of New Zealand’s ODA has been disbursed multilaterally, broadly in line with the current DAC average. Despite New Zealand’s steps towards more intensive co-operation with international organisations, multilateral ODA has slightly decreased both in volume and as a share of total ODA since 1999. A significant increase in ODA would allow NZAID to selectively boost its contribution to and voice in multilateral agencies.
Need for enhanced geographic focus
NZAID works with 11 partner countries in the Pacific and 7 partner countries in south east Asia, South Africa being the only partner country outside these two regions. NZAID is also engaged in another 20 or so other countries in south Asia, southern Africa and Latin America with regional programmes that are delivered through the multilateral, regional and NGO channels. NZAID should reassess the number of its core bilateral partner countries. The question remains whether the agency has the capacity to ensure an adequate strategic management of programmes in 19 core bilateral partner countries. NZAID is currently reconsidering its definition of core bilateral partners with a view to making a clearer distinction between a first-tier of in-depth engagements (reflected in the share of budget and management resources) with a more limited number of countries and a second-tier of country programmes (with a smaller share of budget and management resources).
An engagement in fewer countries would enable NZAID to have more significant country programmes and reach the critical mass necessary to intensify its participation in county-led policy dialogue and donor co-ordinated efforts. This is an issue of particular importance in Asian core bilateral partner countries where resources are spread thinly in many countries and in each country, over many sectors. The potential value added of New Zealand’s modest contribution has also to be considered in the context of joint efforts by the donor community and partner countries to make progress on alignment and harmonisation. This includes the need for donors to concentrate on fewer countries and fewer sectors in each country with the objective of reducing transaction costs associated with the management of aid. With its new strategy for Asia, NZAID has taken steps to strengthen its role as a “strategic niche” player by focusing on rural livelihoods. It is too early to assess the success of these steps in terms of reducing dispersal and putting into practice NZAID’s commitment to “bigger, fewer, deeper and longer” engagements.
Overall, New Zealand’s ODA is dispersed over 100 countries given the existence of numerous funding windows, the main one being the Emergency Management and Disaster Relief, the Voluntary Agency Support Scheme (for co-funding of NGOs projects) and under the scholarship schemes. There is an opportunity cost in having such a large number of countries where funds are disbursed on discrete activities rather than being channelled through or complementing core bilateral country programmes. Typically these funding windows are centrally managed and run the risk of activities being donor-driven rather than supporting country-led poverty reduction strategies. NZAID is currently examining to what extent, and in which cases, specific funding windows should be aligned with its core bilateral priorities.
Increased focus on basic education
Education remains the most important sector of New Zealand’s development co-operation (nearly half of bilateral ODA in 2003). The education sector was singled out by Cabinet in 2001 as the area needing a new policy that would give greater prominence to basic education needs. The new education policy is accompanied with a welcome shift in delivery from individual projects to broader sector support strengthening education policies and systems in partner countries. There is now a clear trend in favour of basic education with an increase from 5% of total bilateral ODA to the education sector in 1999 to 11% in 2003 and to 30% in 2004, as sector approaches to education come on stream as in Solomon Islands. This is in line with the 50% desired target set in NZAID’s education policy statement.
Post-secondary education, mostly in the form of scholarships for study in New Zealand, benefited from more than two thirds of total education sector disbursements in 2003. In implementing its new education policy, NZAID has taken into consideration the main lessons learned over two decades in providing scholarships to students from developing countries. As a result, scholarships need to be more effectively linked with partner countries’ strategies and to take into account labour market and human resource development needs. In-country or regional training and scholarships have become the preferred options as they are more cost-effective and efficient in terms of completion and return rates. Finally, in the Pacific, NZAID intends to move from several distinct scholarship schemes, each with a different set of administrative arrangements, to a single more flexible scheme under a shared set of guidelines aligned with the Australian Agency for International Development (AusAID) regional award scheme.
Policy coherence for development
The OECD and its members recognise that sustainably reducing poverty in developing countries and attaining the MDGs will require mutually supportive and coherent policies across a wide range of economic, social and environmental issues. This can create challenges because specific issues commonly involve domestic interest groups and government departments with primary interests and responsibilities other than that of reducing global poverty.
New Zealand’s commitment reflected in its trade policy
New Zealand is committed to advancing development issues as a key outcome of the multilateral trade negotiations round launched at the Doha Ministerial Conference in 2001 and supports developing country interests in areas such as improved market access and other reforms in agricultural policies such as trade-distorting domestic support and export subsidies, special and differential treatment and capacity building, taking into account their priorities, constraints and vulnerabilities. The provision of technical assistance to enable developing countries to benefit from the outcome of multilateral trade negotiations is an important component of NZAID’s trade and development programme. NZAID also helps developing countries to address supply constraints which inhibit their ability to benefit from trade opportunities.
Becoming more systematic in enhancing policy coherence for development
The complexity of the issues at stake in terms of policy coherence for development requires action to be taken systematically at the political and administrative levels. Several aspects of the New Zealand system are conducive to enhancing policy coherence. NZAID’s policy advice mandate, which enables the agency to report directly to ministers, places it in a position to advocate for development within the government as a whole. The Associate Minister of Foreign Affairs and Trade with responsibility for ODA is a member of Cabinet, which ensures that development issues can be addressed at the highest level of government. The whole-of-government approach prevailing in the New Zealand government rests on an integrated decision-making process which requires shared analysis and co-ordination. A primary reason for establishing NZAID as a semi-autonomous body attached to MFAT was to enhance the standing of development perspectives in policy advice while facilitating coherence between development and other aspects of foreign policy. Co-ordination between NZAID and MFAT is based on explicit co-ordination frameworks and regular working-level meetings and informal consultations.
The range of issues that impinge on developing countries is wide and evolving, particularly for Pacific Islands countries which face special challenges in the areas of migration, education, environment, trade and investment. New Zealand’s commitment in this respect has not been explicitly endorsed in the form of a political statement in which policy coherence for development is identified as an objective for overall government action. Beyond the area of trade, issues are being addressed as needs arise. While NZAID has been able to influence the trade agenda it will require more resources to play a proactive role in this and other areas of policy coherence.
Aid management and implementation
Carrying the harmonisation and alignment agenda forward
NZAID is playing a key role in promoting the harmonisation agenda in the Pacific through a range of initiatives ranging from raising awareness at various levels to piloting sector-wide approaches in the education and health sectors. At the partner country level, systematic discussions increasingly take place among AusAID, NZAID and partner governments on how the donors can work together more effectively to enable better co-ordination and to lessen the burden of aid management. Progress is under way in the following areas: joint country strategies in Samoa and Kiribati; joint public sector improvement programme in Samoa; and joint administration of scholarships. Common efforts have culminated in the establishment of the first joint country programme in the Cook Islands, with delegated authority from Australia to New Zealand for day-to-day management.
As a new organisation which had to establish its overall capacity (from policy development to staff recruitment), NZAID has been in a unique position to seize the opportunity of adopting the changes in culture and behaviour that are required for the implementation of the aid effectiveness agenda. The agency’s commitment to harmonisation is embedded in its policy framework and strategic plan as well as human resources policies, including staff performance management. NZAID has opted for the preparation of a harmonisation and alignment action plan through an iterative process, allowing for practical experience to feed into the process. In finalising its action plan, NZAID should consider how to demonstrate tangible results in the field in terms of reduced transaction costs by better linking specific actions with measurable benefits. In carrying the aid effectiveness agenda forward, NZAID will have to address several constraints which include the geographical and sectoral dispersion of its programme and its limited presence in the field.
Taking the lead in promoting sector-wide approaches in the Pacific
NZAID’s commitment to increasingly deliver its aid in an aligned and harmonised way is evidenced in Solomon Islands and Papua New Guinea where sector support absorbs a significant share of New Zealand’s ODA: 50% and 30% respectively. Building on joint government and donor efforts to develop an education sector plan and a medium-term expenditure framework, as well as improved financial management achieved through RAMSI technical assistance, NZAID provides budget support to the education sector in accordance with the Solomon Islands government’s own systems, procedures and schedules. In Papua New Guinea, NZAID has been asked to take the lead in co-ordinating discussions among donors and their collaboration with the government in implementing the national health plan. Funding from various donors is pooled in a trust fund to support the medium term expenditure framework for the health sector.
These two examples constitute major new approaches in what remain difficult political, social and economic circumstances and could pave the way for sector support approaches in fragile states more generally. In countries where there are national sector plans and medium-term expenditure frameworks, NZAID intends to deliver its aid support through sector-wide approaches. The only pre-condition required for NZAID to consider sector support is the commitment by the partner country and its willingness to change, with the assumption that the need for credible planning frameworks and sound accountability mechanisms can be fixed through capacity building as part of the preparatory process for a sector approach.
Scope for stronger alignment in country programming
NZAID’s country strategies cover mainly core bilateral support, namely government-to-government co-operation. They could be more comprehensive and integrate the whole range of funding available through various NZAID channels and initiatives to ensure that different activities are mutually reinforcing and all support country-led poverty reduction strategies. Regional programmes, which account for about a third of NZAID’s budget allocation to the Pacific, may be a more efficient and effective delivery channel within the context of a large group of small countries. However, because regional programmes rely on a wide range of organisations and various initiatives, each with their own logic and approaches, NZAID needs to encourage regional organisations to participate in on-going efforts in partner countries to ensure that regional assistance is also aligned and harmonised. Dialogue between NZAID and NGOs is important in order to capture synergies among their respective activities, and this should include any New Zealand NGOs operating in the field.
Need for a greater field presence
The establishment of NZAID has enabled the building up of a competent and dedicated team with extensive development expertise and experience. The agency’s recruitment process has been intensive with 70% of its staff (90 persons at the end of 2004) having been recruited over the past two years. At this stage, apart from five NZAID staff members serving overseas, personnel from New Zealand embassies and high commissions in developing countries are responsible for the implementation of development co operation programmes. With a few exceptions, overall management of NZAID’s programmes rests with Wellington-based staff. The establishment of “virtual” country teams involving staff from headquarters and the field has proven effective for managing NZAID’s programmes and enabled field posts to access expertise in headquarters. Strengthening field presence remains critical in enhancing the agency’s ability to ensure an active participation in policy dialogue with local partners and co-ordination with other donors. Providing sufficient field exposure for staff would also be essential for helping the agency to understand and adjust to local circumstances on an on-going basis.
Emphasis on learning
NZAID has been designed as a lean and integrated structure, with inclusive and participatory decision-making processes, in order to encourage synergies and learning across the organisation. There is no strict distinction between policy and programming which are shared responsibilities across the agency. The emphasis on policy development as an agency-wide function results from a strategic choice aimed at establishing institutional capacity and maximising staff development potential in a relatively small organisation.
Similarly, the responsibility for the monitoring and evaluation systems that are being established to measure the impact of New Zealand aid is shared between a team of evaluation advisors and programme managers. The integration of evaluation within NZAID’s overall programme design will ensure real time learning and adjustment in on-going programmes. Together with learning, accountability is a key function of evaluation that NZAID will have to strengthen in its evaluation policy and guidelines. There is provision for independent evaluation alongside the programme integrated approach to monitoring and evaluation. This includes scope for the evaluation team to identify and implement sectoral and thematic evaluations independently from programme managers and report directly to NZAID’s Evaluation Committee.
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