Development Co-operation Review 1998: Summary and Conclusions
New initiatives towards a high quality aid programme
Spain's aid programme is in a new phase of adjustment and reform, involving its legislative foundations, its composition and the management tools employed: A new draft law is currently under debate in Parliament.
Tied aid loans have declined sharply and their sectoral orientation has shifted, while grant aid has increased.
"Decentralised aid", provided by Spanish regions and municipalities, and mainly implemented through non-governmental organisations (NGOs) which is a particularly innovative part of the Spanish aid effort, has increased significantly. (This dimension of the Spanish aid effort could be a source of inspiration for other donors.)
Major improvements in the planning and evaluation functions are being introduced.
Taken together, these steps respond in large part to the recommendations made by the Development Assistance Committee (DAC) in its first review of the Spanish aid programme in 1994 and hold the promise of a major improvement in the quality of Spain's development assistance effort.
The challenges now for the Spanish aid authorities are:
to carry the reforms through in a way that reinforces the role of the development objectives and criteria that Spain has adopted (and which are reflected in the draft law), drawing inter alia on DAC work;
in association with other DAC Members, to enter into partnerships with developing countries based on local ownership of strategies directed at attaining basic development goals.
A measure of the progress now being made in increasing the developmental orientation and quality of the Spanish aid programme is its composition. Tied aid loans to productive sectors in the faster growing developing countries, provided through a Development Aid Fund (the FAD) with an export promotion character, accounted a few years ago for over half of Spain's official development assistance (ODA). This share has now fallen to about 20 per cent, and influenced by the OECD disciplines on the association of aid and export financing (the "Helsinki Disciplines"), the FAD is now oriented towards the social sectors. Furthermore, a new evaluation function is being introduced to ensure development impact. These changes are in the right direction. The development of a new soft loan facility to be administered jointly with the Spanish Agency for International Co-operation (AECI) and the decision to begin financing microcredit schemes should also help to take the FAD in this new direction. At the same time, because of its tied aid character and association with commercial export credits, the FAD is not always an appropriate aid instrument and special efforts have to be made to adapt the terms when applied to poorer countries and social sectors.
The draft law is still under debate, but promises to provide a strong umbrella for what is very much a pluralistic aid effort, given the role of the regions and municipalities. Hopefully it will be agreed on a multiparty basis, reflecting the widespread public and political support in Spain for development co-operation. It will encompass development guidelines previously established by the Spanish authorities and endorsed by the Senate. It will establish a system of pluriannual and annual plans, with regular reviews by the Spanish Parliamentary Commission on Development Co-operation, an active all-party committee whose oversight role will thus be considerably strengthened. A further important provision is the establishment of an Interterritorial Commission which will promote dialogue and co-ordination between the development programmes of the Spanish Government and the "decentralised" programmes of the authorities in the regions and municipalities.
Meanwhile, action is already being taken to remedy weaknesses in the planning and co-ordination and appraisal/evaluation of Spain's grant aid programme, the responsibility of the Ministry of Foreign Affairs. The annual plans were mainly a collation of ongoing and proposed activities and were often produced behind schedule. New multiannual planning instruments are being introduced currently which will support the parliamentary processes laid down in the draft law and enable a much more strategic approach based on a Logical Framework. This should enhance considerably the capacity of the Spanish authorities to align and monitor their programmes in terms of basic development objectives, such as those set out in the DAC report Shaping the 21st Century: the Role of Development Co-operation. At the country level too a more strategic approach to country programming is under development, requiring some adjustment to the functioning of the Joint Commissions which prepare the country programmes and a conscious effort to implement the partnership principles set out in the DAC report on Shaping the 21st Century. Alongside these improved planning mechanisms, new methodologies for project appraisal and evaluation have been established, through which the Spanish authorities are seeking to have a pervasive impact on the way in which Spanish aid is conceived and implemented on the ground. Previously dispersed efforts are being consolidated into more coherent projects and programmes.
This impressive list of reforms could be enhanced by some further refinement of administrative structures. For example, a more distinct administrative unit with a development identity within the Ministry of Finance and Economy would seem appropriate to complement the enhanced application of development criteria and evaluation processes. At present the FAD, along with other aid responsibilities of the Ministry, is administered by the Directorate-General for Commercial Policy and External Investment.
In the Foreign Ministry, the Planning and Evaluation Office is now to focus much more heavily on its central functions of co-ordination, planning and impact assessment. This has been facilitated by transferring the administration of the cofinancing scheme for NGOs ( which absorbed much of its time and effort) to the aid implementing agency, the AECI, which is part of the Ministry of Foreign Affairs, and headed by a Secretary of State. As with other DAC Members whose aid is implemented from within its Foreign Ministry structure, it is important to ensure development experience and stability among the staff who serve in the agency, to provide for a core of professional expertise with satisfactory tenure and career prospects, and to ensure that financial and bureaucratic procedures designed for domestic functions are adapted to the needs of working with external partners. A more autonomous status for the AECI could help with some of these challenges. There also appears to be scope for further streamlining of the AECI, whose total staff, both in Madrid and in the field seems large in relation to the current size of the programme it administers (some $180 million). At the same time however, the AECI needs to prepare to manage a considerably increased programme in the light of the authorities' desire both to increase total aid and to expand the grant programme while reducing the loan programme (i.e. the FAD).
At the level of governing structures, there are two Commissions through which the decision making process passes to the Spanish Cabinet -- the FAD Commission (supported by the Ministry of Economy and Finance), and the Interministerial Commission for International Co-operation (supported by the Ministry for Foreign Affairs). In principle the new law should help drive Spain's official aid system towards more integrated objectives and strategies, more uniform approaches to development and evaluation criteria, and more co-ordination of instruments and activities in partner countries. The proposed Interterritorial Commission, together with the strengthened role of the Parliamentary Commission and the work of the existing Council for Development Co-operation which promotes dialogue between the authorities, NGOs and civil society, make up a set of co-ordination and discussion bodies whose combined work should help to produce a more focused and collaborative (but still pluralistic) Spanish aid effort under the draft law.
Volume and composition
Spain's aid volume performance has been closely linked to the rise and decline of FAD credits, but with their share in ODA now much reduced, they should no longer determine overall ODA trends. ODA net disbursements had increased rapidly from very low levels in the 1980s to a peak of 0.28 per cent of gross national product (GNP) in 1993. At $1.5 billion (of which $0.8 billion was FAD credits), Spain was the 10th largest donor country in 1992. With FAD credits falling to less than half their peak level in 1995 and 1996, and with Spain's calculated share of European Union (EU) aid down in 1996 with the advent of new members, Spain's ODA fell to $1.25 billion in 1996, ranking as the 12th largest donor country.
The Spanish administration estimates that aid increased again in 1997, and it expects aid volume to rise in the years ahead. Earlier in the 1990s, intermediate aid targets had been set for around 0.35 per cent of GNP. Progress in this direction would imply a very major expansion of bilateral aid, notably through the AECI, although there is also considerable scope for increasing multilateral aid given that non-EU multilateral aid is small by the standards of nearly all other DAC Members.
The composition of Spanish ODA in recent years is characterised by major changes. As mentioned already, the share of FAD credits declined sharply, while bilateral grants rose from 17 per cent in 1992 to 45 per cent in 1996 and became the largest component of Spanish aid (although they still represent a much lower share of ODA than in total DAC aid). The increase of bilateral grants has been the result of larger budget resources for AECI projects and programmes, a rapidly growing amount of debt relief and the rise in aid provided by autonomous regions and municipalities. This so-called decentralised co-operation now represents over 10 per cent of ODA.
Debt relief, non-existent prior to 1993, became an increasingly important part of Spanish ODA in recent years. In 1996 it reached 10 per cent, twice the DAC average. Spain recently signed a debt/equity swap agreement with Morocco, but has yet to articulate a comprehensive approach to debt swaps based on development criteria.
The rising share of grants provided through NGOs by AECI and by the autonomous regions and municipalities is a welcome trend, generating more aid for poverty alleviation, environment protection and the promotion of women. It also facilitates a greater concentration on least developed and low income countries.
As regards the untying of aid, the Spanish authorities are of the opinion that the economic returns to the Spanish economy are essential to justify an aid programme. This position has been reinforced in recent years, since the NGOs have been requested to procure goods and services in Spain. There is broad support across the political spectrum for the tying of Spanish aid, essentially on the grounds that aid can and should be mutually beneficial in a direct sense to both the giver and the receiver. In these circumstances it would seem important for an effort to be made by the Spanish authorities to promote a more comprehensive understanding of the issues raised by the tying of aid and of the costs and benefits of using aid to facilitate Spanish exports and job creation. An objective study for public discussion on aid tying could be helpful, looking not only at the Spanish end of the equation but also examining the issues posed at the developing country end. Spain has indicated that it could agree, in principle, to support the initiative in the DAC to untie aid to the least developed countries, provided that satisfactory conditions for implementation of this initiative are agreed by all DAC Members.
As in all DAC Members' aid agencies, the basic development goals set out in the DAC report on Shaping the 21st Century are provoking some reconsideration of the orientation of the Spanish aid programme. The reform initiatives outlined above are all very relevant to increasing the impact of Spanish aid on poverty alleviation, on social performance, on environmental management and on governance. For the past few years, Spain has devoted particular time and attention to policy development in the areas of good governance and the rule of law (including conflict resolution -- see Box on Guatemala); environmental sustainability and regeneration; gender equality and women's independence; social development for the underprivileged and indigenous peoples; and private sector development.
Decentralised co-operation and NGOs
One of the most interesting new trends in the Spanish aid programme in recent years has been the steep increase of the so-called decentralised co-operation through the autonomous regions, municipalities and other local bodies. The largest amount has been provided by the Basque Country. Andalusia, Navarra, Catalonia are among the regions which have developed significant programmes. Among the most active municipalities are: Madrid, Barcelona, Seville and Vitoria. Some city councils have decided to allocate 0.7 per cent of their budgets to development aid. Although the official guidelines for Spanish aid also apply to the "decentralised" co-operation, each of the autonomous regions and municipalities appears to have established its own priorities and principles concerning relations with the developing countries. In certain regions, special funds have been established to help small municipalities participate in development co-operation. Emphasis is generally placed on poverty reduction, the promotion of social justice, participatory development and relief aid. Most of the "decentralised" co-operation is implemented through NGOs or other non-profit organisations. The proposed Interterritorial Commission will help to promote synergy between the various programmes and with the central government programmes, while reducing incoherencies and/or overlapping of the activities undertaken by the various actors involved in development co-operation activities.
Since 1995 NGOs have been receiving substantial amounts of cofinancing from the central government (over $80 million per year). They also participate in the implementation of the aid programmes of regional governments and local authorities. Government subsidies are allocated on a project-by-project basis through two annual competitive biddings and cover up to 80 per cent of the total project cost. The selection of the projects is carried out by the AECI through a process which attempts to ensure that NGO activities are soundly conceived and implemented by qualified professionals and with adequate financial controls. In line with best practice in many DAC Member countries, it would be useful to consider using multi-year framework agreements as a basis for block grants, programme assistance and other mechanisms which reduce administrative burdens.
To conclude, there has been a radical improvement in the quality of the Spanish aid programme, with the reorientation away from tied aid credits to commercially-viable sectors, that dominated the picture up until the early 1990s along with the current package of reform initiatives designed to strengthen the strategic management and monitoring, and the overall political discussion and co-ordination of what is a pluralistic aid effort. The DAC encourages the Spanish authorities in their pursuit of these reforms (see above) and to take them further in certain respects, notably by:
enhancing the character of the FAD as a developmentally-oriented instrument;
enhancing the autonomy and professionalism of the AECI as a basis for a considerable increase in its programme;
promoting a debate on the issue of aid tying
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