Overall framework for development co-operation
Translating vision into strategic guidance
The US Administration’s determination to renew its global leadership on development is underpinned by new strategic orientations and major reforms, creating a positive dynamic which raises high expectations among US stakeholders and partners. To achieve its ambition, the US Administration now needs to secure broad cross-government ownership of its development vision.
To secure broad ownership of the development vision outlined in the Presidential Policy Directive on Global Development, the US Administration should:
- Continue to make every effort to consult with, and gain support from, Congress for the objectives and results that the development co-operation programme aims to achieve in the medium-term.
- Strengthen efforts to communicate results and engage more strategically with Congress and non-state actors in order to reinforce public and political support for the development co-operation programme.
The US Administration set out its new strategic orientations and ways to engage in development co-operation in two game-changing documents published in 2010: the Presidential Policy Directive on Global Development, a first of its kind by an American Administration, which provides policy guidance to all US government agencies, and the Quadrennial Diplomacy and Development Review, the first ever analysis of how to rebuild civilian power to support sustainable development. Together, they outline an approach based on three elements: i) a policy targeted at sustainable development; ii) an operational model focused on effectiveness and results, underscoring the importance of country ownership and promoting effective division of labour among donors; and iii) a whole of government approach that harnesses development capabilities across government.
The DAC welcomes the work being done by the US Administration to translate the policy shift into concrete strategic guidance for the development co-operation programme. However, the US Foreign Assistance Act – which provides the legal foundation for the US aid programme – now includes 140 broad priorities and 400 specific directives for implementing the priorities. This proliferation makes it difficult to translate the US vision into a coherent set of strategies. It also leads to supply-driven approaches. Many of these problems could be addressed through a strategic framework agreed between the Administration and the Congress. This shared vision would define the objectives and results to be achieved through the development pillar of the “3D” framework of development, defence and diplomacy. Ultimately, this should allow Congress to give the Administration greater flexibility in how it conducts its development programmes and accounts, within the funding levels determined by Congress.
The US Administration also needs to strengthen public support for the aid programme through more targeted efforts to communicate results. The US has a vibrant and generous civil society made up of a wide range of coalitions, which include think tanks, NGOs, foundations, and the private sector. These are instrumental both in advocating and raising public awareness for development and in implementing the aid programme. The Administration would gain from engaging more strategically with them both at the policy and implementation levels, recognising their specificity and the value they can add.
Balancing domestic, geopolitical and development objectives
Elevating the development pillar beside diplomacy and defence and strengthening civilian leadership as a prerequisite to achieve sustainable development remain challenging. Ensuring that diplomacy, defence and development are mutually reinforcing and support the development objectives of the Millennium Development Goals (MDGs) requires continued strong political leadership.
To meet this challenge, the US Administration should continue to:
- Reinforce the role for USAID in the National Security Council
- Give USAID a stronger voice in the final foreign aid budget arbitrations under the State Department’s authority.
The US national security strategy drives the government’s engagement with partner countries. Its objective is to advance US values and interests in the areas of security and prosperity. The alignment of diplomacy, defence and development can be instrumental in supporting the development efforts of partner countries. However, the US needs to be careful when dealing simultaneously with geopolitical and security priorities and development assistance, ensuring that the security driver also supports development purposes. While reducing poverty is not an explicit overarching objective of US development co-operation, some important US programmes are oriented towards fighting poverty, as reflected by the two recent presidential initiatives focused on food security and health – a focus that the US Administration needs to maintain across all programmes.
While the Department of Defense has become a significant player in delivering foreign assistance, the US Administration is now taking steps to elevate development within the 3Ds and to build back civilian power. These are positive signals and will help balance strategic national interests with development objectives when deciding country and sector aid allocations. In the field, and in particular in fragile contexts, a strengthened US co-ordinated approach led by a reinforced civilian power should bring better, longer-term development results. The clear support that both the Secretary of State and Secretary of Defense bring to this agenda is encouraging. As announced in the 2010 policy directive, the Administrator of USAID will participate in National Security Council meetings “as appropriate”. Meanwhile USAID, the lead development agency, has a greater role in formulating its budget and has established the capacity to do so. These are key developments – if the development pillar is to be elevated, USAID will need to sustain a strong voice in the National Security Council and in the budgeting process for foreign assistance.
Promoting development beyond aid
The US government has developed a comprehensive approach to development and foreign assistance, and is increasingly tapping into expertise across government. It is also a leader in developing public-private partnerships for development. Other donors can learn from these examples (see box below).
The 2010 policy directive signals a welcome step towards more systematic scrutiny of the impact of US domestic and foreign policies on partner countries. However the US lacks a strategic framework to ensure that its domestic and foreign policies support, or at least do not undermine, developing country efforts.
To address this gap, the US Administration should:
- Consider identifying key priority areas in which it will pursue coherence between development goals and its domestic and other foreign policies;
- Make full use of its interagency policy committee on global development to monitor and report on efforts to promote coherence and their impact.
The national security strategy and the National Security Council together provide a framework and an institutional mechanism to ensure consistency across US policies. However, being driven by US national security interests, they do not aim primarily at making these policies coherent with partner countries’ development aspirations. Neither does the national security framework encompass all policies with a potential impact on partner countries. The policy directive now calls for the Administration to look at the impact of US policies on developing countries. This is an opportunity to develop a policy framework which prioritises key areas in which to ensure coherence – an approach that other donors have found helpful. The interagency policy committee on global development, established in 2010, could serve as a focal point to promote development concerns in policy arbitrations related to these areas, and monitor the development impact of these policies. The US Administration is strengthening its approach to monitoring performance and results. This should enable it to report better on efforts made to promote coherence and their impact. Achieving coherence also requires attention in the field. Clear guidance should encourage US embassies to point out areas of incoherence and ensure that US engagement does not undermine the partner countries’ development efforts. The Committee was informed that USAID is soon to launch a “dissent channel” to allow officials to state their disagreement with US policy, including on matters of coherence of policies affecting development.
Good practice: Going from aid to development, stimulating public and private investments
Within government, the US is increasingly working across agencies to motivate all departments to contribute to development goals, using the policy-making capacity of USAID and the State Department to design initiatives that have the potential to gain clout. Recent presidential initiatives, such as Global Health and Feed the Future, harness a range of diplomatic, development, and technical capacities from across the US government. Likewise, since the creation of the Global Development Alliance in 2001, the US has been a leader in promoting public-private partnerships. These increasingly go beyond corporate philanthropy to address core business interests. The US Administration is also at the forefront in tackling corruption. Given its extensive experience, the US should assess the contribution of public-private partnerships to development. This could be shared with the donor community to feed into current debates on promoting development beyond aid.
Aid volume and allocation: ensuring strategic budgeting of sustained levels of funding
Increasing its official development assistance (ODA) over the last decade, the US has met all its commitments on aid volume.
The US’ plan to focus on fewer countries while also working more with good performers may put at risk the support it has given in recent years to poor countries with weak capacity, especially in Africa.
The predictability of future US assistance would be further enhanced if the US set and published targets for its future aid volumes.
Budgets continue to be fragmented and heavily earmarked, making it difficult for implementing agencies to deliver coherent and effective programmes.
The Administration is developing a website on foreign assistance that will increase transparency of its aid, in its first stage covering the State Department and USAID ((see box below).
to support its desire to be a global leader on development, the US should:
- Maintain the 2010 ODA level, the highest the US has achieved, and as the US economy improves, increase ODA.
- Ensure that budgets align with the strategic direction provided by the presidential policy directive, and continue efforts with Congress to streamline and simplify the foreign aid budget.
- Continue to guard against the risk of dropping aid to the poorest countries with weakest capacities as a result of the new focus on well performing states.
The US provides about a quarter of global development assistance and remains by far the largest DAC donor. Both republican and democratic administrations over the last decade have increased the aid budgets greatly, reaching record levels of USD 30 billion in 2010. The US has doubled its assistance to Sub-Saharan Africa since 2005, as promised at the G8 Summit in Gleneagles. US co-operation has also doubled in relation to the size of the US economy, from 0.1% of gross national income (GNI) in 2001 to 0.21% in 2010. At its current level, the US ranks 19th of the 23 bilateral DAC donors on this measure. The DAC takes note of the fact that the US has not committed to the UN target of allocating 0.7% of its GNI as ODA. A budget deficit of 11% of GDP and the sluggish recovery of the US economy are putting pressure on the US foreign assistance budget. Rather than increasing the quantity of aid, the US plans to enhance aid quality by delivering development co-operation more effectively and efficiently, and by using other resources to reinforce the impact of development co-operation.
Better, more strategy-driven budgeting should be a key part of efforts to improve the quality of US assistance. Currently, different allocation models interact, based on previous funding requests, Presidential initiatives, congressional earmarks, country-specific budgeting and supplementary appropriations. The result is a highly fragmented budget that translates into a complex array of instruments and reporting requirements for field offices, leaving them very little discretion. Consequently, they find it difficult to build a coherent programme out of such supply-driven funding, let alone to adapt programmes to local priorities. The DAC welcomes the Administration’s intention to reform the way in which budgets are prepared, and to i) allocate funds to broader envelopes with a requirement to report impact, ii) take coherent, country-specific approaches; iii) work with Congress to limit earmarking and supplementary appropriations; and iv) simplify ad hoc interagency transfers guided by shared authority and objectives.
As it plans to engage more with well performing states while focusing development co-operation on fewer partners, the Administration should guard against the risk of dropping aid to the poorest countries with weakest capacities – the countries that need aid the most.
Good practice: the dashboard on US foreign assistance
The new “dashboard” website on foreign assistance launched in December 2010 is a positive step to bring more transparency and accountability on aid volumes. This database was set up to record all US foreign assistance by agency and purpose, and could prepare the ground for better joint planning and stronger synergies between aid and non-aid components. To evolve from a reporting to a planning tool, the dashboard will need to record not only obligations but also disbursements, and include agencies other than USAID and the State Department.
The US is the fourth-largest donor to the multilateral system, representing 9% of the DAC’s multilateral aid. The current US Administration has fully embraced multilateralism; “strengthening multilateral capabilities” is a cornerstone of its new operational model outlined in the presidential directive. The US is now a constructive multilateral donor that drives the reform of multilateral agencies towards more results-based approaches and tries to reduce their reporting burden by relying more on their own evaluation capacities. The Administration should continue these efforts, and engage with Congress to ensure that the US supports multilateral agencies in a way that acknowledges their special nature and comparative advantage.
Organisation and management
Streamlining systems and processes in a fragmented development co-operation set-up
The institutional fragmentation of the US development co-operation system is hampering a more strategic and consolidated approach to policy co-ordination and programming. The US Administration is making efforts to streamline and co-ordinate its development co-operation activities at headquarters and in the field, where the new country strategies offer promising opportunities.
To overcome the difficulties linked to the institutional fragmentation of the aid programme, the US Administration should:
- Complete the roll-out of the whole-of-government country strategy model to all field missions, to ensure stronger oversight and consistency of development activities in the field, ensuring that lessons from the ongoing pilots are properly integrated;
- Review programming approaches of entities involved in development cooperation in order to rationalise planning and budgeting processes;
- Harmonise and simplify reporting requirements.
Out of the 27 entities involved in US development co-operation, USAID and the State Department are the two key drivers of the system. Four other entities are of specific importance: the departments of health and human services, defense, and treasury; and the Millennium Challenge Corporation (MCC). In 2006, the US Administration launched a set of reforms which strengthened collaboration between the State Department and USAID for strategic programming, budgeting and reporting. However, this reform did not apply to the other 25 US agencies.
Co-ordination is vital to ensure that the US uses resources and skills in a complementary and consistent manner. Since 2009 the Administration has taken steps to improve joint planning and activities, with good results. Strategic co-ordination among US agencies should be pursued and widened to reinforce synergies among their different approaches, avoid overlaps and support the US development vision. The policy directive and quadrennial review provide opportunities to establish cross-government mechanisms for ensuring consistency in US development policy. In particular, they require Chiefs of Mission to produce a multi-year integrated country strategy that brings together all organisations’ country-level planning – a challenging task, since programming, budgeting and reporting processes vary from one entity to another. The Administration should also use the country strategies to ensure that resource allocation decisions are closely linked to realities in the field. It should give country offices a stronger voice in deciding how resources are allocated across sectors and areas in relation to priorities set in Washington.
Putting reforms into practice
The State Department and USAID have taken promising steps to drive forward the critical reforms required to implement the policy directive and quadrennial review – in themselves significant political achievements. Pursuing these necessary reforms as a top priority and in ways that ensure sustained progress requires a strong commitment at all levels.
To pursue the reforms, the US Administration should:
- Provide adequate guidance to staff at headquarters and in US missions, and ensure - and monitor - that US missions internalise and implement this guidance;
- Accompany the reforms with appropriate communication and training.
Restoring USAID’s capabilities and promoting more country-driven, outcome-oriented systems are key priorities for the US Administration. In 2010, USAID embarked on an ambitious reform – USAID Forward – to make USAID the world’s premier agency and re-establish it as the leader on development within the Administration, through modernising and strengthening the agency. The quadrennial review takes the reform further. It outlines a new business model for a more strategic agency with stronger linkages between programming and budgeting; more aligned with partner countries’ priorities; more hands-on, implementing rather than only contracting out programmes; more results-oriented; and more focused on building local capacity to support systems that are sustainable. The organisational changes needed are now clear and should be implemented without delay. Promising steps have already been taken, such as the establishment of the Bureau for Policy, Planning and Learning and the Office of Budget and Resource Management. Evaluation is another positive example: having recognised the negative impact of its lack of a central evaluation function, USAID has now set up a new central evaluation office, and is aiming to re-establish a culture of evaluation and learning across the agency. An evaluation strategy aligned to DAC standards was published in January 2011.
The reform process should remain a top priority in the coming years. The quadrennial review must be implemented at all levels in ways that ensure sustained progress. While some measures are already being put into practice, others require longer time to take effect. Along with ensuring sufficient financial resources, implementing the reforms requires headquarters to provide US missions with adequate guidance and appropriate training. US missions must internalise this guidance, and will need appropriate incentives to overcome bureaucratic inertia. In this transition period, it is necessary to bring staff and external partners up to date with the changes in a supportive way. Meanwhile managing whole-of-government approaches involving 27 agencies is labour intensive and the US government should continue to look at ways to streamline the aid system, using the interagency policy committee to this end.
Rebuilding USAID’s human resources
Since the 1990s, decreasing numbers of staff combined with massive increases in the volume of aid have presented major challenges to USAID’s ability to manage its programme. USAID needs to consolidate efforts begun in 2006 to rebuild its human resource capacity.
To build a strong human resource base, USAID should:
- Back up its workforce plan with a reliable data system to identify gaps in staffing and skills;
- Set timeframes to adjust the staff skills mix to the new US aid model and working contexts;
- Provide stronger career prospects for local staff.
USAID’s workforce declined by 2.7% between 2004 and 2009, while programme funding levels almost doubled. This trend, which started in the 1990s, had a major impact on the way USAID delivered its aid programme, depleting its technical skills and turning USAID from an implementing organisation to a contracting organisation with reduced flexibility, weakened ability to support ownership and engage in partnerships, and an increasingly risk-averse bureaucracy. The number of staff becoming eligible to retire is another concern, especially as this involves most senior staff.
USAID is aware that it has lost much of the staff expertise, experience and know-how needed to ensure quality aid. Since 2006, it has taken a strategic approach to rebuilding its human resources. This has three key components: i) increasing core staff numbers; ii) developing a workforce planning model; and iii) launching a new agency-wide approach to training and better aligning staff skills to the agency’s mission. These reforms are underway and need to be consolidated. In particular, to make its workforce planning model more effective, USAID should continue to deepen its analysis of workforce and competency gaps in relation to its objectives. USAID also relies heavily on locally-recruited personnel. With numbers of local staff set to increase, and recognising their importance in delivering a quality programme, it should continue to look at ways to make better use of their expertise and retain the staff at higher grades.
Improving the impact of development co-operation
Disseminating aid quality principles across US development co-operation
Recent US reforms put new emphasis on the aid effectiveness agenda. Past surveys have shown the US lagging behind in implementing the Paris Declaration principles of effective aid. These principles are now well understood by USAID, MCC, and the Treasury, but not to the same extent by other US entities.
As the MCC started implementing its programmes, it demonstrated that its set up allowed it to deliver aid in line with the principles of more effective aid. In this, there are good lessons for both the US and other donors (see box below).
To implement the principles related to improving aid quality outlined in the policy directive, all relevant US agencies should:
- Develop practical guidance for their development co-operation activities in a way that also honours the internationally agreed principles of effective aid;
- Accompany the guidance with adequate training and appropriate incentive structures, conducive to harmonising efforts with other donors and making more use of country systems where possible.
In OECD surveys covering 2005-2007 data, the US scored poorly on the Paris Declaration indicators related to alignment with partner country priorities, the use of countries’ financial and procurement systems, and harmonisation with other donors. Challenges in implementing the aid effectiveness principles include congressional requirements such as earmarking and tying aid to the delivery of US goods and services, and the focus on short-term outcomes. Current US foreign assistance reforms aimed at making development co-operation more effective are therefore timely. In line with the presidential policy directive and the quadrennial review, the USAID Forward reform defines significant concrete steps. These include ensuring USAID’s procurement system relies more on non-US providers and building the capacity of partner countries so that the US can increasingly use their systems. The Feed the Future and Global Health initiatives also emphasise country-led programming.
Good practice: the MCC’s approach to quality aid
Through the MCC, the US has shown that it can deliver development co-operation that is in line with the principles on effective aid. In particular, ownership, predictability, untying, unearmarked funding, and a strong emphasis on results are key characteristics of MCC’s approach. MCC also provides an incentive model that supports partner countries in their reform: it allocates aid based on a country’s policy performance, employing objective indicators to determine a country’s eligibility for funding. Threshold programmes managed by USAID can be set up to help countries meet these eligibility criteria. The MCC benefits from independent legislation which frees it from many of the constraints imposed on other government institutions. MCC nonetheless faces challenges, including in ensuring long-term sustainability, but it has demonstrated its ability to learn from experience and thus its model continues to evolve. Meanwhile, good practice by MCC has been incorporated in other US programmes.
The international principles that aim to drive more effective development co-operation are now well understood by USAID, MCC, and the Treasury, but not to the same extent by other US entities involved in development co-operation. The US should therefore raise awareness of these principles among all its agencies involved in development co-operation, and provide guidance to their staff on adapting working practices for more effective development co-operation.
The two issues requiring most urgent guidance now are how to use country systems more, and how to co-operate better with other donors. The US generally aligns its strategies with the host country’s policies, respecting partner country ownership of the development process, provided partners are committed to good governance and reform. USAID’s approach to align co-operation with the whole of society, not only government, is particularly suited for fragile states. The DAC also commends the US for its efforts to build partner governments’ capacity in finance and audit. Yet at the same time, the US has until now largely bypassed its partners’ national structures for financing or procurement even in permissive environments, and relies little on the local private sector. It should make more use of country systems wherever possible. USAID’s recent procurement reform could therefore yield valuable lessons for other agencies as well. USAID should also put more of its assistance on partner countries’ budgets where it does not yet do so. MCC – which usually creates a temporary entity to implement its compacts - should examine whether it could rely more on, and strengthen, existing local capacity to manage the programmes. Further, the US is not playing a role in co-ordinating with other donors that is commensurate with its ambition to be a leader in development. It should explain to staff how they can co-ordinate better with other donors, for instance by harmonising their reporting requirements, missions, conditions placed on partner governments, and programmes.
Making further efforts to untie aid
Part of US aid, governed by the DAC recommendation on untying aid, remains tied to the delivery of US goods and services. This has a negative impact on the efficiency of the US programme.
To provide better value-for-money and comply with the OECD recommendation on untying aid, the US should:
- Fully untie its aid to least developed countries (LDCs) and to heavily indebted poor countries (HIPCs), consistent with the 2001 DAC recommendation on untying aid as amended on 25 July 2008.
- Continue to carry the message to Congress that US co-operation would yield better value for money for partners if it were not tied to the provision of US goods and services.
The US has made considerable progress in implementing the 2001/2008 DAC Recommendation to untie aid, from 47% being tied in 2005 to only 15% in 2009, progress the DAC welcomes. Overall however – when all forms of aid and all developing countries are considered – the US still ties almost a third (32%) of its aid to the delivery of US goods and services, the sixth-highest share in the DAC. The US is encouraged to follow other donors’ lead in untying beyond the DAC recommendation, all the more since the costs of tying aid have been well documented, including by the US’s own Government Accountability Office. The Administration should therefore continue to remind Congress that US co-operation would be more cost effective if Congress removed or eased the requirement to tie aid. MCC and the President's Emergency Plan for AIDS Relief both have principles for untying and non-earmarking, showing that the US can achieve this. To get the best value for money, and strengthen the capacity of local partners, the US should further ensure that its bidding processes are open to non-US companies (in particular in LDCs and HIPCs) so that local companies truly benefit from the USAID procurement reform.
Towards better humanitarian donorship
Promoting coherent and strategic planning
Recent policy shifts provide a welcome opportunity for the US to build on existing good practice in humanitarian programming, by addressing programmatic inconsistencies and linking humanitarian and development tools across government. Promising steps towards the reform of food aid should continue.
To promote more coherent and strategic humanitarian programming, the US should:
- Develop cross-government humanitarian guidance that reinforces existing good practice, but also
- encourages a systematic approach to support recovery
- enables more flexible and predictable funding for protracted crises, and
- eliminates inconsistencies in support to internally-displaced persons (IDPs) compared with refugees.
- Strengthen cross-government co-ordination mechanisms – including incorporating humanitarian activities into wider US mission strategies.
The US remains a responsive, flexible, rapid and generous humanitarian donor – the world’s largest – with an extensive, experienced and engaged field presence, strong partnerships with the humanitarian community, and an increasing global advocacy voice. However, programmatic inconsistencies remain, such as its unequal responses to IDP and refugee situations. It could also deliver a more holistic response by incorporating a stronger focus on disaster risk reduction, beneficiary participation and supporting recovery.
The US has taken promising steps to reform its emergency food aid, as recommended by the 2006 peer review. Local and regional procurement, cash transfers and food vouchers are now possible under the 2010 Emergency Food Security Programme. The range of tied food commodities is also expanding to include, for example, more appropriate ready-to-use foods for nutritional programmes. Commodities have been pre-positioned in new sites around the world, speeding up delivery.
However, continued over-reliance on Congressional supplementary appropriations, used to top up budgets and provide funding for new crises, is hampering overall funding predictability, limiting strategic planning and restricting the US’s capacity to respond to new emergencies. Efforts by the current Administration to reincorporate humanitarian funding into base budgets are therefore welcomed. The US is also taking innovative steps to broaden the global donor base, by encouraging new donors to contribute more and supporting cash funding to humanitarian organisations by US citizens. Other DAC donors could learn from these practices.
Partnering with the military
Implementing a partnership between US civilian and military actors that is coherent and meaningful, guided by humanitarian principles, best practices and value for money, will need continuous attention.
To support the most effective means of humanitarian aid delivery for each context the US should:
- Develop new cross-government guidance on how humanitarian assistance should best be delivered or supported by the US military, based on practical and principled solutions that deliver maximum value for money.
- Engage with the humanitarian community to find workable solutions and compromises to ensure that its counterterrorism measures are consistent with the shared humanitarian imperative
The humanitarian imperative calls for the delivery of life-saving aid in the most effective manner, and this may at times justify involving military assets. Current policy instructions provide the US military with a mandate, in certain exceptional cases, for the direct delivery of humanitarian aid, in addition to the traditional heavy logistics support role. This mandate has at times been controversial, although there have recently been positive experiences, including in Haiti after the earthquake.
The humanitarian community remains concerned about compliance with the 2001 Patriot Act, which prohibits material support to terrorists, noting both the administrative burden created by new vetting tools, and the potential repercussions for staff and neutrality if the Act is enforced to the extent envisaged by the Supreme Court. These fears have potential to affect the access, security and scope of humanitarian operations, by reducing the pool of humanitarian actors willing to partner with the US.
Good practice: engaging partners in humanitarian training
The overall impact of the US humanitarian system is heavily dependent on the quality of USAID and State Department staff, who are widely praised for being well trained, effective and fully engaged. The State Department’s approaches to staff training, which include embedding partner agency personnel in its training programmes, and training locally-engaged staff in Washington, where they can meet their regular work contacts face-to-face, could provide valuable lessons for other donors.
United States (2006), DAC Peer Review: Main Findings and Recommendations
United States (2002), Development Co-operation Review