Abstract

Many practical and action-oriented international roadmaps to improve the quality of aid and its delivery and impact on development—including the Paris Declaration, Accra Agenda for Action, and Busan Partnership—emphasize a more active involvement of domestic institutions and procedures. Despite widespread agreement among both donor and recipient countries on this issue, we find that aid often tends to bypass national institutional structures. This practice is sometimes justified on grounds of high levels of political and administrative corruption and weak implementation capacity in recipient country bureaucracies. We examine how and to what extent multilateral and bilateral development agencies bypass national and local government institutions while channeling aid and the impact of such practices on aid effectiveness in Africa. Based on an empirical study of project aid and budget support provided to Malawi by the World Bank, the African Development Bank, and the German Economic Group, we argue that earmarked funding, specialized procurement arrangements, and the proliferation of Project Management Units are among the mechanisms used to circumvent the involvement of national institutions. We conclude that while such practices may achieve short-term gains by displaying successful and visible ‘donorship’, the long-term impact is more uncertain. The bypassing of local institutions results in fragmentation of aid, lack of coordination among aid industry actors, and a general weakening of policy space and domestic capacity to formulate and implement development policy.

Highlights

  • Ever since the end of WWII, and the provision of capital by the United States to Europe, there has been considerable academic and policy interest in whether and to what extent foreign aid promotes economic development

  • Several international roadmaps to improve the quality of aid and its delivery and impact on development—including the Paris Declaration (OECD, 2005), Accra Agenda for Action (AAA; OECD, 2008), and Busan Partnership (OECD, 2011)—emphasize a more active involvement of domestic institutions and procedures

  • Despite widespread agreement among both donor and recipient countries on the issue of ‘ownership,’ we argue that a large amount of disbursed aid continues to bypass national institutional structures

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Summary

Introduction

Ever since the end of WWII, and the provision of capital by the United States to Europe, there has been considerable academic and policy interest in whether and to what extent foreign aid promotes economic development. We examine how and to what extent multilateral and bilateral development agencies bypass national and local government institutions while channeling aid and the impact of such practices on aid effectiveness in Africa. The goal was to stop donors bypassing the country’s public administration and ensure greater effectiveness of disbursed development aid to local councils by actively making use of government structures. In addition to visiting LDF projects in four districts—Lilongwe, Zomba, Thyolo, and Mangochi—we conducted forty-five in-depth interviews with local and national government officials as well as those representing the three donor agencies—the World Bank, AfDB and KfW German Economic Bank. They represented a variety of public institutions and aid agencies, allowing us to achieve triangulation and solicit diverse views. We end with some concluding reflections on the effectiveness of bypass strategies

Foreign Aid for Development
The Aid Effectiveness Agenda
Malawi
The Local Development Fund
Earmarked Funding and Procurement Procedures
Coordination and Project Management
Aid and Patronage Politics
Institutional Design and Competition for Scarce Resources
Findings
Conclusion
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