Costs, Benefits and the Political Economy of Aid Coordination: The Case of the European Union

Abstract

Although it is not possible to identify a specific, theoretical optimum level of aid coordination for the European Union, there is a broad consensus on the need for reduced transaction costs and greater impact through a stronger adherence to coordination standards. However, neither member states nor European institutions consequently follow a policy in line with a clear coordination principle. And nor do partner countries always push for more donor coordination. This article uses evidence from two country case studies, Myanmar and Rwanda, in which a conducive aid coordination environment is assumed. The former represents the new foundation of an aid architecture in a country, thus expecting the application of high aid effectiveness standards. The latter consists of a partner government with a strong leading role in aid. Although the political economy of donors and partner countries does not always favour coordination, strong recipient government leadership is crucial to align developmental objectives and clearly establish comparative advantages and division of labour among donors.