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How to spend it - Smart procurement for more effective aid

Bodo Ellmers, September 2011, Eurodad, 32p.

Bodo Ellmers, How to spend it - Smart procurement for more effective aid
September 2011, Eurodad, 32p.

Just three months ahead of the Fourth High-Level Forum on Aid Effectiveness in Busan, Eurodad launched its newest aid effectiveness report. Andris Piebalgs, Development Commissioner of the European Union, and senior officials from OECD, UNCTAD and Eurodad partner UNNGOF were invited to comment on the report’s findings and suggestions. The launch, hosted by the Friedrich-Ebert Foundation, was well attended by officials from the European Union, diplomats from EU and developing countries, and civil society organizations. In a period where the aid effectiveness agenda seems largely stuck, the launch saw a lively and highly political debate on the crucial question : how can we spend aid better ?

Boomerang aid : Much aid never reaches developing countries

Eurodad’s Bodo Ellmers presented the findings of the new report which focuses on the area of procurement, aid untying and the use of country systems. This is just a small share of the aid effectiveness agenda, but a crucial one that links aid with wider issues of trade and private sector development. Ellmers highlighted that aid yields a double dividend when it not just funds development projects but is spent locally, on locally produced goods and services. Injecting aid monies into developing countries economies builds productive capacities, and creates jobs and income opportunities that the local population can use to lift themselves out of poverty.

Unfortunately, Ellmers stressed, two thirds of contracts awarded by bilateral donors still go to firms from the North. Multilateral aid does not yield much better results. More than half of World Bank-funded contracts in the case study countries went to foreign firms, in Uganda the share of local procurement is as little as 18%. This is a consequence of donors’ procurement practices : Tying aid to the condition that all contracts go to Northern firms is the worst of all because it fully excludes firms from developing countries from the business opportunities that development cooperation offers. Although formal aid tying could be reduced due to aid effectiveness agreements, donors use many other informal tying practices to lift the playing field in favour of businesses based in donor countries. Ellmers concluded that the key for making aid a more effective tool for driving sustainable economic development is to spend aid locally under consideration of social and environmental criteria that creates decent work and drives green growth. Donors should support developing countries in building procurement systems which are up to this task, and use these systems as the default option.

Double dividends of smart procurement

The EU Commissioner for Development acknowledged that local spending can yield a double dividend for development. He cited the latest data from the Paris Monitoring Survey that assesses donors performance against aid effectiveness commitments that proves that EU donors perform better than peers, in particular when it comes to using country procurement systems. But there is also an enormous perception of mismanagement risk in Europe that prevents some EU donors to use these systems to the maximum extent possible. Transparency is key for reducing such fiduciary risks. The EU will continue its efforts to further untie aid and scale up the use of country systems, however, stressed the Commissioner. “ We acknowledge that there is a double dividend of aid when country systems are used. The European Commission is committed to do every effort to continue increasing the use of country procurement systems.”

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Publié le 19 septembre 2011

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