Chapter 5. Building an evidence base on policies, decision-making and monitoring practices

This chapter presents evidence for good multilateral donorship on policies, decision-making processes and monitoring practices with respect to the multilateral development co-operation system. It does so by examining sovereign states’ current practices in these areas and the implications of these practices for the quality and effectiveness of multilateral partnerships. Building on this evidence, the chapter concludes by highlighting lessons on policies, decision-making processes and monitoring practices. These lessons constitute a first set of building blocks for good multilateral donorship in the era of the 2030 Agenda.

    
Box 5.1. OECD “2018 Survey on Policies and Practices vis-à-vis the Multilateral Development System”

In 2018, the OECD carried out a survey on sovereign states’ policies and practices with respect to the multilateral development system to inform this Multilateral Development Finance report. The survey (henceforth “OECD/DAC 2018 Survey on Policies and Practices vis-à-vis the Multilateral Development System” or, for brevity “2018 OECD Survey”) elicited information on three main topics:

  • Why and how sovereign states partner with and fund multilateral organisations;

  • Sovereign states’ views on the implications of the 2030 Agenda for partnerships with multilateral organisations;

  • Reflections on the findings emerging from a case study on the World Health Organization (WHO) on measuring and encouraging good multilateral funding.

This last section was submitted only to the eleven top contributors to WHO for which such metrics was calculated.

The Survey was submitted to all members and associates of the OECD DAC. The response rate, based on a total of 30 DAC members, was 73%. Twenty-two DAC members responded, namely: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hungary, Italy, Japan, Korea, Luxembourg, New Zealand, Norway, Poland, Portugal, Slovenia, Spain, Sweden and Switzerland. As one DAC member1 provided responses only on the third section of the survey, the analysis of responses on the first two sections is based on a total of 21 responses. Romania became a participant in the DAC in April 2018 and Bulgaria did so in June 2018, therefore they were not included in the targeted sample. A similar survey was also conducted in late 2013 to inform the 2015 Multilateral Aid Report. Twenty-nine DAC members responded to the 2013 survey.

1. Switzerland

5.1. Sovereign states’ engagement with multilateral institutions at policy level

Sovereign states share a strong commitment to multilateralism enshrined in various development policy documents

Sovereign states articulate their engagement with multilateral organisations through a multitude of policy documents. Almost all respondents to the 2018 OECD Survey stated that this engagement is articulated in their overarching development co-operation strategy. There, they express their commitment to the principles of multilateralism and acknowledge the importance of multilateral organisations for advancing global sustainable development. They also emphasise that multilateral organisations are critical partners for achieving the objectives of their national development agendas and for channelling development co-operation (see Box 5.1). The articulation of Development Assistance Committee (DAC) countries’ multilateral engagement in their overarching development co-operation strategy presents different degrees of detail. For instance, Finland, briefly describes support to specific multilateral organisations (among the European Union [EU], the United Nations Development System [UNDS], the multilateral development banks [MDBs], etc.) in its overarching strategy. In contrast, Japan devotes a section of its ‘Development Co-operation Charter’ to the partnerships with international, regional and sub-regional organisations, but without referring to specific institutions.

Figure 5.1. DAC countries articulate their engagement with multilateral organisations in various development policy documents
picture

Source: OECD/DAC “2018 Survey on Policies and Practices vis-à-vis the Multilateral Development System” (unpublished).

In addition to the overarching development co-operation strategy, several members describe their engagement with multilateral institutions in other policy documents. These include 1) stand-alone multilateral strategies; 2) strategies for engaging with individual or a group of multilaterals, and 3) thematic or sector strategies. Figure 5.1 illustrates the overlaps among policy documents in which DAC members articulate their engagement with multilateral organisations. More specifically, among the 19 respondents that detail their engagement in their overarching strategy, 10 also outline the role of partnerships with multilateral organisations also in a thematic or sector strategy. For instance, Australia articulates the role of multilateral partnerships to achieve the objectives of the Department of Foreign Affairs and Trade’s strategy on health (Australian Government, Department of Foreign Affairs and Trade , 2015[1]). Moreover, nine respondents have developed a specific strategy for engaging with individual, or a group, of multilateral organisations. For example, Austria’s Federal Ministry of Finance has a policy document providing strategic guidelines for international financing institutions (IFIs), thus the International Monetary Fund (IMF), World Bank Group, regional development banks and other MDBs (Austrian Federal Ministry of Finance, 2015[2]). Finally, seven DAC members have a stand-alone strategy for engaging with multilateral organisations. For instance, Germany and Sweden have policy documents outlining their strategies for multilateral development co-operation.

As further discussed at the end of this chapter, developing a strategy for engaging with multilateral organisations which contains a comprehensive vision of common goals and priorities can be an important element of effective partnerships with multilateral organisations. More policy documents are no guarantee of more effective use of the multilateral aid system. However, a well-articulated vision can help providers mainstream their goals and priorities with the administration and can help ensure that this is reflected in actual funding allocations. Furthermore, having a multilateral policy in place can increase transparency with respect to both multilateral partners and domestic constituencies. It can signal to the public that the portion of the official development assistance (ODA) budget being channelled multilaterally is carefully considered and monitored.

Box 5.2. Why multilateralism?

Evidence from DAC members’ responses to the “2018 OECD Survey on Policies and Practices vis-à-vis the Multilateral Development System”

Increasingly, what happens in one part of the world can affect the lives of distant people and places. We are interdependent and the fortunes of countries are increasingly intertwined. Global interdependence creates a need for collective action and international policy co-operation to achieve fundamental global public goods (GPGs). These include economic stability and development, peace and security, and environmental sustainability. To provide security, for instance, keeping peace at home is not enough: the cross-border impacts of conflict elsewhere1, transnational terrorist networks and the diffusion of deadly weaponry become concerns of each state.

When asked, in the 2018 OECD Survey, an open question regarding why they support the multilateral system, DAC countries acknowledged the need for collective action and for multilateral norms and standards to govern a peaceful and fair world. The most-cited reason was multilateral organisations’ role in setting and monitoring international norms and standards – including on gender, humanitarian and migration issues – needed to achieve peace, security and prosperity. Peace, security, and climate, were among the GPGs that respondent donors highlighted most often when describing comparative advantages of multilateral organisations. Further, respondents mentioned the relevance of multilateral organisations’ neutrality and impartiality, which gives them legitimacy on the global stage. They also stressed the importance of the convening power of multilateral organisations to tackle development challenges and to co-ordinate and leverage bilateral efforts to achieve the 2030 Agenda.

Another frequently cited reason for engaging with the multilateral development system is the ability of multilateral organisations to extend the reach of bilateral co-operation. Through their support to multilateral organisations, bilateral donors can help meet needs in countries where they do not have a bilateral presence. They can reach more risky contexts or contribute to sensitive situations where they do not have enough capacity or neutrality to operate. This is consistent with findings in (Dietrich, 2013[3]), which show that donors delegate more resources to international organisations when recipient countries are poorly governed. This is because these organisations are more likely to ensure that foreign aid achieves its intended outcome. Through support to multilateral organisations, bilateral donors can also contribute to larger and more complex programmes and operations. This is possible because multilateral organisations are able to combine multiple resources and contribute to larger-scale and more rapid interventions.

Some respondents also highlighted a greater effectiveness of multilateral channels compared to bilateral ones. They mainly cited the multilateral organisations’ broad range of expertise and knowledge, wider networks and the cost-effectiveness of their operations that results from economies of scale. The greater effectiveness of multilateral channels was first highlighted by Rodrik (Rodrik, 1995[4]) . It was further identified as a prompt for countries’ delegation to multilateral organisations for effective development by several authors [ (Winters, 2010[5]), (Dietrich, 2013[3]), (Dietrich and Joseph, 2015[6])]. Smaller donors, in particular, highlighted the importance of partnering with multilateral organisations in order to reach countries where they have limited diplomatic presence or little experience and expertise working, such as in least developed countries (LDCs) and fragile contexts.

1. https://www.cgdev.org/sites/default/files/more-mobilizing-less-lending-pragmatic-proposal-mdbs.pdf.

5.2. Decision making between inclusiveness and fragmentation

Who decides how much to allocate to the multilateral development system?

Decisions around ODA funding to multilateral organisations are generally centralised in one ministry or institution, primarily the Ministry of Foreign Affairs or the national development aid agency. Allocations to development banks, in contrast, are generally under the responsibility of the Ministry of Finance. Not all sovereign states adhere to this “concentrated model”, however. In some, like France and the United States, the responsibility for engaging with international organisations is more diffused among government departments.

Funds to be allocated as core contributions to multilateral organisations are usually approved by the parliament, as part of the endorsement of the ODA budget. This process was identified by most respondents to the 2018 OECD Survey (17 out of 21) as an occasion to explicitly discuss the balance between bilateral and multilateral ODA allocations within their governments. In addition, a few respondents highlighted that discussions on the split between bilateral and multilateral ODA allocations can also take place occasionally. For example, they might follow external reviews, such as the OECD DAC Peer Review. This is an opportunity to reconsider the strategic direction of the national portfolio on development co-operation. However, these discussions rarely consider the split between total funding to the multilateral development system (core plus earmarked) and bilateral ODA, or between core contributions and earmarked funding.

Almost all respondents to the 2018 OECD Survey reported that there were no legal or discretionary limits on their contributions to multilateral organisations beyond the limits of the overall ODA budget. These limits and the volume of multilateral allocations are decided by parliament through the annual budget approval process discussed above. Of course, however, contributions to multilateral organisations and the ODA budget are constrained by the overall national budget. Situations of public finance consolidation and public debt control therefore constrain contributions. These were explicitly mentioned by Greece, Spain and Slovenia in their survey responses.

In 2013, Germany lifted a cap that set its ODA allocations at two-thirds for bilateral and one-third for multilateral aid. This provision had been endorsed by parliament in 2006, and reaffirmed by the coalition agreement of the Federal Government in 2009. In 2018 France committed to a substantial increase in the ODA budget over 2018-22. It has decided to allocate two-thirds of the average increase of engagements cumulated in the 2018-2022 period bilaterally. France stated that the aim of this was to counter a progressive erosion in the bilateral-to-multilateral ratio of France’s ODA and to increase France’s ability to target its priority countries (Interministerial International Cooperation and Development Committee (CICID), 2018[7]).

Deciding how to allocate resources across multilateral organisations

How do sovereign states determine the resource allocation across multilateral organisations? Hundreds of multilateral organisations exist, some with distinct mandates and functions and some with a high degree of overlap with other institutions. Providers’ strategies to build a multilateral portfolio involve questions on the number of multilateral organisations to support; how much funding to contribute to each one beyond assessed contributions (i.e. the membership fees); what type of multilateral organisations to support, i.e. forum organisations (e.g. United Nations Conference on Trade and Development [UNCTAD]) versus service organisations (e.g. United Nations Development Programme [UNDP]); and finally in which ways to support multilateral organisations.

Responses to the 2018 OECD Survey suggest that such decisions are based on several considerations and sources of evidence. The most common factor DAC members (13 out of 21 respondents) cited is the alignment of a multilateral organisation’s mandate and agenda with the donor country’s development policy objectives. Another important factor, mentioned by 13 respondents, is the evaluation of the effectiveness and impact of the programmes of the multilateral organisation. Some DAC members highlighted that they draw such information from the Multilateral Organisation Performance Assessment Network (MOPAN) assessments.

More specifically, DAC members stated that they partner more with multilateral organisations that share the same priorities as donor bilateral aid programmes. This “revealed preference” is consistent with findings from recent research conducted on the financial contributions of 22 OECD countries to 12 multilateral organisations from 1970 to 2008 (Schneider and Tobin, 2016[8]). This study shows that countries tend to delegate more resources to those with higher levels of portfolio similarity. In addition, responses to the survey suggested that providers also prefer to partner with multilateral institutions that they perceive as having a significant positioning and comparative advantage in international development. Other relevant factors considered by DAC members are: the degree of relevance of the organisation’s mandate in global aid and the history of partnership between the organisation and the donor. In contrast, they little consider positive feedback shared by civil society or given by partner countries (Figure 5.2).

Figure 5.2. DAC members reveal they partner more with multilateral organisations that focus on the same priorities as their bilateral development programmes
picture

Source: OECD/DAC “2018 Survey on Policies and Practices vis-à-vis the Multilateral Development System” (unpublished).

 StatLink https://doi.org/10.1787/888933875055

Although the bulk of multilateral funding generally falls within the authority of one national entity, funding can be thinly spread across many extending agencies

While the bulk of multilateral funding is decided and provided by one ministry/institution, several more ministries and institutions extend ODA funds to multilateral organisations, and the total number is on the rise. In 2013-2016, 20 DAC countries extended 70% or more of all core contributions from one ministry or institution. At the same time, however, the number of DAC countries’ government agencies and ministries extending core funding increased from 125 during the period 2011-2013 to 140 during 2013-2016 (+12%). The total number of agencies extending earmarked funding went from 142 to 168 (+18%) over the same time period.1

These figures suggest that earmarked funding tends to be extended by a large number of ministries and agencies. This confirms that donor decision making on earmarked funding is largely scattered and decentralised among various departments and institutions (OECD, 2015[9]). Although the average number of agencies extending core funding (5) is approximately the same for earmarked funding (6), there is great degree of variation among DAC countries for earmarked funding (standard deviation of 3 for core, 4 for earmarked funding). Further, there seems to be a larger number of government entities that provide earmarked funding in an ad hoc and sporadic fashion: in 2013-16, 16 DAC countries had one or more agencies/ministries extending earmarked funding only once throughout the period, against 9 for core resources.

Spain and Germany are the DAC countries with the highest number of government agencies and ministries extending multilateral funding. Spain has 11 for core and 15 for earmarked funding; Germany has 12 for core, 14 for earmarked funding. At the other end of the spectrum, Luxembourg displays the most “consolidated” multilateral portfolio, as the Ministry of Foreign Affairs is the only national entity extending both core and earmarked funding. Luxembourg is followed by the Netherlands and New Zealand, which both have two government entities extending core resources and one providing earmarked funding.

This plurality of extending agencies and ministries is viewed differently across multilateral organisations. In informal consultations conducted for this report, some representatives of multilateral organisations suggested that this fragmented funding configuration reduces clarity over the overall objectives of the partnership with donor governments and thus diminishes its impact. In contrast, other multilateral organisations view this plurality more opportunistically, with more donor sources potentially meaning greater funding overall.

Table 5.1. The bulk of multilateral allocations is provided by one ministry or institution, but several ministries or institutions provide additional funding

DAC member

Core: number of extending agencies

Non-core: number of extending agencies

Core: share provided by the largest agency

Non-core: share provided by the largest agency

Australia

2

2

90%

Australian Government

99%

Australian Government

Austria

9

13

94%

Federal Ministry of Finance

46%

Federal Ministry of Finance

Belgium

6

6

55%

Directorate General for Co-operation and Development

86%

Directorate General for Co-operation and Development

Canada

5

6

58%

Global Affairs Canada

98%

Global Affairs Canada

Czech Republic

7

5

89%

Ministry of Finance

72%

Ministry of Foreign Affairs

Denmark

3

1

99%

Ministry of Foreign Affairs

100%

Ministry of Foreign Affairs

EU Institutions

2

3

56%

Commission of the European Communities

44%

European Investment Bank

Finland

2

2

74%

Ministry of Foreign Affairs

100%

Ministry of Foreign Affairs

France

5

8

34%

Government

51%

Ministry of Foreign Affairs

Germany

12

14

91%

Ministry for Economic cooperation and development

40%

Foreign Office

Greece

13

7

92%

Ministry of Finance

75%

Ministry of Finance

Hungary

7

8

43%

Ministry for National Economy

48%

Miscellaneous

Iceland

2

3

97%

Ministry of Foreign Affairs

86%

Ministry of Foreign Affairs

Ireland

4

3

40%

Miscellaneous

98%

Department of Foreign Affairs

Italy

4

6

63%

Central Administration

59%

Directorate General for Development Co-operation

Japan

5

5

64%

Other Ministries

73%

Ministry of Foreign Affairs

Korea

4

4

50%

Ministry of Strategy and Finance

63%

Ministry of Foreign Affairs and Trade

Luxembourg

1

1

100%

Ministry of Foreign Affairs

100%

Ministry of Foreign Affairs

Netherlands

2

1

84%

Ministry of Foreign Affairs

100%

Ministry of Foreign Affairs

New Zealand

2

1

97%

Ministry of Foreign Affairs and Trade

100%

Ministry of Foreign Affairs and Trade

Norway

2

5

98%

Ministry of Foreign Affairs

84%

Ministry of Foreign Affairs

Poland

6

6

79%

Ministry of Finance

89%

Ministry of Foreign Affairs

Portugal

2

3

100%

Government

88%

Government

Slovak Republic

6

4

91%

Ministry of Finance

50%

Ministry of Foreign and European Affairs

Slovenia

5

5

74%

Ministry of Finance

41%

Miscellaneous

Spain

11

15

74%

Ministry of Public Administration

63%

Spanish Agency for International Development Co-operation

Sweden

2

11

98%

Ministry of Foreign Affairs

92%

Swedish International Development Authority

Switzerland

4

4

87%

Swiss Agency for Development and Co-operation

61%

Swiss Agency for Development and Co-operation

United Kingdom

9

11

82%

Department for International Development

88%

Department for International Development

United States

3

13

48%

Department of Treasury

60%

Agency for International Development

Average

5

6

77%

75%

Note: Sum of funding in 2013-2016. The “number of extending agencies” refers to the number of agencies that have extended multilateral funding at least once over the period 2013-2016.

Source: Authors' calculations based on (OECD, 2018[10]), “Creditor Reporting System” (database), https://stats.oecd.org/Index.aspx?DataSetCode=crs1.

 StatLink https://doi.org/10.1787/888933875074

When asked about how they ensure co-ordination and coherence of their multilateral portfolio among national entities, respondents were not explicit about the challenges or opportunities entailed by a plurality of extending agencies. Responses suggest that co-ordination takes place differently among DAC members. Some respondents indicated the Ministry of Foreign Affairs was in charge of co-ordination with other ministries. Other DAC countries, such as Italy, Portugal and Spain, stated that they have established inter-ministerial committees to ensure co-ordination. Responses suggest, overall, that co-ordination mostly takes place through regular exchanges of information and meetings. Several respondents also indicated that differences exist in terms of co-ordination mechanisms concerning core and earmarked resources. For instance, France highlighted that some earmarked contributions, such as programmed food aid, are decided by ad hoc committees that involve the concerned ministries (e.g. Ministry of Agriculture).

A positive development is that, increasingly, discussions on multilateral ODA are held by participatory bodies, although these bodies only have an advisory role. In their Survey responses, seven DAC members indicated that they have set up inter-ministerial committees or commissions with an advisory role on the scope of multilateral engagement and other aid-related topics. These generally involve the Ministry of Foreign Affairs and the Ministry of Finance, but can also include a broader range of actors. For instance, Korea’s major ODA policies, including those relating to multilateral aid, are decided by the Committee for International Development Cooperation, which is composed of 25 members including the prime minister, ministers of related ministries, heads of ODA implementing agencies and civilian experts. This committee holds meetings approximately three times a year to deliberate and decide upon the framework plans and annual comprehensive implementation plans and evaluate the ODA policies. Spain decides the scope of the multilateral aid portfolio within the Ministry of Foreign Affairs and the Spanish Agency for International Cooperation and Development. It also holds regular discussions on the balance between bilateral and multilateral ODA within the Inter-Ministerial and Inter Territorial Commissions for International Cooperation, comprising regions and local governments, and within the Council for Cooperation, which includes a broader range of actors.

5.3. Monitoring and accountability practices to ensure impact of resources allocated multilaterally

A proliferation of bilateral assessments of multilateral organisations decreases slightly

The increased public scrutiny of aid budgets and the budget constraints faced by several OECD countries in recent years have indeed pushed donors to request greater transparency and accountability from multilateral organisations. Bilateral providers have a responsibility to ensure that public resources are well spent when allocated to multilateral organisations, these trends have unfortunately encouraged a proliferation of bilateral assessments that often did not produce the intended benefits. In most cases, it was found that multilateral organisations were not informed of the criteria against which they were being assessed. In addition, the outcomes of assessments were often not shared with the multilateral organisations upon completion. A lack of transparency on methodologies, outcomes and implications of these assessments, therefore reduced opportunities for learning and for performance enhancement. These assessments also failed to inform discussions with the broader membership of the reviewed organisation on reforms needed to perform better. In addition, the transaction costs associated with providing primary data to numerous consultants for these assessments can be high and drain substantial resources away from multilateral organisations’ core activities. Further, it often remains unclear how the donors conducting these assessments use them internally. Limited evidence is available on the impacts of these assessments on the behaviour of the donors, including in terms of funding decisions.

New data drawn from the 2018 OECD Survey highlight that the number of bilateral assessments and reviews of multilateral organisations remains high, totalling 128 in 2015-18. This, however, represents an encouraging decrease from the 202 figure for the 2011-2014 period (which covers the same respondents). According to responses to the 2018 OECD Survey, over the 2011-18 period, ten DAC members conducted bilateral assessments of multilateral assessments, slightly more than half of all respondents. It is positive that two respondents to the survey, one a MOPAN member (Canada) and one a non-MOPAN member (Spain), explicitly stated that they do not conduct bilateral assessments as they relied on MOPAN’s reviews (Table 5.2).

Table 5.2. The number of bilateral assessments of multilateral organisations conducted by DAC members remains high

2011

2012

2013

2014

2015

2016

2017

2018

Number of DAC members that conducted at least one assessment

(out of the 21 respondents to the 2018 OECD/DAC Survey)

4

2

2

5

4

4

5

5

Number of bilateral assessments conducted

87

45

30

40

30

14

35

49

Source: Author’s calculations based on responses to the OECD/DAC “2018 Survey on Policies and Practices vis-à-vis the Multilateral Development System” (unpublished).

 StatLink https://doi.org/10.1787/888933875093

There is wide variation in the scope and depth, as well as methodology, of assessments carried out by DAC members

Many bilateral assessments are essentially desk reviews that rely heavily on secondary sources, but some do imply the collection of primary data and impose high transaction-costs on multilateral organisations. These differences may not be fully captured in the overall trends above. However, bilateral corporate reviews of multilateral organisations are relatively similar in substance, looking at some variation of two themes: how well an organisation is performing and how well its work is aligned to national objectives, compares to bilateral interventions, or otherwise fulfils national priorities.

For instance, in 2012, the Australian Department of Foreign Affairs and Trade carried out the Australian Multilateral Assessment. This was a major review assessing the performance and effectiveness of Australia’s main multilateral partners, in order to inform decisions on future funding allocations. This review used both primary and secondary data and assessed 42 multilateral organisations, comprising the UN system, MDBs and vertical funds. It is positive that in 2015 Australia introduced the Australian Multilateral Performance Assessment (MPA) process. This allows for more contained and streamlined assessments that primarily draw on secondary sources, such as the MOPAN assessments. Therefore, with the MPA, Australia has reduced the burden imposed on multilateral organisations, while still allowing the performance of Australia’s key multilateral partners to be assessed. This informs Australia’s partnership engagement with key multilateral organisations, including budget decisions on voluntary core funding.

The United Kingdom has been a frontrunner in the development of a comprehensive framework for the assessment of multilateral organisations, the Multilateral Aid Review. The Multilateral Aid Review was put in place in the context of increasing levels of United Kingdom’s aid spending. It was part of the aim to meet the government’s pledge to reach the UN target of 0.7% of GNI ODA as by 2013 (which it successfully met). The Multilateral Aid Review was launched in 2011 and assessed the performance of 43 organisations, ranging from IFIs and MDBs to UN specialised agencies and humanitarian organisations. The outcomes of these assessments have affected the United Kingdom’s funding decisions. Following the 2011 Review, the United Kingdom discontinued core contributions to six of the nine organisations that were assessed as “poor value for money”.

An update of the Multilateral Aid Review was published in 2013 and a new full cycle was conducted in 2016 (entitled “Raising the standard: the Multilateral Development Review”). The 2016 Review examined every agency that receives more than GBP 1 million of annual core funding from the Department for International Development (DFID), making 38 in total. It considered two indices: how their work “aligned with UK development and humanitarian objectives”; and their “organisational strengths”. The United Kingdom’s Multilateral Aid Review, in contrast to its peers, does provide some indication of its methodology of the outcomes and the implications of the assessments, and some organisations have pointed out that these reviews have led to fruitful internal reflections on performance weaknesses and strengths. Multilateral organisations have a clear incentive to implement the Review’s recommendations so as not to lose United Kingdom funding. However, some multilateral organisations have stated that there were tensions between some of the assessment’s recommendations and the priorities for change expressed by the broader membership through the governing board.

At the end of 2017, the United States introduced the Multilateral Aid Review Act. The bill to establish regular evaluations of the effectiveness of multilateral institutions had bipartisan support. These evaluations would be supported by the United States, i.e. the Multilateral Aid Reviews (MARs). The stated purpose of these reviews is to publicly assess the value of the United States’ Government investments in multilateral entities to: 1) guide United States’ decision making and prioritisation with regard to funding multilateral entities and provide a methodological basis for allocating scarce budgetary resources to entities that advance relevant United States’ foreign policy objectives; 2) incentivise improvements in the performance of multilateral entities to achieve better outcomes on the ground in developing, fragile, and crisis-afflicted regions; and 3) protect United States’ taxpayer investments in foreign assistance by improving transparency with regard to the funding of multilateral entities. The MARs will be conducted by a United States’ interagency task force (chaired by the Secretary of State or a senior official and with members chosen by the President), and a peer review group with eight volunteer NGO members appointed by senate and house majority and minority leaders. The bill specifies 38 multilateral institutions to be reviewed, including the World Bank and several entities within the UN. The review will create an assessment scorecard to determine the effectiveness of institutions, programmes and aid. Grades will be based on the relationship between stated goals and actual results, whether institutions have responsible management, the accountability and transparency of institutions, alignment of institutions with United States’ foreign policy objectives, whether a multilateral or bilateral approach would be more effective and whether there are any redundancies or overlaps between institutions or programmes.

The United States’ MAR could be a powerful instrument to maintain strong engagement by the United States in the multilateral sphere. It could strengthen United States’ support for organisations promoting development world wide, based on principles of transparency and effectiveness. At the same time, however, it is important that this review applies the lessons learnt through other assessments. Its objectives should be twofold: meeting domestic need for greater transparency and accountability, and strengthening the “multilateral character” of organisations, by reinforcing the multilateral accountability mechanisms of these organisations. The proposed criteria by which an organisation would be assessed covers alignment to national interest as well as more general organisational performance. In the latter, there is substantial overlap with existing efforts, by for instance MOPAN, and so it is critical that the methodology used would explicitly avoid duplication by relying on existing data wherever possible and focus resources on issues best examined through a bilateral exercise.

Bilateral assessments can be powerful instruments to achieve strong multilateral engagement based on principles of transparency and effectiveness, but they should focus on where they add value and avoid duplicating work done by multilateral efforts like MOPAN. This means concentrating on the national perspective and relying heavily on secondary data collection and existing assessments for questions of organisational performance and results.

Multilateral assessments – such as MOPAN assessments - can lead to more cost-effective accountability and performance improvements

MOPAN was launched in 2002, through a network of like-minded donor country members, for monitoring the performance of multilateral development organisations. Recently, MOPAN has taken important steps to become more ambitious and professional, adopting a refined assessment approach, and establishing a permanent Secretariat, hosted by the OECD since 2013. The latest set of revisions to MOPAN’s methodology were significant in their scope and potential impact. They expanded the range of organisations assessed, allowed more data to be collected from more partners and focused on the relevance, efficiency, effectiveness and impact of the development programmes. MOPAN assessments also avoid the pitfalls of many bilateral exercises, emphasising transparency, collaboration and learning through the assessment process.

The 2018 OECD Survey indicates a strong reliance by DAC members on MOPAN assessments to evaluate multilateral organisations’ performance and to inform their engagement with multilateral institutions. For instance, it is extremely positive that, since 2017, Sweden no longer conducts bilateral assessments and exclusively relies on MOPAN assessments. Research conducted by MOPAN also finds evidence that donors are increasingly either replacing or scaling back their bilateral exercises as their needs are increasingly met by MOPAN in terms volume, methodology and substance.

The large costs arising from the proliferation of bilateral assessments and the optimisation of resources using MOPAN joint assessments suggest that increased reliance on MOPAN could lead to more cost effective accountability. It could also encourage a dialogue between donors and multilateral organisations on how to improve performance. While MOPAN assessments are not meant to be granular at the project level and should not capture alignment to specific national priorities, donors should maximise the degree to which MOPAN meets their needs in terms of which organisations are assessed and to what frequency. This savings would allow bilateral assessments/reviews to focus on the areas where they add value, i.e. the national fit and alignment. There is a particular opportunity for MOPAN members to ensure that the instrument further meet their needs as MOPAN is entering a new strategic cycle in 2020.

5.4. Lessons for good multilateral donorship in the era of the 2030 Agenda: policies, decision-making processes and monitoring practices

This chapter has illustrated how sovereign states articulate their engagement with multilateral organisations in policy documents, in the internal architecture of decision making, and through accountability measures for ensuring impact of multilateral allocations. The following section reviews how the policies, decision-making processes and monitoring practices of sovereign states need to evolve to support effective multilateral development co-operation to achieve the 2030 Agenda. These elements, summarised in Figure 5.4, provide building blocks for the principles of good multilateral donorship presented in the overview chapter.

1) Define the expected outcomes and modalities for engaging with multilateral organisations in light of an inclusive whole-of-government dialogue open to non-state actors and to relevant stakeholders

The integrated nature of the 2030 Agenda calls for progress on social, economic and environmental dimensions to achieve sustainability. This will require a broader range of partners to contribute expertise and resources towards the achievement of these ambitions. Although the Ministry of Foreign Affairs generally has responsibility for engagement with multilateral development organisations, line ministries could establish direct partnerships with relevant international institutions to advance specific SDGs. To provide integrated solutions and approaches to managing policy trade-offs, line ministries could increasingly be called upon to work together and collaborate with multilateral organisations to promote sustainable development. For these reasons, it will be important to encourage whole-of-government strategic thinking on the expected outcomes and modalities for engaging with multilateral organisations. As non-state actors are also called upon to contribute to the 2030 Agenda, it is important that countries find ways to transform their inputs into coherent partnerships.

The examples offered by some DAC members on participatory bodies and fora where discussions on multilateral ODA are held (section 5.2.) provide good practices. Sovereign states can explore and adapt these to the state’s specific contexts. Discussions on the balance between bilateral and multilateral ODA will specifically need to be encouraged in these contexts. This will clarify the objectives and scope of multilateral engagement and encourage a cohesive use of the multilateral co-operation system.

These discussions are central to the development of clear, evidence-based policy documents and guidelines on partnerships with multilateral organisations. Section 5.1. illustrated that DAC members articulate their engagement with multilateral organisations in a range of policy documents. It is thus critical to ensure that these policy documents incorporate the outcomes of discussions with the range of actors engaging with multilateral organisations. These policy documents also need to build on evidence, provide clarity and transparency and establish a basis for guidelines. Policy documents can help providers mainstream their goals and priorities throughout the administration and ensure that these are reflected in actual funding allocations.

2) Establish adequate co-ordination and accountability mechanisms to ensure a responsible and coherent whole-of-government approach to engagement with multilateral organisations

As documented in section 5.2, the Ministry of Foreign Affairs is usually responsible for engagement with multilateral organisations on development co-operation matters. Several donor ministries and institutions, however, do extend funding to multilateral organisations. The allocation of earmarked resources is generally even more scattered, owing to the decentralised and more ad hoc nature of this kind of funding.

A plurality of entities extending funding is not necessarily bad and it may be needed to harness expertise and resources from a broader range of partners in support of the 2030 Agenda. However, uncoordinated funding from many different donor interfaces – such as different ministries and institutions – can reduce overall coherence and strategic focus. It can also weaken the continuity, transparency and trust required for effective partnerships. Therefore, sovereign states need to encourage effective co-ordination mechanisms to maximise the benefits of engaging many donor entities, while minimising fragmentation and duplication costs.

Besides co-ordination and coherence among different actors, it is critical to ensure adequate communication and coherence at different levels within the administration. When asked about how the quality and effectiveness of partnerships with multilateral organisations could be enhanced, all respondents to the 2018 Survey highlighted effective communication and coherence in donor-multilateral organisation relations at all levels: country, headquarters and governing boards.

3) Establish cost-effective monitoring and accountability processes

Sovereign states need to ensure that scarce public resources are spent effectively. This necessitates processes and mechanisms to monitor the effectiveness of multilateral spending and ensure accountability. At the same time, the analysis in section 5.3 highlighted a proliferation of bilateral assessments that impose high transaction costs on organisations. These assessments often fail to achieve both greater performance-based donor allocations and greater effectiveness of the multilateral organisations. When conducted by large funders requesting specific improvements, these risk creating a parallel track of reforms that may diverge from the orientations of the full membership. This can create tensions that erode the multilateral accountability frameworks of the organisation. Concerns have also been raised over the risk that new bilateral assessments may be used to undermine the case for multilateralism (Scott, 2017[11]). To guard against this risk, Scott (2017) suggests: 1) reviewing both bilateral and multilateral aid (but recognising the impracticality of like-to-like comparisons); and 2) establishing an ex-ante policy commitment to devote a share of United States’ assistance to multilateral channels.

Sovereign states need to put accountability mechanisms in place for their multilateral spending that: do not impose excessive burdens on multilateral organisations and allow a constructive dialogue on performance through multilateral accountability mechanisms internal to the multilateral organisations. In particular, sovereign states and other concerned stakeholders should consider to:

  • Use executive boards’ discussions to encourage changes that will improve the performance of multilateral organisations. Donors should use the findings of their bilateral reviews to engage the membership in discussion on performance to strengthen the evidence base for the board’s decisions on reforms.

  • Rely on existing sources for their bilateral assessments to the maximum extent possible. Donors should support jointly, through governing bodies, independent evaluation units, enabling them to provide the primary information donors need for their assessments. Donors should make either the totality or parts of their bilateral assessments publicly available, in order to provide useful information for other donors’ reviews.

Ultimately, sovereign states and other contributors will need to move away from project-by-project controls to programmatic and strategic guidance. An important step is to develop better results frameworks that could be aggregated over the system to identify gaps.

4) Understand and tackling systemic gaps and overlaps and to encourage multilateral organisations to work better as a system

Good multilateral donorship requires efforts to understand and tackle systemic gaps and overlaps and to encourage multilateral organisations to work better as a system. In this respect, the G20 Eminent Persons Group on global economic governance represents a positive start. It has called on the MDBs to collaborate more closely on “principles, procedures, and country platforms” and to work more “as a system”.

There is a need, however, to intensify these efforts. The adoption of harmonised working practices to reduce the burden on developing countries should be promoted. This is not enough yet. A reflection is needed on whether, on the basis of their mandates and relative comparative advantages, imbalances exist across multilateral institutions – in terms of their financial capacity and functions – and if gaps exist in the delivery of results for the new integrated sustainable development agenda.

The Global Action Plan for SDG3 could provide, in this respect, a positive example. This Global Action Plan is consistent with the current Quadrennial Comprehensive Policy Review (QCPR) and UN reform, and could be extended to other SDGs and areas. This Global Action Plan aims to align the programme budget of institutions with a mandate on health and encourage a smart and effective collaboration across these multilateral institutions and other relevant partners. It defines the strategic priorities what each institution needs to achieve to effectively contribute to SDG 3. This could, in turn, guide the distribution of donor resources among these institutions. What would matter, then, would be that each player is adequately funded to deliver its contribution to the SDG 3 and that, together, the world meets the SDGs. This could be accompanied by monitoring frameworks that aggregate results of institutions to identify gaps (as discussed above). This approach could be complemented by country platforms that identify projects, and pool funds and expertise from multilateral institutions and other stakeholders.

Finally, while this chapter identified building blocks of good donorship that are valid for all multilateral organisations, good multilateral donorship may require specific actions for specific multilateral institutions. Box 5.3 highlights elements from recent research on what good donorship may mean in the context of MDBs for the achievement of greener infrastructure.

Box 5.3. Donor shareholders’ role in promoting environmental risk management in multilateral development banks

The way infrastructure is built in the next ten years will determine whether developing countries achieve economic and development gains through more sustainable development pathways. Multilateral development banks (MDBs) – the World Bank and the regional development banks - are critical actors in this regard, helping to support project pipelines and affect the needed policy reform. At the same time, many large-scale infrastructure development projects continue to be associated with significant environmental and social impacts, such as the degradation of natural capital and biodiversity, air and water pollution, greenhouse gas emissions, involuntary resettlement of communities and impacts on indigenous peoples, among others. MDBs have put in place environmental and social safeguard systems to minimise the impacts of their projects on the environment. However, these systems often come under pressure due to the perceived delays they may cause.

Donor shareholder governments, i.e. those that provide finance but are not eligible for finance themselves, play an important role in supporting MDBs to better implement their safeguards systems and minimise potential negative impacts. Donor shareholders support MDBs in mainstreaming environmental issues into their projects and portfolios through the provision of concessional finance targeted at different themes. They engage with MDBs on environmental issues:

  • at a strategic level (on policy) by reviewing environmental policies and strategies of the banks;

  • at an operational level (on projects) by reviewing individual MDB projects when they are presented to boards for discussion.

The survey of OECD DAC members demonstrated that the way donor shareholders engage with MDBs on safeguard issues varies significantly across members. Some members engage in detailed project review and others engage only in certain cases. While project-level review can be resource intensive for donor countries, they can act as an added layer of accountability, and strengthen safeguards for a project. Going forward, working together, across ministries and even across countries, to share information on projects could help focal agencies engaging with development banks and development finance institutions (DFIs) to better understand the risks of projects.

Figure 5.3. DAC member engagement in the review of environmental impact of policies and projects of MDBs
picture

Note: This figure is based on survey responses from 20 OECD DAC members.

Source: (Crishna Morgado, forthcoming[12]), “Promoting environmental safeguards in development banks and development finance institutions (DFIs) – what role for donor shareholders?”

 StatLink https://doi.org/10.1787/888933875112

Figure 5.4. Summary of recommendations
picture

Note: Numbers in the puzzle pieces indicate the recommendations in section 1.4.

Source: Authors

References

[1] Australian Government, Department of Foreign Affairs and Trade (2015), Health for Development Strategy, https://dfat.gov.au/about-us/publications/Documents/health-for-development-strategy-2015-2020.PDF.

[2] Austrian Federal Ministry of Finance (2015), Strategic Guidelines of the Federal Ministry of Finance for International Financial Institutions, https://www.bmf.gv.at/wirtschaftspolitik/int-finanzinstitutionen/Strategischer_Leitfaden_IFI_EN_.pdf?67ry3z.

[12] Crishna Morgado, N. (forthcoming), Promoting environmental safeguards in development banks and development finance institutions (DFIs) – what role for donor shareholders?, OECD, Paris.

[3] Dietrich, S. (2013), “DIEBypass or Engage? Explaining Donor Delivery Tactics in Aid Allocation”, International Studies Quarterly , Vol. 57(4), pp. 698–712., https://onlinelibrary.wiley.com/doi/abs/10.1111/isqu.12041.

[6] Dietrich, S. and W. Joseph (2015), “Foreign Aid Allocation”, Journal of Politics, Vol. 77/1, pp. 216–34, https://www.journals.uchicago.edu/doi/abs/10.1086/678976.

[7] Interministerial International Cooperation and Development Committee (CICID) (2018), Statement of conclusions, https://www.diplomatie.gouv.fr/IMG/pdf/18-0495-2018.02.08_cicid_releve_de_conclusions_global_-_final_revue_elysee_cle833ba2.pdf.

[10] OECD (2018), Creditor Reporting Sytem, OECD, Paris, https://stats.oecd.org/Index.aspx?DataSetCode=crs1.

[9] OECD (2015), Multilateral Aid 2015: Better Partnerships for a Post-2015 World, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264235212-en.

[4] Rodrik, D. (1995), “Why Is There Multilateral Lending?”, NBERG Working Papers, http://www.nber.org/papers/w5160.

[8] Schneider, C. and J. Tobin (2016), “Portfolio imilarity and international development aid”, International Studies Quarterly, Vol. 60 (4), pp. 647-664.

[11] Scott, M. (2017), Congress Wants to Take a Closer Look at Multilateral Institutions, https://www.cgdev.org/blog/congress-wants-take-closer-look-multilateral-institutions.

[5] Winters, M. (2010), “Choosing to Target: What Types of Countries”, World Politics , Vol. 62/3 , pp. pp. 422-458, https://cepesp.files.wordpress.com/2012/08/choosing-to-target-what-types-of-countries-get-different-types-of-world-bank-projects.pdf.

Note

← 1. These totals exclude Hungary, to allow comparison between 2011-2013 and 2013-2016.

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