A tool for Australia’s aid review - "QuODA"

3 February 2011

by Nancy Birdsall, President and Rita Perakis, program coordinator, Center for Global Development in Washington 

What does the Quality of Official Development Assistance (QuODA) Assessment, a joint publication of the Center for Global Development (CGD) and the Brookings Institution, suggest would make Australian aid more effective? You can find out for yourself on the CGD website above; below we dig a bit deeper into a few of QuODA’s findings. 

QuODA builds on past work done in aid effectiveness to identify concrete and quantifiable indicators of aid quality as the basis for a comprehensive, data-driven measure of how donors perform. In our country-level analysis, Australia is one of 23 DAC member country donors and there are also 8 major multilateral organisations (World Bank, the Asian Development Bank, etc). The assessment is based on 30 indicators that comprise 4 dimensions of aid quality:

  1. Maximizing Efficiency
  2. Fostering Institutions
  3. Reducing Burden; and
  4. Transparency and Learning  

Indicators were chosen based on a general consensus of what constitutes “effective aid” – mainly from academic literature or from the principles articulated in the Paris Declaration and Accra Agenda for Action (more info here). 

Australia is the top performer, on the Transparency and Learning dimension, but is 14th out of 31 on Reducing Burden, 19th on Fostering Institutions, and 21st on Maximizing Efficiency. Low scores on certain indicators, particularly in the Maximizing Efficiency dimension, point to areas that can be – or already are – targeted for improvement. 

For example, Australia has a relatively low score on the indicator 'Specialization by sector'. This indicator rewards a donor’s focus on sectors where that donor has a revealed comparative advantage (i.e. where the proportion of all its aid going to that sector is above the average of other donors’ proportions of all their aid), or put another way, a donor’s readiness to avoid being a minor player in sectors where other donors are already specialized. The Global Fund does well because it is obviously specialized but so does the Asian Development Fund – a major player in almost all the sectors where it is active. In 2008, Australia reported to the DAC Creditor Reporting System aid allocated to 31 different sectors, in only 11 of which it had a revealed comparative advantage. Australia is a major player in basic education and in government and civil society programs, for example, but a minor player in water supply and sanitation and business and other services. Aid to the  20 sectors in which Australia is a small player took up almost 30 percent of all its aid in 2008; in comparison, the Asian Development Bank put only 6 percent of its aid in the sectors where it is a small player, and Portugal, the best performing bilateral on this indicator, only 9 percent.

Australia performs better on the indicator 'Specialization by recipient country', one of the more controversial aspects of the aid review, as noted by Jenny and Stephen in their blog posts from last week. Australia allocates a healthy 88 percent of its aid to countries where it has a revealed comparative advantage (including the Pacific Islands, Indonesia, Cambodia, Laos and China). That is a higher percentage than such other large bilaterals as Canada, Norway and Sweden. It scores below only the regional multilateral banks whose borrowers are limited to their members of course, and a few smaller bilaterals such as Portugal and Ireland. Australia allocates aid to a number of African and Middle Eastern countries in which it does not have a comparative advantage; it has a presence, but not a comparative advantage in several other Asian countries, including Vietnam, Thailand, and Malaysia.

Many donors are working to increase their focus by sector or country as they face shrinking or stagnant aid budgets. In light of its increasing program budget, but presumably with some pressure to minimise its non-program costs, Australia could consider more co-financing with other donors (at lower administrative costs) outside of the Asian countries, and could propose to other bilateral donors that they rely more, including through co-financing, on AusAid in countries in Asia where Australia is a major donor. A similar strategy is even more important to consider across sectors, where Australia appears less specialized in general compared to other donors. 

Australia also had low scores on its 'Support of select global public good facilities' (under the category Maximizing Efficiency) and 'Contribution to multilaterals' (under Reducing Burden). Global public goods are often underfunded because donor countries do not have strong political incentives to support them. Our assessment rewards those donors that do contribute to these public goods, including the Advance Market Commitments for Vaccines, Extractive Industries Transparency Initiative Multi-Donor Trust Fund, and Montreal Protocol Fund (see our report for a full list).  (QuODA calculates the portion of ODA that is channeled through core support to multilateral agencies, excluding funds earmarked for certain countries or sectors. The DAC (grouping of country donor members) notes that Australia has one of the highest shares of 'non-core' or earmarked funding among member countries). Multilaterals perform better than bilaterals in QuODA, so more aid going through multilaterals would imply better aid overall.

Some notes to keep in mind when exploring QuODA: our numbers are based on 2008 data, the most recently available at the time of publication, and the snapshot of Australian aid might look a little different today. We will be updating QuODA later in the year and hope that it can provide a benchmark for agencies like AusAID to track their progress over time. Since we still consider QuODA to be a work in progress, we are also open to feedback to ensure that QuODA will be a useful tool in development policy-making.

Comments

3/16/2011 11:44:58 PM #
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