Paris: This fourth DAC Report on Multilateral Aid examines recent trends in multilateral ODA and aid channelled through the multilateral system; provides an overview of fragmented country programmable aid; analyses different approaches adopted by donors in assessing multilateral organisations; and finally proposes ideas for guiding principles and guidelines to limit the proliferation of these channels.

Trends in multilateral aid

2. The level of donor investment in the multilateral system increased to USD 38 billion in 2011, likely leading to an increase in the subsequent outflows from the multilateral system to partner countries in 2012. Despite a 2.7% overall decrease in ODA in 2011 for the first time since 1997, multilateral ODA – or DAC members’ un-earmarked contributions to multilateral agencies – increased by 1% in real terms. On the other hand, since 2007 the multilateral share of ODA has levelled off to 28% from a high of 32% in 2001.

Along with slowing overall growth in gross ODA, annual growth rates of multilateral ODA have decelerated in recent years, from 9% in 2008 to 5% in 2010 and down to only 1% in 2011. In 2010, contributions to EU institutions accounted for the largest share (35%) of DAC members’ multilateral ODA (USD 13.2 billion).

3. In 2010, USD 37.6 billion was spent to fund multilateral agencies’ core functions. An additional 12% of total ODA (USD 16.7 billion), though scored as bilateral, was earmarked, channelled through and implemented by multilateral agencies in 2010 (referred to as “non-core” or “multi-bi” aid). Of the multi-bi aid allocated to specific countries, well over half goes to the poorest and most fragile countries. Taken together, the total use of the multilateral system (core and non-core) accounted for 40% of gross ODA, or USD 54.3 billion in 2010 compared to USD 51.2 billion in 2009.

Twenty-one countries that are not members of the DAC reported their 2010 aid flows to the DAC: the most recent country to report to the DAC is the Russian Federation. China, Brazil and India do not report aid data to the DAC, but China’s 2010 contributions to international organisations is highlighted.

Fragmentation of efforts

4. Fragmentation stems mostly from bilateral sources; however, multilateral agencies together represent over one-third of the resource outflows at the global level and are also beginning to contribute to the global fragmentation picture. Two out every five donor-partner country relations are not financially significant. The fragmentation analysis finds that multi-bi aid also contributes to fragmentation and may complicate fragmentation on the ground. Of course, increasing disbursements where aid relations are “non significant” may neither be relevant, desirable or possible. What is clear is that the motivation and rationale in providing multi-bi funding should be given careful consideration.

Assessments of multilateral organisations

5. A number of important bilateral and joint assessments of multilateral organisations have taken place in the past year: Australia’s Multilateral Assessment (2012); Denmark’s Analysis of its Engagement in Multilateral Organisations (2012); Sweden’s Organisational Assessments (2011); Dutch Scorecards of DCD/DAC(2012) Multilateral Organisations (2011); the United Kingdom’s Multilateral Aid Review (2011); and finally results from the annual Multilateral Organisation Performance Assessment Network (MOPAN).

6. The most comprehensive reviews (Australia, Sweden, the Netherlands, the United Kingdom and MOPAN) have many common criteria, including the strategic management and capacity to “manage for results”; benchmarks as the MDGs and poverty reduction objectives; consideration of the fit-for-purpose of human resource policies for optimal organisational and operational effectiveness; measuring the impact of an organisation through an evaluation function; assessing an organisation’s financial accountability and how closely it operates within its mandate and in line with international commitments; and finally, assessing the partnership behaviour of multilateral agencies.

7. As the different models of decision making imply, in order for the assessments to influence policy, they need to coincide with a range of other factors including appropriate timing and political will.

While it is true that there can be a political dimension to the assessments and to the demand for evidence, there is a strong degree of convergence in the different criteria adopted by the different reviews and assessments. Enhancing existing assessments rather than promoting comprehensive bilateral assessments will help ensure that organisations are also assessed against collective objectives. While there is certainly a domestic accountability dimension to these assessments, mutual and international accountability requires also placing an emphasis on the evidence from clients or “end-users” of the multilateral system.

Guiding principles to limit the proliferation of channels

8. The emerging principles from the analysis in this report play out on different levels:

(1) For bilateral donors in their headquarters interaction with multilateral agencies:

*  Avoid setting up new funds unless they respond to a compelling need. Do not duplicate, or compete with, existing organisational mandates and programmes; (create checklist for “thinking twice”)

*  Within government, establish coherence in decisions on what multilateral activities to fund (more detail in the 8 DAC Good Practice Principles on Multilateral Donorship)

*  Where possible, consolidate multilateral organisations, funds and initiatives and use existing coordination mechanisms within the multilateral systems.

(2) Organisational effectiveness of multilateral organisations:

*  Continue to work within the DAC membership and with multilateral partners to develop more coherent approaches to assess multilateral effectiveness and build on existing frameworks to stem the further proliferation of assessments of multilateral organisations.

*  Place greater emphasis on assessing the suitability of multilateral organisations’ funding, policies, mechanisms and instruments for partner countries, where possible. Where this is irrelevant for a particular fund or organisation, agree on a framework that can measure an organisation’s effectiveness.

*  Agree on a systematic method to internalise the results of multilateral assessments more regularly within formal and informal decision-making processes, and know key levers for change.

(3) For the effective delivery of multilateral aid:

*  Support efforts to co-ordinate multilateral operations at partner country level (including reporting, analyses, strategies, missions, and capacity development) and to respect the five Principles of Aid Effectiveness, in particular allowing partner governments to own development efforts.

*  Ensure such efforts have the necessary support structures at headquarters.

(4) For country-level harmonisation between bi- and multilateral donors:

*  Bilateral and multilateral donors participate actively in multi-donor co-ordination mechanisms and engage in common procedures for programming, supporting government-led processes.

• Executive summary to: 2012 DAC report on multilateral aid, OECD, dated 20 July 2012.  The 86 page report can be accessed here.
• Related reading:  BACKGROUND REPORT FOR THE OECD STRATEGY ON DEVELOPMENT, OECD, dated 20 July 2012.  The 59 page report can be accessed here.