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Making Aid Accountable and Effective in Vietnam Workshop for Elective Members on Supervising Aid Hanoi, October 2007
Aid in Vietnam • Vietnam is a large recipient of aid and much of this aid has been used to benefit the Vietnamese people • Vietnam is also well known for its strong aid management and coherent development strategy • However, some donors are still not providing aid as effectively as they could be • Some aid aims to meet donor priorities not those of the Vietnamese people • Donors are not held accountable • Key objectives • More ‘real aid’ which benefits Vietnam • More accountable aid
What is Real Aid? • Real Aid = money that is genuinely available for national development • Real Aid = Official Development Assistance (ODA) minus ‘phantom aid’ • Phantom Aid: • Aid not targeted at poverty reduction • Debt repayments and aid counted as debt relief • Aid spent on overpriced and ineffective Technical Assistance • Tied aid • Poorly co-ordinated aid
Phantom Aid 1: Poorly targeted aid • Only 40% of global aid goes to low income countries • Even within low income countries, aid may not aim to reduce poverty: • Japan’s aid to Vietnam: aims to promote Vietnam as a manufacturing base, a potential future export market and an energy supply base • Aid therefore concentrated on large scale infrastructure
Phantom Aid 2: Debt repayments • Vietnam owes about 39% of national income in the form of debt • 2% of national income is spent each year servicing debt • In other words, about half of the ODA received by Vietnam goes out again in the form of debt repayments • Vietnam has not yet had any debt cancellation although other developing countries have • When debts are cancelled, this is also counted as ODA
Phantom Aid 3: Technical Assistance • TA = spending on consultants, training and research • Accounts for ¼ - ½ of global aid • Heavy spending on consultants from the donor country • Vietnam: one donor estimated that foreign consultants paid $18,000 - $27,000 per month, compared to $1,500 to $3,000 for local consultants • Cambodia: 700 international TA = 160,000 Cambodian civil servants • Often over-priced, and spent on consultants from the donor country • Can skew priorities and follow donor agenda • Little evidence on effectiveness of TA in terms of long term capacity building
Phantom Aid 4: Tied Aid • Donors commonly tie their aid to purchase of goods and service from the donor country • Roughly 40% of Vietnam’s aid is tied (in line with global figure) • Increases costs by 15-40% • Skews development priorities, and undermines the development of the local economy
Phantom Aid 5: Poorly co-ordinated aid • Donors fail to co-ordinate aid and place a heavy burden on poor countries • In 2005, Vietnam hosted more than 15 missions from donors per week, only 10% of them joint • Separate project implementation units also common – Vietnam alone has 111 • Donors and governments are starting to improve aid through the implementation of the Paris Declaration on Aid Effectiveness.
More Real Aid in Vietnam means.. • Making sure that national development is the key objective of all aid programmes • Cancelling illegitimate and unpayable debts • Making sure that Technical Assistance is demand driven and truly country owned • Untying all aid • Donors and Government fully implementing the Hanoi Core Statement on Aid Effectiveness • To get there, we need more Accountable Aid
From Donor Conditionality to Accountable Aid • Donor aid is highly conditional – they require policies to change before they provide aid… • Which makes governments more accountable to donors than to citizens or their representatives….. • But donors are not held accountable for meeting their promises…. • Making it difficult for citizens to ensure that aid money is being well spent
Criticisms of conditionality • Conditionality is unfair, because it gives one group of countries the right to determine the policies of another • Conditionality undermines sovereignty, because decisions are taken away from citizens and given to donors • Conditionality is ineffective, because when governments have not determined their own policy choices, they are less motivated to implement them • Conditionality imposes inappropriate policies – the World Bank and IMF in particular have imposed one size fits all free market policies which have often been shown to fail
Donor accountability – the missing element • Donors impose conditions on governments, but are not held accountable themselves • Numerous commitments over the years to improve quality and quantity of aid – rarely implemented • Lack of transparency • Lack of scrutiny by citizens in either North or South
More Accountable Aid means… • Governments • Setting out clearly to donors what kind of aid they want, agreeing targets for donors as well as recipients, and saying no to bad aid • Saying no to policy conditions • Being transparent and accountable to citizens about the use of aid • Donors • Being more transparent to citizens • Agreeing binding targets with recipients for improving aid effectiveness and meeting those targets • Being open to scrutiny by parliamentarians and civil society in recipient countries • National Assembly Members/Parliamentarians • Scrutinising new loans and grants coming into the country to ensure that they truly benefit citizens • Inviting donors to give evidence on their aid programmes • Monitoring donors and governments to ensure they meet their commitments • Regularly reporting on the performance of donors and government in effective use of aid • Civil Society • Working with communities to monitor impacts of aid
In conclusion…. • Real aid can help countries to develop and reduce poverty • But too much aid is currently ‘phantom aid’ rather than ‘real aid’ • Increasing real aid in Vietnam means • Ensuring that all aid is targeted at poverty reduction • Cancelling debts – using additional money • Making sure Technical Assistance is demand driven and builds capacity • Untying aid • Implementing the Hanoi Core Statement on Aid Effectiveness • We need to move from Conditionality to Accountable Aid • Governments, donors, National Assembly members and civil society all have a role in making this happen