Comments

Hi Jo and Terence, Thanks for the interesting response. There are obviously a bunch of things for me to think about, and I will try my best to make some time to do that quickly. Again, some (strictly) personal thoughts that in no way reflect the views of my employer. These comments are purposely terse and technical for any avoidance of doubt that this isn’t an official plain-English response 🙂 1. The process of appropriating, allocating, expending and evaluating aid well requires optimization across multiple dimensions and constraints. These include a number of complex political economy considerations. This means that the solution set of “approaches” to how to deliver aid is vast, non-linear, and not entirely dependent on any one of those dimensions or constraints. 2. In other words, if lower volatility was the only thing worth caring about, aid could take the form of a pre-committed agreement to simply “transfer” resources across to aid partners (whether they were governments, organizations or multilateral institutions). 3. I have to think about this some more, but I am in the formative stages of wanting to say that volatile aid can still be predictable if there is sufficient up-front clarity about the nature of that volatility, and strong, continuous early communication of any changes. In other words, volatility might create first-order predictability problems, but managing that volatility might offer predictability. 4. This is important because the change from red to blue was accompanied by a structural shift that involved a move within the solution space of aid approaches. That move may have coincided with a political adjustment, but ultimately involved a large tradeoff between being close to the “just make a transfer” set of solutions and somewhere else within that set which may lead to either (a) a temporary; or (b) a permanent increase in volatility. It may be temporary because this new approach involved a learning curve and fixed costs that required time for us to “settle in”. It may be permanent because the types of investments are naturally bulky, discrete, and involve large degrees of decision-making under uncertainty. My suspicion is that it may be both. 5. Given that structural shift, forcibly smoothing volatility (e.g. by “washing-up” as described in my official response), may be sub-optimal in the short-medium term. Instead, it is more important to communicate this change of approach well and manage the volatility as described in my third point. 6. If aid investments are more discrete and lumpy in this new approach, and if those discrete and lumpy investments are occuring in a challenging, uncertain, and unpredictable environment, then it might well be that we encounter deviations that appear “large” even over a shorter planning horizon. 7. It also means that the 3-year horizon becomes a more relevant base to measure spending predictability. 8. Also there is an important policy question that is missing from your commentary: while the structural shift caused increased volatility, there was a (large) levels shift which meant more aid was flowing overall to the country. How should a recipient country assess the overall impact of those two opposing forces? I’m sure there is an easy, pithy, 50-word way to say all this, but who doesn’t enjoy a verbose and inefficiently long-form comment? It’s so much more fun. Again, all unofficial, formative thoughts. But I will continue to have a think with my official hat on. Vinny

Great to know that you're going to use this in teaching, Gerard. It has been a fun and interesting exchange, and got me thinking a lot about the challenges of improving aid predictability (and reducing volatility). I think there is the potential to do much more to stimulate informed discussion about aid policy, particularly in NZ. Maybe you could also assign students to make comments on these blogs to join in the discussion? For many issues in aid policy, and public policy in general, I think the winner has to be the policy at the end of the day: the discussion is only as good as it informs efforts to improve policymaking and implementation, with the ultimate goal of improved development outcomes. These are complex issues and there are layers to their discussion. In discussions with others, I think there is still more to say on the predictability issue, such as the need for careful partner country analysis (including public financial management and absorptive capacity analysis), and how to translate this into realistic planning. It also raises the question regarding whether more money should go to multilaterals rather than bilateral relationships, etc. And it raises issues about who makes decisions about aid policy and expenditure, and how a donor country can create quality aid policy. But I've been forbidden to write any more blogs (or blog comments for that matter - oops!) until my PhD is finished, so hopefully somebody else will in the meantime.

Thanks Gerard, To be fair, Jo can dance; I'm the only one with the issue there. Great to know you'll use it as a teaching example. I'll be very interested to see what the students make of it. Not just in a who won sense, but also in terms of what the students think the impediments are to informed public v govt department debate about aid, and what might remove these. Terence

This is really cool to read at two levels. First, for the content by Jo/Terence and by Vinny reply, and the reply to that from the people-who-cant-dance. Insightful, and I enjoy trying to get my head around this. Second, so great to see constructive engagement. Almost a text book example of what dialogue can do for the *public* policy-making process. No, not almost. it actually is a textbook example. I can say that because I'm going to use this back-and-forth in the teaching of 41 postgraduate Development Studies students. Thanks!

What would happen to Solomon Islands country if RAMSI leave the country?

Thank you Pauline and John. Pauline, please do free to share links to the debate. Kind regards Terence

Hi Tess, Thanks for the good questions (and sorry about the delayed reply - for some reason the system did not notify me a comment had been left). Nationally, income inequality decreased between the 2008-09 and 2013-14 household income and expenditure surveys, after having increased between 2002-03 and 2008-09. There is a lot going on underneath those headline figures, however. Poverty has declined in rural areas, but increased in urban areas (hence the focus on squatter settlements etc). Note that this is likely to have contributed to lower inequality nationally, given that rural areas are generally poorer than urban areas. Regionally, poverty rates have declined in the West, but have increased in the Nausori-Suva corridor. So it is a mixed story overall. You can read more <a href="https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwi9vIjghZ_OAhXDsJQKHYxhCL0QFggfMAA&url=http%3A%2F%2Fwww.statsfiji.gov.fj%2Fcomponent%2Fadvlisting%2F%3Fview%3Ddownload%26format%3Draw%26fileId%3D1381&usg=AFQjCNFhtnSYGHSHGqpR_-giPT-FerYwyw&sig2=xgv7FwRgYNZNqk9VOQrSnA&cad=rja" rel="nofollow">here</a> [pdf]. On the investment question – these are Reserve Bank of Fiji figures, which are not accompanied by an RBF definition. That said, the distinction would be generally understood as follows: ‘government’ includes any investment by government departments, whereas ‘public’ includes investment by state-owned enterprises. Matt

Very good analysis and response to Vinny's blog. Twenty million is definitely not small change. We put a link to Vinnys blog in the July edition of our e-newsletter Update. The August edition could include your reply.

A sensible, balanced follow up. Excellent work.

Thanks, Paul. I totally agree that there are many instruments and actors involved in any country's development. Yet aid is still an important component, and persists as a tool governments use. Indeed, more countries are giving it. I'm not so sure it is going to go away anytime soon. Further, government aid can help leverage broader flows of money to developing countries, for development purposes. Given aid is money that often gets used for non-development purposes, I think it is useful making sure that the money that is spent gets spent well, and DAC rules help here, as do country strategies. I agree that rigid plans aren't helpful - but a strategy does not have to be a plan. It can be a careful, context-aware relationship-based engagement that allows for flexibility and adaptability in the pursuit of well-being improvements. And as for rules, human-beings are norm-conformers: there are always rules, whether formal or informal, and while we can game the rules, they still shape how we behave and we can use them to positive ends if we get them right.

While aid law and legislation in various donor countries provide an important framework for aid planning and delivery, we may be missing the point that aid itself, with its rules and constraints, may not be (any longer) the best instrument for helping developing countries. Traditional aid is bureaucratic, donor-driven and constrained by many political (and now security) concerns. Players other than governments are in the ascendency (NGOs, private sector investors, foundations, local capital, local civil society, etc.) and we should reduce our focus on "getting the rules right" for what is an old concept and focus instead on broadening aid flows and instruments. DAC rules and five-year donor "country strategies" are very much a 20th century construct, almost sovietish. Paul Hitschfeld Chair, Trade Facilitation Office of Canada (based in Ottawa, operating around the world).

Ian's view on Canada's "toothless" legislation is obviously consistent with my own on most such legislation. As you say, it's not quite clear what he takes to be the relationship between a Canadian ICAI and aid legislation. I don't think he could be suggesting that the creation of such an institution would somehow make the existing legislation more useful, but he might be suggesting that the legislation should be amended, or parallel legislation passed, to give the institution statutory independence. If so, it's worth underlining a point we made in our <a href="https://devpolicy.org/publications/policy_briefs/PB14AidLaw_whatisitgoodfor.pdf">policy brief</a> (p. 5), that the UK's ICAI has no basis in legislation. It is part of the executive branch of government, but is an "advisory non-departmental public body" which is "sponsored" by DFID but reports directly to Parliament. I am not in a position to judge the quality of its work or its impact on the quality of UK aid but, if it has been as successful as claimed, its success owes nothing to statutory independence.