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How can the Development Community help to achieve greater progress towards the Millennium Development Goals?

by Richard Manning

In this lecture, I will discuss the contribution that aid might make to the Millennium Development Goals, and suggest how this might be improved. In doing so, I draw very much on the annual Development Cooperation Report of the OECD-DAC, which has just issued.

Let us start by looking at the progress so far against the MDGs, most of which were to be achieved over the period 1990-2015, a period already past midpoint. While progress on poverty reduction appears to be in line with the relevant goal (though its achievement will still leave some 800 million people in 2015 living on under a dollar a day), progress on the other goals is less encouraging. The health goals look particularly difficult, given the impact of HIV/AIDS. Looked at regionally, East Asia and Latin America seem well placed, and the growth in South Asia, and its emerging ‘demographic dividend’ gives hope for good progress there. But sub-Saharan Africa stands out as off course on all the goals, though the World Bank points out that considerable progress could be made by 2015 by a combination of better policies and more assistance.​

In looking at how more progress can be made, I would stress, like the Bank, that the main contribution must and will come from the developing countries themselves. There is no substitute for home-grown effort. And although I shall talk mainly about aid in this lecture, I should also stress that the enabling environment provided by the policies of OECD countries – for example on trade and agriculture – is also more significant than aid for most recipients. To adapt Schumacher's dictum ‘economics as if people mattered’, we should argue for ‘policies as if development mattered’.

Private flows, and particularly private investment, are also of great importance to development, another reason why the policy environment, both internationally and in developing countries, is so important. But the boom in private investment over much of the past 15 years seems to have slackened in the early years of this century (though UNCTAD suggests some improvement again in 2003).​

By contrast, as Figure 1 shows, aid as measured by the DAC (‘official development assistance’) appears to be following a very different course. After remaining virtually unchanged as a proportion of DAC GNI from 1980-1992 (perhaps kept up in the last couple of years by the consequences of the Gulf War), aid fell sharply in real terms from 1992-1997, and as a proportion of DAC GNI sank to the unprecedentedly low level of 0.22%. Since then the ratio has stabilised, and aid has once again started to increase in real terms even as private flows have declined. In 2002, aid rose to $58 billion from $52 billion the year before, though rising debt forgiveness (up from $3 billion to $6 billion) accounted for about half the increase [Figure 1].

At the Monterrey Conference in 2002, most donors committed themselves to significant further increases. If delivered, aid would rise to around $75 billion (in 2002 prices and exchange rates) by 2006 – the largest real increase in aid since the DAC was founded in 1960. Decisions to be taken by five major donors are critical for the total increase [Figure 2].​​

This situation presents a major opportunity for progress. But it is also a major challenge. Let us suppose that these increases are delivered and yet we see little progress to the outcomes set in the MDGs. What sort of story will we in the development community have to tell our publics and parliaments?

Making aid more effective in helping developing countries progress is therefore a critical task – as is better measurement and evaluation of what aid is achieving. What progress can we report?

DAC figures show that aid has become gradually more performance related over the past 5 years [Figure 3]. This seems right, though we also need intelligent interventions in poor performing countries, where so many of the destitute live. Over the long term, the untied portion of aid has tended to increase, and the share of grants has risen, reducing the contribution of aid to indebtedness. On the other side of the balance sheet, the proportion of aid going to least-developed and other low income countries has stagnated. Some of the sectoral shifts are also noteworthy: more for governance and health, but less for industry and energy (perhaps as a result of the OECD disciplines on tied aid credits), for education and, to a worrying extent, for agriculture.​

There are interesting questions about the transactional efficiency of aid, too. Each year, some 35,000 new transactions are reported to the DAC, 85% of them under $1 million in value. This is at least one new activity per developing country per day. It is therefore hardly surprising that there are concerns over the burdens, particularly to developing countries, of the way donors do business. At a High Level Forum in Rome in February 2003, donors agreed to a set of principles which recognised the need to harmonise their procedures and to align their operations more behind partner country strategies and systems. The DAC has established a Working Party on Aid Effectiveness, with strong participation from the Multilateral Development Banks and the UN, which is attempting to put more energy behind this agenda. This involves encouraging and monitoring progress at country level, developing good practice in new areas (such as predictability of aid and procurement) and working to harmonise systems for managing for results. We shall expose the results of all this work to Ministerial-level scrutiny at a further High Level Forum in Paris early 2005.

My message is therefore that there is a real prospect that aid can indeed make a stronger contribution to helping developing countries achieve the Millennium Development Goals. But both on volume of aid and on its effectiveness, progress can by no means be taken for granted.

Richard Manning is the Chair of the OECD’s Development Assistance Committee ( DAC). Mr Manning was former Director General for Policy at the UK Department for International Development (DFID). This article is based on a public lecture by Mr Richard Manning delivered at WIDER in Helsinki on Monday, 9 February 2004.