Abstract
In response to the challenges posed by the Millennium Development Goals, the key stakeholders in international development set out a new agenda to improve the effectiveness of aid. This agenda, embodied in the Paris Declaration on Aid Effectiveness, articulates a series of commitments reflected by the following tenets: ownership, alignment, harmonization, managing for results, and mutual accountability. The goal of this study was to identify lessons learned from the application of the Paris Declaration tenets in the infrastructure sector and, specifically, to determine whether the unique characteristics of this sector result in unique challenges and opportunities for implementing the tenets. This report, submitted to the Steering Committee by The Urban Institute, presents detailed findings on the Study on Aid Effectiveness in the Infrastructure Sector.
Executive Summary
Objective
The Urban Institute (UI) was contracted by the World Bank on behalf of the Japan Bank for International Cooperation
(JBIC), the Asian Development Bank (ADB), KfW Entwicklungsbank (KfW), and the Agence Francaise de
Developpement (AFD), with funding from the Japanese Government to carry out a study intended to contribute to the
Accra High Level Forum (HLF) on Aid Effectiveness in September 2008 by providing lessons learned for
implementing the five tenets of the Paris Declaration on Aid Effectiveness—ownership, alignment, harmonization,
managing for results, and mutual accountability—in the infrastructure sector. The analysis was based on 14
infrastructure case studies from four countries in Africa and three countries in Asia.1 The projects were selected by a Steering Committee made up of the World Bank, AFD, ADB, KfW, and JBIC. The African Development Bank (AfDB),
the UK's Department for International Development, and the European Commission also provided input.
The goal of this study was to identify lessons learned from the application of the Paris Declaration tenets in the
infrastructure sector. One key hypothesis to test was whether the unique characteristics of the infrastructure sector
would result in unique challenges and opportunities in implementing the Paris Declaration tenets, different from those
in other sectors. Within the sector itself, the study looked at the hypothesis that the implementation challenges would
be different for large-scale infrastructure, such as major roads and bridges, and for small-scale projects, such as rural
water and sanitation programs.
Approach
This study involved preliminary analysis of the projects submitted by the Steering Committee, followed by country
visits to conduct more in-depth analysis of the projects and, more broadly, the sector in each case study country. The
team also prepared and presented preliminary findings at two regional consultative workshops for partner countries
and Steering Committee Members in Asia (Indonesia) and Africa (Ghana). This report represents the team's analysis
of the case studies, field work, and findings from the workshops (the case studies are presented in Annex A).
Findings
As the case studies show, there are some aspects of the infrastructure sector that have resulted in a variety of
approaches to applying the Paris Declaration tenets:
-
Ownership is a key element in achieving the other Paris Declaration tenets. However, strong country
ownership requires capacity, not just at the planning stage, but also throughout implementation. And country
ownership can be generated through additional structures, such as community-based working groups or
leadership from individual agencies or ministries.
- Large-scale infrastructure projects demand significantly more partner country capacity in several areas—specifically, procurement, public financial management, social/environmental safeguards—than are
generally required in other sectors. As highly visible and expensive investments, such projects, when financed by donors, are also often subject to more scrutiny and demands for safeguards—financial, environmental, and social—when reporting to the boards and funders of multilateral donors and the political bodies that oversee bilateral development agencies. These increased country capacity and donor reporting
demands make certain aspects of the Paris Declaration tenets challenging to implement, particularly with
respect to the key area of alignment. As a result, implementing the Paris Declaration in large-scale
infrastructure includes devoting significant resources to strengthening country capacity to manage large
investments with significant social and environmental effects. Donors may begin by using country
procurement systems for smaller procurements and donor procedures for larger procurements.
- Whether in developing or in developed countries, large infrastructure projects tend to be managed through a
project approach. Project funding and monitoring of the progress of the project and its impacts can therefore
be appropriate.
- There is strong support for sector-wide and other program-based approaches, using a variety of funding
mechanisms. Almost every case study involved such an approach.
- Aid in the infrastructure sector has been funded through a variety of financing mechanisms, including
general and targeted budget support (i.e., sector or sub-sector support), pooled financing, project support,
and other coordination mechanisms such as the Six Banks in Vietnam that can support harmonization and
alignment.
- Managing for results and mutual accountability continue to need increased attention from donor and partner
countries compared to the other three tenets. Improving managing for results may be particularly important
for infrastructure projects, given the impact it could have on operations and maintenance. However,
managing for results appears to be a challenging principle to implement regardless of sector.
At the same time, evidence from the in-depth analysis of the case studies reveals that there are many commonalities
across all sectors in terms of the challenges in implementing the Paris Declaration tenets—deepening ownership,
building capacity in country systems, reducing the transaction costs of harmonization, strengthening managing for
results and mutual accountability. As a result, many of the lessons learned in this study of the infrastructure sector
are also applicable in other sectors such as health, education, and agriculture.
Large- and Small-Scale Infrastructure
The study also examined the differences between small and large-scale infrastructure projects in the application of
the Paris Declaration tenets. Community-level ownership is likely to be strong for small-scale projects. Central
governments like, and therefore own, large-scale projects, but their very complexity may result in more than usual
donor involvement, which may in itself take some ownership away from government. Alignment is perhaps the most
challenging of the Paris Declaration tenets to achieve with large-scale donor-financed infrastructure investments,
which require substantial capacity on the partner country side in terms of project management, procurement, and
overall public financial management. While the use of public financial management systems is more likely with donor
funds provided as budget support, this form of funding is less common in the infrastructure sector, at least with largescale
projects. Smaller scale projects offer greater opportunities for communities to be involved in making sure the
intended results are being achieved, also in planning the projects themselves, thus increasing local ownership. The
early benefits likely from small-scale projects also make it easier for communities to see results and stay committed
to projects. The results from large-scale projects are invariably much longer term. Such projects are more likely to
receive parliamentary scrutiny and formal national audits and less likely to be subject to local community participation. However, in the case study countries, the national audit agencies lacked capacity to monitor highly
complex projects, increasing the risk that benefits will be diverted through corruption.
Tenets
Ownership: The Paris Declaration defines ownership as "partner countries exercise effective leadership over their
development policies and strategies," which requires both political will and technical capacity. Ownership in Paris
Declaration terms is demonstrated through development strategies linked to the budget and developed by the partner
country through a consultative process bringing in the views of stakeholders from citizens, civil society, the private
sector and from different levels of government. At the sector level, then, ownership implies sector strategies and
plans linked to a national development plan and budget framework developed through consultation.
In almost all of the cases examined, donor funding supports sector strategies prepared by the government and linked
to national strategies that are developed with at least some stakeholder consultation. While capacity constraints in
planning and problems linking infrastructure sector and national plans to multi-year budgets/MTEFs can reduce
ownership, the case studies also demonstrated that country ownership can be generated through additional
structures, such as community-based working groups or leadership from individual agencies or ministries.
Ownership is relevant not only at the planning stage, but also, importantly, throughout implementation. One of the
features of the infrastructure sector is that agencies at varying degrees of arms' length from the executive branch of
government have responsibility for the implementation and sometimes design, of the projects. This is almost always
true for projects involving major capital works, but it can also be true for urban and rural programs consisting of many
small-scale capital projects.
The in-depth case studies showed generally strong government ownership of projects/programs of all kinds, with or
without an agency implementing the project/programs. There were some instances of insufficient ownership outside
the lead government agency, with other government agencies less involved than they should have been to ensure
long-term sustainability. In one case, for example, a lack of buy-in by the Ministry of Finance resulted in inadequate
funds to sustain the project.
Alignment: This tenet requires donors not only to support government-developed national and sector strategies, but
also to use partner country systems, most significantly those for procurement and public financial management. The
Paris Declaration recognizes that many partner countries' systems are still weak and specifies that donors should
help build capacity and refrain from setting up parallel systems that undermine system-building. This is perhaps the
most challenging of the Paris Declaration tenets to achieve in the infrastructure sector because of the large size of
many donor investments, which requires substantial capacity in country systems with respect to project management
and implementation, procurement, overall public financial management, as well as environmental and social
safeguards. Where such capacity is weak or lacking, donors are undertaking infrastructure projects and programs
that apply the Paris Declaration tenets by supporting the development of partner country capacity along with putting
in place strong country and donor accountability mechanisms. This use of existing country systems where possible,
while simultaneously strengthening, improving, and building capacity for better systems, has proved to be effective.
Alignment with national procurement systems emerged as the most difficult aspect of this tenet to achieve. The case
study analysis found that donors were less likely to align with government procurement systems for large-scale
infrastructure projects. The main point emerging from the case studies is that alignment is less likely where largescale
procurement involving International Competitive Bidding (ICB) is required. Alignment is more likely where
national procurement is possible, and that is generally for smaller scale procurement. In almost every case study country, donors are funding the capacity building needed to reduce the risks of relying on national procurement
systems.
Under the alignment principle, the case studies show that, apart from procurement, considerable progress has been
achieved in improving public financial management from the preparation of budget (although there are few real
MTEFs), its execution and to a lesser extent accounting for the uses of funds. Most of the funds provided by donors
are aligned with the national budget and are on-budget. With respect to financing modalities, the case studies show
that good examples in applying the Paris Declaration in the infrastructure sector include utilization of both project and
budget support, as well as co-financing mechanisms.
PIUs continue to be used by donors, ministries, and agencies responsible for design and implementation for all kinds
of projects and programs. Almost all are mainstreamed in terms of reporting to public officials, thus becoming a part
of the government's accountability system. However, in some of the cases, PIU staff were paid salaries much higher
than salaries paid to officials in similar positions in the civil service or parastatals, making it difficult for officials to
exercise authority over PIU staff. In addition, in practice, PIU staff often had closer relationships with the donors than
with the department to which they reported. One hypothesis considered in the study was that the size and complexity
of some infrastructure projects make it more likely that a PIU relatively detached from mainstream government will
manage the implementation of the project. The PIUs for the two large-scale infrastructure case studies, including
Vietnam's Ministry of Transport's PMUs and the Jamuna Bridge's Multipurpose Bridge Authority, were, however,
integrated in that the PIUs reported directly to a government minister and a number of under-secretaries.
Harmonization: Under this Paris Declaration tenet, donors commit to implement common arrangements and to
simplify procedures, as well as to reduce redundancy in terms of programs/projects and assessments/missions.
The case studies show that donors have made significant efforts to harmonize their support through sector-wide or
other program-based approaches of various kinds, including collaboration where the project funding has been
favored, as with the two large-scale infrastructure projects in the case studies.
However, there is some evidence that the often difficult process of harmonization among the donors may sometimes
come at the cost of diminished ownership. In at least one case, donors agreed with government a program in a form
that the donors could reach consensus to support rather than the form that government might have preferred. It is
also clear from the case studies that harmonization usually takes a long time, delaying the start of programs quite
seriously in some cases.
The study also looked at whether the size of projects affected whether or not donor funds were provided as pooled
funding. The case studies showed mixed results. The two Vietnam national highway projects are funded by a number
of donors using different mechanisms, although with close collaboration between the main donors. Jamuna has
multiple co-financiers who work closely together and follow similar procedures. Some other projects financed with
pooled funding do include some moderately large capital expenditures. As noted above, in almost all cases, funding
was on-budget.
Another hypothesis considered in the study was that donors, sensitive to size and complexity, may be more involved
in preparing plans and policies in this sector than in others. There is no strong pattern here. Donors are heavily
involved in working with governments on plans and policies in all kinds of infrastructure projects as well as in other
sectors.
Managing for Results: The Paris Declaration calls for partner countries to build results-oriented frameworks into their
national and sectoral development strategies and plans and for donors to align their monitoring and evaluation frameworks with these country M&E systems. Where country systems are weak, donors are to harmonize their M&E
and reporting requirements.
Few countries' public administrations are organized to facilitate management for results through effective program
budgets and performance appraisal systems. Most of the case study countries have project- and program-level
monitoring for results, although these are often not effectively linked to a performance-oriented budget or MTEF and
in turn to the PRSP or national development plan. Some countries have set up institutional arrangements within the
public administration to measure performance, although implementation has been hampered by capacity constraints.
Most countries monitor for results at both the program and project levels, examining progress in terms of outputs,
outcomes, and impacts. This also applies to large-scale infrastructure projects. The study revealed that systems for
monitoring appear to be more effective at the project level, where donors and as well as government play an active
role.
Mutual Accountability: The Paris Declaration states that "[a] major priority for partner countries and donors is to
enhance mutual accountability and transparency in the use of development resources." To that end, partner countries
commit to strengthening their own accountability and participation systems and donors and partner countries agree to
conduct joint assessments of aid.
Like managing for results, mutual accountability is given less emphasis than the first three Paris Declaration tenets.
However, in every case there is joint donor?government monitoring of infrastructure programs and projects. In the
infrastructure sector, the case studies show that small-scale projects are more likely to have accountability
mechanisms that involve local stakeholders, since they are directly involved in its use.
Most of the case studies have put policies and programs in place to reduce corruption; this is a positive step, since
corruption makes it less likely that the planned results, although the results of these efforts are, to date, unclear.
Case study countries also have efforts underway to increase participation in planning and assessments and capacitybuilding
initiatives for their parliaments.
End of Excerpt. View the entire report in pdf format.
Latest Research
Browse by Topic:
PDF
Printer-friendly summary
