POOL RESOURCES AND REINVENT GLOBAL AID / THE FINANCIAL TIMES COMMENTARY & ANALYSIS ( HIGHLY RECOMMENDED READING )

Pool resources and reinvent global aid

By Jeffrey Sachs

Published: September 20 2010 22:20

The traditional system of bilateral development assistance is broken. In New York this week, the UN millennium development goals summit will agree on many important priorities. But these will need to be financed, and the lesson of the past decade is that bilateral aid rarely reaches the needed national or regional scale. So we must replace the fragmentation of bilateral programmes with a new strategy based on multi-donor pooled funding that has clear timelines, objectives and accountability.

There have been two important aid stories over the past 10 years. In the first, a series of large pronouncements – at Monterrey in 2002 (to reach 0.7 per cent of GNP in development aid), Gleneagles in 2005 (to double African aid by 2010), L’Aquila in 2009 (to direct $22bn over three years to raise productivity of smallholder farming) and Copenhagen in 2009 (to add $30bn over three years for climate change adaptation and mitigation) – were easily made but not delivered. Indeed, high-income donor countries, taken together, have fallen short on every big headline pledge they have made.

Why? Commitments have come without clear mechanisms for fulfilment. Most aid has remained bilateral, making it hard to monitor and largely unaccountable. Shortfalls are attributed to problems in recipient countries. Even when aid is disbursed, these programmes are scattered among many small efforts rather than a unified national plan, and include an endless spectacle of visiting dignitaries from donor countries, politicised negotiations, and countless headline announcements of support that all too often fails to materialise.

The second story is vastly more positive, and has come when aid operates on a different model – one that scales up investments in smallholder agriculture, health, education and infrastructure, complementing the rising flows of private capital entering the developing world. The most exciting example is the Global Fund to Fight Aids, TB and Malaria. The fund pools resources from many donor nations, with an independent review board approving national programmes according to scientific and management criteria rather than bilateral politics. The fund thereby provides aid in a scaled, systematic and predictable way. And while a decade ago all three diseases were running out of control, now all are being reined in with millions of lives saved.

Of course the fund is not perfect, but the programmes it supports are transparent and easily monitored – meaning that when corruption occurs, as it sometimes will, a programme can be halted and the malefactors removed. The fund’s design is a profound improvement over traditional donor aid. But it and efforts like it are chronically underfunded, largely because the US and European donor countries keep too much of their aid budgets in bilateral programmes.

Responding to the shortcomings of traditional aid, donors are making small reforms, like co-operating among themselves in committees in many recipient countries. But the process remains too slow, too political and too often swayed by donor’s concerns for commercial contracts, arms deals and diplomatic issues only tangentially related to development.

We need a major change of funding toward pooled donor funding. Bilateral aid would remain, but mainly to promote demonstration efforts and innovations. The core of assistance would use pooled mechanisms to scale up what has been proven to work, avoiding fragmentation and poor accountability. Indeed, there are moves in this direction: a new maternal and child health initiative to be agreed this week saw African leaders specifically request that the support should come through the Global Fund. Similarly, infrastructure funding could be scaled up through new public-private financing pools for roads, rail and power, via the World Bank and African Development Bank.

The new UK government has shown exceptional leadership in keeping promises to increase aid towards 0.7 per cent of income despite budget austerity. This is heartening, and can set the stage for an even bolder move: a new global system that builds on pooled donor funding, and that leaves the politics behind. If we continue with the existing haphazard arrangements, the millennium goals will not be met. But if we move decisively to pooled, transparent and mutually accountable financing, the world can still achieve them by 2015.

The writer is director of The Earth Institute at Columbia University

Copyright The Financial Times Limited 2010