Four ways OECD aid donors are failing the most fragile countries and what to do about it

This week, the OECD will launch States of Fragility 2015: Meeting Post-2015 Ambitions. The report comes ahead of the UN Summit on the Post-2015 Development Agenda in September this year, which will adopt a global framework to replace the Millennium Development Goals when they expire.

The report argues that the richest countries are failing the most vulnerable. And here are the four main ways:

First, the world’s poorest people are increasingly concentrated in countries affected by conflict and instability. Of 50 fragile and conflict-affected countries monitored by the OECD, nearly two-thirds will fail to meet the Millennium Development Goal (MDG) of halving poverty by 2015. 43% of the world’s poorest people now live in those countries. Left unchecked, the percentage could be 62% of people living below $1.25 a day 15 years from now.  One of the reasons that these countries are lagging behind is that the MDGs did not help countries to address head on the causes of fragility.

Second, OECD donors’ track record in promoting peace and reducing fragility is poor. Despite commitments made in 2011 at Busan to supporting national peacebuilding and statebuilding goals, very little aid has been re-aligned to these areas. By 2012, we found that 4% of aid to fragile countries had been directed to supporting political processes, less than 2% had been dedicated to building national security institutions, and less than 4% had been geared towards building national justice institutions. Yet, accumulated knowledge tells us that supporting these areas is essential if countries are to exit conflict and to lay the foundations for development.

Even in MDG priority areas such as health, aid performance has not always been strong in fragile situations. In 2012, OECD donors collectively reported an investment of $9 million in building national infectious disease control systems in Guinea, Liberia and Sierra Leone combined. Underinvestment and low capacity of national health systems prevented these countries from effectively containing the Ebola outbreak, which will have lasting consequences. The World Bank estimated economic impacts ranging from $1.6 to $5.2 billion in 2015, not to mention the human cost of Ebola.

Third, OECD aid allocations to countries have been seriously imbalanced. Although the OECD’s aid to fragile countries has risen consistently since 2000, now exceeding aid to all other developing countries (at 53% of all aid in 2012), 22% of aid to fragile countries since 2003 went to Afghanistan and Iraq alone. These geopolitically driven allocations constitute much more aid than those countries are likely to have been able to absorb, and much of it was spent through private contractors. Meanwhile, 10 out of 11 of the world’s “aid orphans” are among the poorest and most fragile countries, including Guinea, Sierra Leone, Nepal, Niger and Sierra Leone. Donors do not take account of one-another’s aid allocations when deciding where to spend aid, crowding in to some countries and forgetting others until crisis hits.

Fourth, donors are not helping fragile countries to reduce their aid dependency and to attract new sources of development finance.  Support for generating national domestic revenues does not appear to be growing – in fact, the latest data shows a drop in investment by $200m between 2011 and 2012. Fragile countries also find it harder to attract foreign direct investment (FDI). Only 6% of FDI to developing countries in 2012 went to fragile countries, and over 70% of this was invested in natural resources extraction in the Congo, D.R. Congo, Egypt and Nigeria. Yet, fragile countries receive the lowest levels of donor support among developing countries for attracting FDI. Remittances, another important source of finance for families and communities, mainly benefit a handful of populous countries like Nigeria. International migration policies limit expanding opportunities.

So what are the solutions?

The negotiators of the post-2015 Sustainable Development Goals (SDGs) proposed a new SDG to promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels. This SDG presents an historic opportunity to galvanize concerted international development action behind national plans to tackle fragility and conflict.  If fragile countries can accelerate the development of their national institutions by 2020, they could bring down the people living on $1.25 a day from an estimated 500m to 350m by 2030. The alternative, as the OECD warned, will be to leave behind the most vulnerable people and societies in the international community.

In 2015 and 2016, every donor organization must now introduce a new package of much smarter aid measures to achieve peaceful societies by 2030. They must address the serious imbalances in aid allocations across fragile countries. They must consider why they are failing on their commitments to peacebuilding and statebuilding and bridge the divide between ambition and reality. They must introduce more innovative aid measures, that help countries to attract FDI and remittances, such as providing risk guarantees for investors, and reducing the costs of transferring remittances imposed by the war on terror that have had disastrous consequences for countries such as Somalia. Generating finances beyond aid will also require a new global partnership for reducing illicit financial flows from developing countries.  They must help to expand South-South cooperation. Developing countries are much more knowledgeable and experienced in institutional development than those of the OECD, to which achievement of the MDGs testifies.

Finally, donor organizations’ need retooling to deliver on the SDGs. They will need new skills for supporting peaceful societies and accountable institutions, in areas such as universal monitoring of global fragility trends and risks, ending violence and building access to justice for all.  They will need new tools and funding mechanisms to galvanize multi-sectoral and multi-stakeholder partnerships that involve the private sector, NGOs, communities, governments, police forces, judiciaries and beyond.

It’s time to deliver. Read more in the OECD report here

Notes

The OECD’s States of Fragility 2015 report was authored by NYU CIC’s Sarah Hearn, with Ben Oppenheim and David Steven, supported by Alison Burt and Shelley Ranii.

All aid figures are based on OECD 2012 latest available data

Publication Date:
Mar 26, 2015
Topic(s):
Fragile States,
Post 2015 Development
Program(s):
Pathfinders for Peaceful, Just and Inclusive Societies