2nd Policy Dialogue on Development Assistance
Closing Remarks by
Liqun Jin
Vice President
Asian Development Bank
5-6 September 2007
Seoul, Korea
After enjoying such a wealth of insightful views, comments and observations, I think that it will be very hard for me to offer anything original. Perhaps I could only state the obvious. But still, I would like to make some remarks around the following themes.
- Development effectiveness -some generic issues
- Particular issues for non-DAC donors
- Ownership and voice
- Challenges of capacity building
- Donors' coordination and accountability
Development Effectiveness
The choice of development approach must primarily draw upon development practices in the developing countries. In this context, formulation of a development strategy must fully reflect the ownership of the developing countries. For all the aid money pouring into a poor country, nothing is going to happen that people do not choose. It is imperative to adopt a broad-based approach to poverty reduction, sustainable economic growth and social development. The government and the people should be convinced of the development effectiveness in the first instance. In addition to economic growth, upgrading public sector management, improving efficiency of public services, ameliorating investment climate, as well as increasing spending on human development services will all have a positive bearing on achieving development effectiveness.
Only a comprehensive, balanced and coordinated development strategy can deliver the prosperity and benefits from economic growth potentially to reach every citizen.
Renewed emphasis on investment in infrastructure has been placed by MDBs in recent years. This is critical to remove the bottlenecks to development. The experience of China has been instructive: China borrowed heavily during the 1980s and early 1990s for a well balanced infrastructure development program covering ports, roads, railways, power generation and transmission, among others. The returns, of course, have been enormous, paving the way for the economic take-off starting from the late 80s and early 90s. Early in the stage, a great proportion of resources came from World Bank, and then ADB, as well as from bilateral donors, particularly Japan.
Getting infrastructure right requires more than just finance. It requires vision, strategic planning and management, attention to social and environmental consequences, and the capacity to follow through.
Traditional donors have usually placed emphasis on institutional capacity, and social sector development in the developing countries. This is important and will continue to be so. Nevertheless, capacity building can also work through lending programs for infrastructure. Infrastructure development has its special role to play in enhancing capacity at the sector level, which can underpin capacity building at the state level.
Issues for non-DAC donors
With enhanced economic development and growth, some better-off developing countries which have benefited from external assistance are now taking a more proactive stance towards international cooperation to provide assistance to the extent possible to other developing countries, adding fresh vigor to the concept of "South-to-South" cooperation. Such mutual assistance among developing countries represents a more equal development partnership rather than the traditional donor-recipient relationship.
As the weight of non-DAC donors in the regional and global economy grows, it is hoped that they will also assume a more proactive role in coordinating with the DAC donors. I think non-DAC donors can see enormous benefit from enhanced participation in the multilateral financial frameworks, and aid effectiveness.
Non-DAC donors are likely to face a multitude of challenges in their efforts to produce development impact in countries they aim to help. The non-DAC donors usually do not feel comfortable to be associated with Paris club; they would like to enjoy a free hand, not subject to the benchmark rules of the traditional donors. They are also reluctant to leave their native pod, unwilling to change their status as developing countries. The way they provide assistance to less successful fellow countries in the developing world could be a major departure from the approaches of traditional donors. Instead of pointing fingers, or jumping to conclusion that the non-DAC donors are not doing the right thing, DAC donors could engage the non-DAC donors for an exchange of views on an equal footing. For non-DAC donors, it is really important to take a look at the experience of traditional donors, both positive and negative, so as to replicate what has worked and avoid what has not worked so well. It is in the non-DAC donors' interest to see that their aid money would not turn out to be another round of unsustainable debt waiting to be written off once again.
ADB also has a Regional Cooperation and Poverty Reduction Fund which has attracted non-DAC donor support.
I think non-DAC donors can benefit from their experience of association with international organizations such as World Bank and ADB in the process of providing external assitance. The approach to development may also reflect both this history and philosophy, and the non-DAC donor's own experience as a developing country.
The Ownership and "Voice" of Developing Countries
I hold the opinion that development ownership is the premise for achieving development results. Countries differ from each other, such as their development priorities and strategies; but, the formulation of each country's own development strategies in line with the local conditions will often determine its ultimate development results. In order to achieve favorable results, the recipient countries should be encouraged to choose and to establish their own rational and feasible programs, fit into the actual development circumstances, including state of public sector reform and their own implementation capacity. This does not mean, however, that donors should not impart to them valuable knowledge and experiences available from other countries when working with them in setting out the development strategy.
Trade and Aid
Aid for trade should receive more emphasis for the international donor community. Trade and aid are closely related. Trade is not just an alternative to aid; free trade is an ultimate solution to poverty in developing countries. Trade confers dignity to weakly performing countries; trade opportunity induces diligence and cures the disease of moral hazard and aid addiction. Voices are heard that developing countries do not want to depend on aid forever; instead, they would like to have access to market to earn their decent living through their own efforts.
Donor countries should step up efforts to open up their markets to developing countries, reduce trade barriers, and thus create a fair and enabling external environment for developing countries. In the meantime, it is important that all countries should be able to participate in the process of globalization to ensure a balanced development of global economy. In my view, aid quantity is no less important as aid quality. ODA contribution from developed countries should be measured and monitored with the 0.7% UN target as benchmark.
Increasing aid for trade is an integral part to help the developing countries enter the global market. The MDBs should strengthen cooperation, and create a long-term and stable source of funding to support these efforts. Moreover, the MDBs should actively coordinate with the developed countries to contribute to adequate financing and strengthen cooperation in this regard.
To attain the MDGs, developing countries need to formulate country-owned development strategies, advance reforms and create a sound domestic environment for sustained and stable economic growth. I believe that opening markets to developing countries on an equitable basis is also crucial and will become one of the most effective measures to achieve MDGs.
Challenges of Capacity Building in Developing Countries
Further to my observations on the role of infrastructure development in building capacity at the sector level, I would like to stress that infrastructure development not only provides a platform for economic activities to flourish and thrive, but also pushes for capacity building in other related and critical areas: resource mobilization which, in turn, stimulates financial sector development, institutional capacity building, human resources development, and legal and regulatory improvements. Indeed, it covers all the essential areas of economic programming and major decision-making at the state level.
Undoubtedly, one of the most important outcomes of well-designed, well-managed infrastructure investment in developing countries is that it allows a government to move to higher levels of sophistication, broadening the horizons and raising the intellectual capital of the society as a whole.
Donors' Coordination and Accountability
Official Development Assistance (ODA) is playing a key role in facilitating developing countries to achieve the MDGs. In terms of the overall ODA volumes, the huge financing gaps still represent a binding constraint for development. While debt reduction has helped improve the developing countries' fiscal space for budget allocation, for vital investment in education, health, environment, etc, its direct impact on fiscal revenue is limited. Therefore, the developed countries should make concrete efforts to raise the ODA levels to the target of 0.7% of GNP.
All donors, DAC and non-DAC alike, should, based on their mandates and comparative advantages, strengthen their cooperation and coordination to support developing countries' policy reforms. As far as ADB is concerned, I think progress has achieved so far in promoting country ownership, emphasizing infrastructure development and reducing cost of doing business. ADB's efforts to strengthen its support for borrowing members, including increasing flexibility and simplifying procedures, lowering financial cost, and so on, are, in my view, conducive to helping the situation.
It is necessary that all donors should work in close collaboration in helping recipient countries achieve MDGs. Currently, many donors are facing tremendous challenges in how to formulate appropriate country development strategies based on their comparative advantages. The international donor community should up the ante for achieving aid effectiveness, which can only be measured by results on the ground. The grand jury is none other than the people for which aid is intended for. I think all donors will be required to pay more attention to the demand of recipient countries, and to strike a proper balance between aid for capacity building and for projects to support infrastructure, environment and social sector. Donors are accountable not just to the taxpayers in their own country, but more importantly to the people in the recipient countries they intend to help.
One Final Thought
It is the people in the recipient countries who are the final judges of the development results. Thus, the recipient country should play a leading role in the development program implementation and result-based measurement and monitoring, with the participation of all other stakeholders. Donors could very well assist our clients in helping to build capacity for project monitoring and evaluation and for defining those measurement indicators.
It is my view that the whole process should be flexible, country-owned and results-oriented. International standards and codes can only work when the international good practices are applied in the context of country-specific situation to improve economic management and promote grown in developing countries.
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