<< Programmes - Democratic Governance

From Paris to Malawi:

Making Development Assistance More Effective

Location:
Lilongwe, Malawi
Period:
2007 - 2011
Corporate Thematic Area:
Democratic Governance
2007 Budget:
US$ 422,000
2008 Budget:
US$ 1,400,000
Implementing Partners:
Ministry of Finance, UNDP, EP&D
Contact:
Roberto Paganini
Policy Advisor
P.O. Box 30135
Lilongwe 3, Malawi
Office: +265 (0) 1 773 500, Ext. 235
roberto.paganini@undp.org

"Only through government leadership, national involvement and international partnerships can Malawi move effectively towards achieving the Millennium Development Goals."
- Honourable Goodall E. Gondwe, MP, Minister of Finance

On 2 March 2005, Malawi joined 111 other countries and nearly 30 international organizations in signing the Paris Declaration on Aid Effectiveness (PD). The PD committed signatories to far-reaching and monitorable actions to reform the ways aid is managed and delivered.

Paris Declaration on Aid Effectiveness
12 Indicators of Progress

1. Partners have operational development strategies

2. Reliable country systems

3. Aid flows are aligned on national priorities

4. Strengthen capacity by coordinated support.

5. Use of Country public financial and procurement systems

6. Strengthen capacity by avoiding parallel implementation structures

7. Aid is more predictable

8. Aid is untied

9. Use of common arrangements or procedures

10. Encourage shared analysis

11. Results-oriented framework

12. Mutual accountability

The PD signifies a shift away from a world where donors and development partners dictate strategy and manage policy towards one in which developing country governments are in a better position to drive their own development agenda.

Aid plays a very important role in Malawi’s economy. In 2004, Malawi received aid inflows amounting to US$575 million, or 28 percent of GDP. Currently this aid is coming from a variety of donors and is directed to a variety of programmes and projects. Typically, donors decide how much they will give, what they would like the money to be spent on, and how the money is disbursed.

Without Coordination
If development assistance remains un-coordinated and developing countries are not adequately empowered to designate how much and where to spend, aid effectiveness will remain sub-optimal. Money is wasted on high overheads. Developing country governments waste time and energy on managing numerous bilateral agreements with donor and development partners. More resources are directed into non-development areas than would be otherwise necessary.

Key areas are not covered by funding while other areas are over funded. Donors may favor projects that target children or HIV/AIDS while they may be less interested in putting money into agricultural research and infrastructure.

It is also difficult to track money when it is being disbursed through varied means, according to individual schedules and/or towards specific areas. It is relatively likely that there will be some duplication of efforts and some key areas that are overlooked.

As of 2006, just over half of aid to Malawi is reported in the national budget. When relevant ministries and agencies are bypassed by development projects, it contributes to structural and institutional decline. Failing to coordinate aid can mean high transaction costs and wasteful duplication and overlap in the work of donors. In 2005 there were 69 parallel project implementation units and only 24 percent of donor missions were coordinated. These numbers suggest that a large amount of time is spent facilitating donor missions rather than programme implementation and valuable resources are wasted on duplicating efforts. The challenge for Malawi is to build the systems and capacity to receive donor assistance and to coordinate implementation of development projects.

The UN system is adapting to a changing aid environment characterized by a shift to budget support and the emergence of sector-based and programme-based approaches. UNDP is supporting a number of projects that target capacity development in coordination, monitoring and evaluation, procurement and other areas.

The development assistance coordination project, spanning from January 2007 through 2011 and possibly beyond, is assisting the Ministry of Finance in making Development Assistance more effective. The main components of this project are establishing a Development Assistance Coordination Unit (DACU) within the Ministry of Finance’s Debt and Aid Division (DAD), supporting key policy documents on development assistance strategy, and building DAD capacity to implement PD targets.

Implementing PD recommendations requires change in development mindsets and in government capacity and represents an innovative conceptual framework responding to 40 years of development weaknesses. DACU is an embodiment of this innovation in Malawi. It is mandated to coordinate Government bodies with the larger development community. DACU is charged with assimilating, monitoring, disseminating and managing development assistance in line with targets set out in the PD on aid effectiveness and harmonization.

Currently, DAD is understaffed and underequipped. UNDP will provide funds and technical assistance to DAD towards capacity development—focusing on building both human and physical resources. This includes undertaking a baseline study, providing gap funding for 11 posts in DAD, supporting training of DAD staff in aid harmonization, upgrading ICT facilities—i.e. upgrading the area network, establishing a comprehensive development assistance policy framework, strengthening project monitoring capacity, and advocacy efforts aimed at donors and relevant ministries. Financial and output monitoring should be much easier under a harmonized structure.

This project will lay the institutional foundation for a larger UN System assistance package to support the Government and merge development assistance, whether the revenue comes from Malawian or overseas taxpayers. Funds will be coordinated from the larger pool of donors and directed towards achieving the strategic vision of the Malawi Growth and Development Strategy.

Far reaching change does not take place over night. While the functions of DACU have been started within DAD, positions within the DACU itself remain unfilled. Helping bridge this gap has been identified as a high priority for the project. Some infrastructure has already been procured to support DAD, but needs are expected to expand as the division assumes its full role. The area network has been upgraded, and next steps include introducing Aid Information Management System software and providing training for its use. With support and funding from UNDP, the Malawi Development Assistance Strategy will be published in late 2007/early 2008.