Summary. This summary is designed to provide help for the understanding COUR DES COMPTES. French development aid policy. of the Public thematic report

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1 COUR DES COMPTES Summary of the Public thematic report June 2012 French development aid policy Disclaimer This summary is designed to provide help for the understanding of the Cour des Comptes report Only the report is legally binding. The responses of government departments, councils and other organisations concerned are attached to the report.

2 Contents Introduction Unrealistic objectives An ill-defined three-way organisation A need to improve impact assessment How to better use the aid channels General conclusion Recommendations

3 Introduction In 2011, official development aid from the member states of the Organisation for Economic Co-operation and Development (OECD) amounted to billion, that is 0.31 percent of their gross national income (GNI). The aid takes several forms: grants, loans, debt cancellation, taking in refugees, etc. It may be allocated directly by a donor state to a beneficiary state (bilateral aid) or allocated through an international organisation (multilateral aid). With a contribution of 9.35 billion in 2011, France is the fourth largest donor in the OECD. Its involvement is organised mainly by three entities: two ministries (the Ministry of Foreign Affairs and the Ministry of Economie and Finance), and an agency (the French Development Agency). In spite of significant progress in its contribution over the past decade (with an increase from 0.31 percent of the gross national income in 2001 to 0.46 percent in 2011), the France State has not been able to reach the 0.70-percent target agreed on, while still expressing higher ambitions than other donor states. At a time when the French authorities, taking note of changes in the international context and of the debate about the notion of development aid, authorities have expressed their intention of moving from a policy of aid to one of co-operation, the Cour des Comptes has tried, for the first time, to have a closer look at the manageable aid that is aid that can really be subjected to financial planning and covered by a decision from the authorities on a national level. How can the use of international indicators be reconciled with the wide range of objectives covered? How can these objectives be combined? How can the national effort be organised and how can systems be brought into play to increase the effectiveness of aid? These are some of the questions which the Cour des Comptes tries to answer in its Public Thematic Report. 5

4 Cour des Comptes 1 Unrealistic objectives A budgetary effort that cannot be sustained France has undertaken a wide range of actions to foster development aid over the past decade. Its ambitions are within the scope of aid as defined for measurement by the OECD. The OECD s reference has the advantage of being universal, but has often been the subject of criticism. It measures more an overall effort on the part of the donor rather than an actual transfer of resources to the beneficiary. It includes widely differing components: taking in foreign students and refugees or cancelling debt does not constitute an actual transfer of resources; spending on overseas territories does not benefit foreign countries. It includes such wideranging goals as culture and aid benefitting French companies (known as tied aid ). However, it does not take into account fiscal spending, guarantees granted, innovative funding schemes or non-subsidized loans. The contribution made by the French State to development aid is difficult to keep up in a continuous fashion. Marked by a significant increase at the beginning of the last decade caused by large amounts of debt cancellation, the volume of French aid has become more difficult to forecast since 2007, and is fluctuating. In such conditions, the contribution, that has to be based on significant budgetary resources, is unlikely to enable France to fulfil its commitment to achieve a level of 0.70 percent of GNI, even though the requirement has been extended to To reach the objective set, France will have to increase the amount of aid it gives by almost 9 billion, that is a 20-percent increase over four years, which seems unlikely to be able to be accommodated by the budget. The scenario whereby aid stabilises around 10 billion per year seems more realistic, and would lead to a level of approximately 0.41 percent of gross national income. However, such a prospect is worrying for the OECD, which has asked the French authorities to draw up a road map to account for the route it is intending to follow. Too many objectives, with ill-defined priorities The implementation of official French development aid is held back by 7

5 Unrealistic objectives 8 the large number of objectives and by the fact that their relative importance has not been defined. This characteristic is in contrast with what is practised by several other countries. The objectives only started to be precisely defined in For example, in 2010 the French State s strategy documents included formal statements about its co-operation with the World Bank and its commitment to European development policy. In spite of having a few weaknesses and limitations, the overall framework document adopted in 2011 constitutes progress that is to be encouraged. The text picks out four objectives whose relative priority has not been defined: combating poverty, supporting growth, protecting public goods worldwide and preventing crises and conflicts. It also includes ways of leveraging actions, such as promoting democracy, seeking increased prestige or providing support for domestic companies, that prove to be secondary objectives that do not go well together. Setting of priorities may have been facilitated, but it remains complex nevertheless. Strategies defined for specific countries, that have been set up over the past decade to guide co-operation with the main beneficiaries, have in addition shown their shortcomings and will have to be reconsidered in the light of priorities defined and resources available for aid policy. The intention to do this was expressed in France has long sought to define its priorities by applying a geographical criterion with a view to concentrating its contribution to development aid At the beginning of the last decade France created a Priority solidarity zone grouping together 55 countries. This relatively high number of beneficiaries means that a selective approach has not been possible. The zone has changed little over the last decade, and this approach has not really encomparred the aid provided by the Treasury or the French Development Agency (Agence Française de Développement - AFD). The main beneficiaries of French aid are thus still traditional partners of France and the major emerging nations (China, Indonesia, Morocco, etc.) rather than poorer countries that should be given priority. This explains the appearance, in 2009, of the notion of differentiated partnerships enabling improved coordination of objectives and aid instruments. Each partnership involves a specific category of nation, and has appropriate objectives and instruments. This typology is incomplete however, which restricts the scope of the approach. Thus, in spite of repeated assertions to the contrary, development aid is having difficulty in concentrating on the

6 Unrealistic objectives area most in need of it: Sub-Saharan Africa. The French State, which allocated to the region 70 percent of the aid awarded over the past decade, only devoted 36 percent of its bilateral aid to it in This means that the objective of allocating 60 percent of the French State s financial contribution to this area, set for the three years from 2011 to 2013, seems extremely ambitious. In 2012, with the same conditions, it is highly unlikely that France, having reached 0.07 percent in 2011, will be able to fulfil the objective, stated in common with the other members of the OECD, of providing the least advanced nations with aid equalling 0.15 percent of its gross national income. However, France has devoted an increasingly large part of its aid to the emerging nations using the leveraging effect of subsidized loans while counting on benefit for French companies. Intervening for their benefit proved a relatively heavy drain on the state budget, with uncertain results. This observation has led the French authorities to suspend budgetary subsidies for loans to China since Defining which sectors are to be given priority proved overall to be rather theoretical. French aid has covered numerous economic and social sectors, without always being based on specific strategies. A strategy for the health sector was only drawn up in The priority announced for the social and administrative sectors has been difficult to reconcile with France s predilection for using loans as an instrument. Attempts to concentrate aid on a few sectors given priority for each country proved more notional than real. 9

7 Cour des Comptes 2 An ill-defined three-way organisation The specific character of the French model In many respects, the French model is different from that of the other major donors. United States In the United states, aid is linked to considerations of prestige and national security. It consists mainly in bilateral grants. For a long time aid was handicapped by problems of co-ordination, since it was covered by five different departments. A Global Development Policy has however been in existence since 2010, emphasising the management role of the Department of State. At the same time, procedures with a view to checking the effectiveness of the aid process have also been launched. Other institutions contribute to development aid. The International Development Agency (USAID), present in 84 countries, deals with half of aid payments made. Its role is both to draw up aid strategy and apply it. The Millennium Challenge Corporation, created in 2004, aims to reduce poverty through expansion. It has a budget of 1.7 billion dollars, and runs 18 offices in the field. Germany In Germany, development aid policy is not part of the remit of the Ministry of Foreign Affairs (except with respect to humanitarian aid). It involves 75 lines of action. As a rule, Germany prefers grants to loans, and the main aim is to reduce poverty. An autonomous Ministry of Economic Co-Operation and Development defines the strategy, which is implemented by agencies and non-governmental organisations (NGOs). The KfW-E bank, that is responsible for financial assistance, is currently involved in over a hundred countries and contributes to 1,800 projects. The Society for international cooperation (GIZ) deals with co-operation in technical matters. It is participating in 2,300 projects in over 130 countries. A grouping of various implementing agencies recently was decided after a recommendation was issued by the OECD. United Kingdom In the United Kingdom, development aid has the single aim of reducing poverty. Tied contracts have been outlawed since

8 An ill-defined three-way organisation 12 Parliament plays a central role, backed up by a law on financial transparency passed in The objective of aid equalling 0.70 percent of GNP by 2013 has been maintained, in spite of the recession. The emphasis is on aid to public services in poor countries: the United Kingdom intends to devote 50 percent of its bilateral aid to this, mainly in the form of grants. British aid is controlled mainly by an autonomous ministry, the Department for International Development, which draws up the strategy before applying it itself. British aid is also managed by the Commonwealth Development Corporation, mainly through loans to south-eastern Asian and sub-saharan African countries. The French model The French model is steered on a governmental level by the Interministerial Committee on International Co-operation and Development (CICID), which defines the orientation of official development aid, its priorities, and the balance between bilateral and multilateral aid. However, the committee did not meet between 2006 and 2009, and has not met since. Other co-ordination structures have shown their limitations: the Conference on Programming and Strategic Orientation, created in 2004, has not met since December 2007; the Strategic Orientation Council (Conseil d Orientation Stratégique - COS), established in 2009, is consulted more regularly, but, in spite of meetings being attended by ministers, its mandate is only to co-ordinate the state s action with respect to the French Development Agency. Shared control The control of the aid policy is mainly shared between two ministries, the Ministry of Foreign Affairs and the Ministry of Economie and Finance. The way their roles are shared out depends less on the type of aid involved than on a historical compromise, which has led to some difficulties. The role of the Ministry of Economie and Finance is greater in France than elsewhere, given the weight of debt cancellation in French aid policy, and also because of the Agency, which is a bank. The action of the Ministry of Foreign Affairs is based on the General Globalisation Directorate created in 2009, which has a staff of 320. However, the Directorate has encountered human resources problems, which have affected its role in devising national strategy. In addition, the reform of central administration has loosened ties with embassies. Finally, a recurrent failing of the French system, the ministry tends to both devise and implement the strategy in some fields (higher education, governance).

9 An ill-defined three-way organisation The two ministries are responsible for the programme 209 Solidarity with developing countries, which in 2011 had a 2.09 billion budget, and programme 110 Economic and financial development aid ( 1.18 billion in 2011) respectively. This sharing of the budgetary role between two entities is not without drawbacks, in spite of efforts being made to achieve convergence between the mission s programmes. Thus, aid for vaccination is included in programme 110, whereas programme 209 includes a health objective. The high level of administrative costs, that officially made up 3.4 percent of French aid in 2010, as opposed to 2.8 percent in the United Kingdom and 3.0 percent in Germany, bears witness to the cost of managing French aid. If the French Development Agency is included, they amount to over 700 million in 2010, that is almost 9 percent of the yearly investissement. On a local level, the French aid network seems elaborate and complex. In the field, embassies, Agency branches and Treasury agencies form a dense network, whose work has been rendered complex by a transfer of responsabilities, required since 2004, but implemented in an irregular fashion. Co-operation with other state entities In spite of the financial support provided by the State, bringing together regional authorities who conduct their own decentralised co-operation schemes has been made more difficult since the co-ordinating body was disestablished n Work in conjunction with NGOs is also restricted, since in 2010, only 0.15 percent of aid went through these channels, as opposed to an average of 2 percent in the OECD as a whole. To attempt to integrate NGOs into the network more successfully, the scheme for backing up NGO initiatives was transferred from the Ministry of Foreign Affairs to the Agency in Backup for NGOs is thus as much an aim in itself as a way of providing aid, which should be easier to accept. A hybrid yet powerful operator: the French Development Agency. The Agency changed profoundly over the past decade by becoming the main contributor to aid policy. In 2011, it accounted for over 30 percent of aid documented and managed two-thirds of programmable bilateral aid. Its dual identity is not easy to assume: it is both a credit institution and an official institution involved in the French State s foreign programme, as defined by the law on state foreign action dated 27 July

10 An ill-defined three-way organisation The Agency s involvement mainly covers loans, that accounted for 84 percent of its activity in Its undertakings in favour of foreign countries have more than tripled in six years, reaching 5.13 billion in 2011, with Sub-Saharan Africa only receiving 45 percent of its loans in The Agency s funds come mainly from the financial markets, with satisfactory conditions. Faced with this development, the State had difficulty in defining its role. The sharing of roles between the Agency and the State, made more difficult by the fact that two ministries are responsible for overseeing them, has led to some inconsistencies. There were delays in signing the objective contracts, with the Agency only having a single objective and resource contract from the State since the autumn of

11 Cour des Comptes 3 A need to improve impact assessment Stepping up evaluation efforts One of the conditions of aid effectiveness lies in its evaluation. In France, this is done by several entities belonging to the Ministry of Foreign Affairs, the Ministry at Economy and Finance and the Agence Française de Développement whereas, in several major donor countries, it tends to be done by a single entity. Evaluation work only accounts for a relatively small amount ( 3 million), representing a smaller proportion than the average of donors in the OECD. A more significant sum could be allocated. The evaluation of aid is incomplete. Several components of manageable aid (donations by the French Priority Solidarity Fund (FSP), subsidies to associations, conditional aid, budgetary support) are not systematically assessed. The Agency has stepped up its evaluation effort, particularly for current projects. It has initiated strategic evaluations and impact assessments which are still in the experimental stage. The other forms of aid are still little assessed, although flexibilities created by debt cancellation and debt-relief and development agreements would gain from such assessment. The national contribution to multi-lateral organisations is more difficult to evaluate. It depends, above all, on the institutions themselves, but the French representatives to these organisations could be called upon in a more active manner given the size of certain contributions made by France (European Development Fund, Global AIDS Fund, etc.). Finding a means of measuring impact Measuring aid effectiveness is still a complex issue, much debated in terms of doctrine. It is made even more difficult in France by the number of aid objectives and the fact that they are not prioritized. The French authorities have not clearly identified risks of misappropriation, even though fighting corruption is one of the objectives of certain aid projects. Assessment of the overall effort is often poor. Budget performance indicators are heterogeneous and not actually very appropriate as they 15

12 A need to improve impact assessment often focus more on the means than the objects in view. Parallel efforts initiated by authorities in 2004 to introduce a complete performance assessment methodology only reached an outcome in 2011, following a recommendation of the General Review of Public Policies (RGPP). A grid comprising a number of indicators has been developed and represents a move forward. It must, however, be enhanced with a greater number of result indicators and be linked to budget documents and evaluations. These efforts are vital both to improve guidance in the allocation of budget resources and to inform citizens of the results of action taken. 16

13 Cour des Comptes 4 How to better use the aid channels Developing bilateral aid France devotes a substantial portion of its aid (47% in 2010) to non-programmable aid (accommodating refugees, tuition fees, debt cancellations), which makes it even more difficult to manage. The constraints weighing upon French bilateral aid demand that a sharper approach be taken to the portion that results from programming and rollout by national stakeholders. This manageable aid is not limited to bilateral aid but greatly encompasses it and must be better identified by aid managers. French bilateral aid reflects a growing preference for loans; its proportion rose from 10% in 2005 to 26% in 2010 and is above that of major donors. These instruments do have advantages, particularly in middle income countries, but they above all have a low budget cost. The amount of aid declared can thus be optimised, taking advantage of the financial model of the Agence française de développement. From the beneficiaries standpoint, however, these instruments have limits: they are generally less advantageous than those granted by other OECD donors and are not accessible to the poorest countries, even when the interest rates are low. If the budget remains the same, continuing their development could threaten grants from the Ministry of Foreign Affairs and raise the question of maintaining the Agency network in countries that do not have access to them. Over the past decade, debt cancellations have represented substantial amounts but now tend to be revised downwards. By nature, they are difficult to integrate into the national aid strategy. The introduction of a new instrument, the debt-relief and development agreement, in 2002, has helped improve control over the use of these funds, by having the compensation for the cancelled debts paid to the assisted country to fund anti-poverty projects. Full control of more traditional aid instruments is still a challenge, although they no longer involve the same amounts as in the past. Management of the project aid provided by the Ministry of Foreign Affairs, which has mainly passed through the Priority Solidarity Fund since 2000 and which had only 62 million in 2010, lacks discipline: 17

14 How to better use the aid channels 18 while project launches are governed by formal procedures, follow-up is insufficient and often reveals de facto continuity between operations. Subsidies awarded to national or local NGOs would also gain from improved follow-up. Tied aid, which is handled by the Ministry of Economy and Finance and accounted for 11% of bilateral aid in 2009, is used to fund development projects while awarding a part of their performance to French companies. The impact on these companies is positive, despite the appearance of some dependency, but their impact on local development is more uncertain. Technical assistance, which was a significant and symbolic aspect of French aid at the start of the last decade, has experienced a decline. In 2011, only 600 agents were involved, of which 410 for the Ministry of Foreign Affairs and 170 for the Agency, i.e. fewer experts in Africa than deployed by German cooperation. Yet, the French Embassies regard this instrument as a valued system; however, its management has been weakened by transfers between the Ministry of Foreign Affairs and the Agence française de développement and still suffers from being dispersed between several national operators. Budgetary support, whereby financing can be transferred directly to the authorities of beneficiary countries, is little used by France (3% of the total effort) despite its advantages in terms of beneficiary accountability and disbursement of funds. A doctrine governing the use of budgetary support was defined in 2007 and includes conditions relative to public finance viability and the sustainability of macroeconomic policy. It has not apparently always been observed, as the examples of Haiti and Benin demonstrate. Integration into the multilateral system In 2010, French multilateral aid passing through the national budget amounted to 2.22 billion, i.e. 61% of the budgetary mission. Both the amount and the proportion have been on the rise since There are still many recipients of this aid, despite measures taken to reduce numbers since However, four fifths of this aid go to the European Commission (which accounts for 45% of French funds), the World Bank, the International Development Association (21%) and the World AIDS Fund (15%). Compared to its rank, France is however less present in international financial institutions than certain major donors. It ranks fifth in the World Bank with 658 million being transfered in It also contributes to United Nations organisations involved in development, which account for 6% of its multilateral aid, but the significant

15 How to better use the aid channels reduction in its voluntary contributions now makes it a relatively small donor. The European vector remains at the forefront. In 2010, France devoted 2.01 billion to it, of which 1.10 billion for the community budget and 0.91 billion for the European Development Fund. While joint programming of European Union and Member State aid, as recommended by the Commission, is still not within immediate reach, French aid provided via the Union is now based on a formal strategy defined in 2010, which particularly advocates including the European Development Fund in the general community budget. France also invests increasingly in vertical funds, which account for 44% of its multilateral aid outside the EU. These new aid instruments allow contributions to be made to thematic projects. France contributes greatly to funding health and has become the second biggest donor to the Global Fund to Fight AIDS, Tuberculosis and Malaria, with a planned contribution of 360 million per year between 2011 and In a restricted budget context, this development of multilateral aid can bring fear that bilateral aid will be supplanted. Rather than setting initial limits between the two channels, which would be difficult to effect owing to the characteristics of multilateral aid, it would seem better to have a real multilateral strategy covering the entire scope. The connection between bilateral and multilateral aid must be reinforced, including in the field. While there appears to be good synergy between the European Union and France, it must be improved, particularly in the area of health, given the extent of French contributions. In this respect, it would be a good idea to call upon French representatives to international institutions, and to make better use of bilateral aid to support multilateral projects. A network could also be set up between French representatives to international institutions and organisations and the networks of Embassies, the Treasury and the Agence française de développement, to improve the circulation of opportunities and projects. 19

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17 General conclusion T he OECD predicts a minor increase in official development aid in 2012, followed by stagnation as of The Government s budget effort should be lower next year ( 7,380 million) than it is this year ( 7,468 million) which, despite debt cancellations estimated at over 1,200 million, will lower the ratio of aid to gross domestic income in In these conditions, achieving the objectives set for 2015 seems quite unrealistic. Above and beyond the vital need to be rational, the situation requires the national aid model to be rebuilt to improve its overall efficiency. Although it lacks continuous drive, the model is not without advantages, including a specialized operator playing a major role at EU level. It must, however, overcome its handicaps, particularly the lack of a pilot, poor channelling of manageable aid, the weight of administrative barriers and insufficient attention to results. There are therefore two options to restore coherence, depending on the level of resources that can be mobilised. Like other major donors, France could favour multilateral aid by playing a more active part in the relevant organisations, by instigating network action between its stakeholders and international institutions and by reserving its bilateral financing for projects targeting clearly defined national objectives. Alternatively, it could continue to prefer bilateral aid provided it adapts the governance principles, aligns objectives with the means, improves control of manageable aid and pays greater attention to the results of action taken. 21

18 Recommendations 22 Encourage diversification in the ways used to measure aid within the OECD and anticipate this move in documents presented to Parliament; review the objective of devoting 0.70% of gross national income to aid by 2015 to make it more compatible with general public finance constraints; propose a prioritization of aid objectives to Parliament, drawing a clearer distinction between objectives and means; create a roadmap to achieve the commitment of devoting 0.15% of the gross national income to the least advanced countries; revert to an annual meeting of the inter-ministerial committee for international cooperation and development; streamline aid management bodies by re-designing the entire system; clarify ministerial management by establishing a protocol between the Ministry of Foreign Affairs and the Ministry of the Economy and Finance; check the adequacy of the Ministry of Foreign Affairs organisation by presenting an assessment of the Direction Générale de la Mondialisation to Parliament by the end of 2012; reduce the cost of the public network implementing aid on a local level; this should rely on the agencies of the Agence française de développement, under the authority of the Ambassadors; restore steering committee involving non-government national aid partners; strengthen national public assessment capabilities by combining them and allocating appropriate resources; extend the scope of evaluation to aid representing significant volumes (debt cancellations, multilateral contributions); redefine the budget performance indicators by encouraging convergence between programmes and effectiveness assessments; finalise work to measure the effectiveness of aid initiated since 2009;

19 Recommendations better identify manageable aid in the national effort by focusing strategies on this aggregate; make greater use of technical experts to achieve a better link between bilateral and multilateral aid; use the network of French stakeholders in the field to optimise the decisions of multilateral organisations; complete the vehicle-specific strategies adopted since 2010 (World Bank, European Union) with a strategy for multilateral aid. 23