Global Monitoring Report: Findings on Progress since Monterrey

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Global Monitoring Report: Findings on Progress since Monterrey Governance, institutions, and capacity A number of developing regions have made considerable progress toward regulatory reform, but Sub-Saharan Africa's progress has been slower. Sub-Saharan Africa firms view corruption, high taxes, costs and access to finance and electricity as the most significant constraints. The policy and institutional environment in developing countries is continuing to improve. Along with pursuing sound macroeconomic policies and better public sector management, developing countries have strengthened institutional quality, improved public sector governance, pursued wide-ranging structural reforms, and adopted policies of social inclusion and equity. These improvements have been shown to contribute to faster growth. Over the past decade, Sub-Saharan Africa has made considerable progress on political governance, including the percentage of countries holding competitive multiparty elections. To help convert this progress into a broader improvement in governance, it will be essential that the Peer Review Mechanism instituted by NEPAD move ahead. UNECA s 25 African Governance Report: Perception of Key Dimensions of Governance (average for 23 African countries) Corruption control 48 Economic management 49 CSO/media Independence 54 Executive's effectiveness 44 Human rights and rule of law 48 Institutional effectiveness/accountability 48 Political representation 65 4 45 5 55 6 65 7 Note: The scale is from to 1, where scores close to 1 reflect good governance as perceived by the survey respondents. Source : Survey of national expert/opinion leader panels conducted for the 25 African Governance Report, published by the United Nations Economic Commission for Africa. Countries have increased, and continue to increase, their capacity to absorb aid productively. A 23 World Bank report assessed the capacity of 18 better performing, lowincome countries to effectively use more aid to achieve the MDGs. It found that the five large Asian countries in the sample (Bangladesh, India, Indonesia, Pakistan, and Vietnam) could effectively absorb an immediate doubling or more of aid. Overall, the Sub-Saharan countries in the sample were found to have the capacity to use additional aid productively if they continued and strengthened their reforms.

Foreign direct investment and other private flows For most Sub-Saharan countries, the prospects of attracting FDI are constrained. Costs as a share of lost sales are two to three times larger in Kenya, Tanzania and Zambia than in China and Brazil. Of the 58 countries in this year s Doing Business review that reformed regulation or strengthened property rights in the last year, only 8 were in Africa. In Ethiopia, business registrations increased by 48 percent when the process was simplified in 23. In Namibia, the cost to expand output fell by 15 percent as a result of more flexible working hours introduced in 23. Among Sub-Saharan Africa countries which scored 5 or higher on the ease of doing business index in 25, the correlation with the rate of private investment during the period 199-23 was 7 percent. Trade In 24 WTO negotiations came back on track, with a package of agreements reached in August. The proliferation of reciprocal preferential trade arrangements continued in 24, with activity spread across all regions and countries. Globally, average tariffs fell by 2 percentage points between 1997 and 2 and by 1 percentage point between 2 and 23. As measured by most favored nation tariffs, South Asia is the most restrictive region, followed by Sub-Saharan Africa. The share of aid for trade activities in total aid commitments rose from 3.6 percent in 22 to 4.2 percent in 23. Trade Growth (average annual growth rate; percent) Country group 1991 95 1996 2 21 3 Exports World 8.7 4.8 5.8 Developing countries 12.2 7.7 7.4 Least developed countries 3.8 1.1 8.4 African least developed countries.1 7.3 1.2 Low-income countries 8.7 9.6 8.1 African low-income countries 2.8 12.6 4.2 Imports World 8.1 5.2 6. Developing countries 13.3 5.3 8.1 Least developed countries 5.8 3.3 12. African least developed countries 3.1 1.9 13.3 Low-income countries 9.2 4.4 12.8 African low-income countries 5.2.9 16.1 Source: IMF, Direction of Trade Statistics.

Aid and aid effectiveness Aid volumes increased by 5 percent in real terms in 23, a slower pace of expansion than the 7 percent growth recorded in the previous year. Combined with exchange rate movements and inflation, which accounted for $7.9 billion of the increase in aid volumes in 23, nominal ODA rose by $1.7 billion to $69 billion. DAC members ODA: 199-23 and prospects for 26 and 21 23 US$ billions 12 1 8 ODA as % of donors' GNI(right axis).25.3 Percent.35.32.3.25 6 Total ODA (left axis).2.15 4 2 Total ODA to SSA (left axis).1.5. 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 Note: Prospects for ODA in 26 and 21 are based on DAC members post-monterrey announced commitments. Not all DAC members have made commitments beyond 26. Source: OECD 25. ODA as a share of donor GNI in 23 was.25 percent. Five countries Denmark, Luxembourg, Netherlands, Norway, and Sweden have achieved ODA/GNI ratios of.7 percent or more, and six countries Belgium, Finland, France, Ireland, Spain, and the United Kingdom have announced a timetable. Even on pledges, DAC donors aid effort is expected to reach only.32 percent by 21, below the level of the early 199s. Debt relief and technical cooperation account for fully two-thirds of the increase in DAC members ODA between 21 and 23: $6 billion was allocated to debt relief and $4.8 billion to technical cooperation. At about 17 percent, emergency disaster relief and food aid also represented a significant portion. Thus, the increase in bilateral ODA allocated to program and project assistance was a modest $.6 billion. Non-OECD countries are contributing significant amounts of assistance to less developed countries. These flows reached $3.4 billion or 4.9 percent of DAC ODA in 23. Saudi Arabia is the largest provider of aid in this group: $2.4 billion in 23. The Czech Republic more than tripled its development assistance in the past two years, providing $91 million in 23. South-South cooperation is also significant: countries such as Brazil, China, and India have been particularly active in providing technical assistance to low-income countries. Grants from NGOs using their own resources totaled $1.1 billion in 23 (compared to $8.8 billion in 22) and are expected to be sharply higher in the aftermath of the East Asia tsunami.

The share of Sub-Saharan Africa in total net ODA climbed to 33 percent in 23 amounting to $23.7 billion. After debt relief, though, the increment in program and project assistance was a modest $.6 billion. The increase was concentrated in: Congo (DR), Cameroon, Sudan, Tanzania and Ethiopia. ODA as a percent of donor GNI and ODA volumes: 23 and prospects for 26 Sweden Norway Luxembourg Denmark Netherlands Belgium Ireland France United Kingdom Finland Switzerland Spain Portugal Italy Greece Germany Austria DAC total Canada New Zealand Australia Japan United States ODA/GNI in percent.1.2.3.4.5.6.7.8.9 1 Sweden Norway Luxembourg Denmark Netherlands Belgium Ireland France United Kingdom Finland Switzerland Spain Portugal Italy Greece Germany Austria Canada New Zealand Australia Japan United States Net ODA in 23 US$ billions 5 1 15 2 25 Breakdown of nominal increase in net ODA by DAC donors in 21-3 (US$ billions) 17 16 15 14 13 12 11 1 9 8 7 6 5 4 3 2 1 Multilateral: $1.9 billion Emergency & disaster relief & food aid: $2.8 billion Debt relief: $6. billion By type Other bilateral: $1.2 billion Technical cooperation: $4.8 billion Total nominal increase in ODA in 21-3 is $16.7 billion and the real increase is $7.5 billion in 23 dollars. 19 18 17 16 15 14 13 12 11 1 9 8 7 6 5 4 3 2 1-1 -2 MICs: $.2 billion Jordan: $.8 billion Iraq: $2.1 billion Congo: $5.1 billion By country Unallocated by country: $3.9 billion Sub-Saharan Africa LICs: $3.9 billion Afghanistan: $1.1 billion Other LICs: ($.6) billion Source: OECD DAC Database

Sub-Saharan Africa s largest donors (21-3) Other multilateral 9% United States 16% IDA 14% France 1% EC 11% United Kingdom 7% Germany 6% Other bilateral 27% Source: OECD DAC database. Estimates of MDG financing needs vary widely, but all point to the need for a substantial increase. At the conservative end of these estimates, an increase in ODA of at least $5 billion is needed. Millennium Project Report (25) Increase over 23 levels of: Various Development Committee Papers (23-24) Report of the High-Level Panel on Financing for Development (Zedillo Report, 21) Commission for Africa (25, preliminary) $66 billion by 26 $83 billion by 21 $126 billion by 215 Initial increment of at least $3 billion (for MDG investment needs), rising into the $5 billion plus range Approx. an additional $5 billion a year over current levels (for directly supporting the MDGs) For SSA: An additional $25 billion a year (i.e. doubling over current levels) within 3-5 years, followed by an additional $25 billion a year by 215. Donors are allocating more aid to better performers those with stronger policies and institutions and to poorer countries. Selectivity in aid allocation Official development assistance net of emergency and food grants Flow Policy selectivity 1999 Policy selectivity 23 Poverty selectivity 1999 Poverty selectivity 23 Total aid 1.57 * 1.77 * -.34 * -.55 * Bilateral aid 1.15 * 1.4 * -.27 * -.47 * Multilateral aid 2.9 * 2.71 * -.68 * -.87 * Five largest donors United States 1.37 1.43 -.77 * -.88 * Japan 3.72 * 1.74 * -.23.1 France.65 1.27 -.17 -.32 Germany 1.99 * 3.36 * -.24 * -.52 * United Kingdom 2.82 * 3.89 * -.47 * -1.21 * * Significant at the 1 percent level or higher. Source: Levin 25.

Debt Relief As of November 24, 27 Highly Indebted Poor Countries (HIPCs) have reached the decision point and are receiving debt relief. Fifteen HIPCs have also reached the completion point. Harmonization In terms of flexibility and predictability if aid, for Africa overall, budget support increased from about $1.5 billion in 22 to about $2.5 million in 23. Delegated cooperation is highly limited to 21 percent of donors. For instance, in Ethiopia, Sweden will delegate its role in the health sector program to Norway, while Norway will delegate its role in the education sector program to Sweden. Less than 8 percent of donor missions were carried out jointly. Progress on alignment, harmonization, and predictability of aid Do donors rely on PRS to program their country assistance? Is budget support predictable? 9 7 8 7 6 5 4 3 79 68 66 64 62 6 58 56 6 6 69 2 1 Yes 21 Yes but.. 54 Donors making multiannual commitments Donors making timely commitments Donors making timely disbursements Use of country systems by donors Are donors delegating cooperation? Procurement Disbursement 31 33 6 Reporting 29 5 4 Monitoring & Evaluation Source: WP-EFF Survey Audit Environmental Impact Assesment 23 28 27 1 2 3 4 3 2 1 57 21 21 Yes Yes but.. No but.. No