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The Developmental Effectiveness of Untied Aid: Evaluation of the Implementation of the Paris Declaration and of the 2001 DAC Recommendation on Untying ODA to Ldcs

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The Developmental Effectiveness of Untied Aid: Evaluation of the Implementation of the Paris Declaration and of the 2001 DAC Recommendation on Untying ODA to Ldcs THEMATIC STUDY The Developmental Effectiveness of Untied Aid: Evaluation of the Implementation of the Paris Declaration and of the 2001 DAC Recommendation on untying ODA to LDCs Zambia Country Study Oliver S. Saasa Chrispin Mphuka The Thematic Study is being undertaken with the support of the Secretariat for the Evaluation of the Paris Declaration and OECD DCD. The views expressed are solely those of the study team and do not reflect the views of the sponsoring organisations. October 2009 ____________________________________________________________________________ Premier Consult Limited Offices Postal Address 29 Njoka Road P.O.Box,38163 Lusaka Zambia Olympia Park Lusaka Zambia [email protected] Tel: 260-211-290056 Fax: 260-211-290581 i Table of Contents Executive Summary ............................................................................................................................. iv Acronyms .............................................................................................................................................. ix Introduction ............................................................................................................................................ 1 1.1 BACKGROUND AND APPROACH ...................................................................................................................... 1 1.2 SCOPE AND METHODOLOGY .......................................................................................................................... 1 1.3 ZAMBIAN CONTEXT ....................................................................................................................................... 2 Aid flows and policy .............................................................................................................................. 5 2.1 OVERVIEW ..................................................................................................................................................... 5 2.2 AID POLICIES AND INSTRUMENTS ................................................................................................................... 5 2.3 STRUCTURAL ISSUES ..................................................................................................................................... 7 2.4 INSTITUTIONAL AND AID MANAGEMENT REFORMS ISSUES ........................................................................... 7 Statistical Review of Aid ..................................................................................................................... 10 3.1 TRENDS AND STRUCTURE OF FOREIGN AID ................................................................................................. 10 3.2 MODALITIES AND APPROACHES OF ODA .................................................................................................... 14 Consequences of Untying for Aid Uses ............................................................................................ 17 4.1 AID AND PROCUREMENT .............................................................................................................................. 17 4.2 NEW AID MODALITIES AND APPROACHES ................................................................................................... 17 4.3 PUBLIC PROCUREMENT ............................................................................................................................... 19 Project Analysis ................................................................................................................................... 22 5.1 BRIEF BACKGROUND OF COVERED PROJECTS ............................................................................................. 22 5.2 RULES AND REGULATIONS .......................................................................................................................... 23 5.3 PROCUREMENT PRACTICE .......................................................................................................................... 25 Developmental and Cost Effectiveness of Aid ................................................................................. 28 6.1 AID EFFECTIVENESS OF UNTYING ............................................................................................................... 28 6.2 DEVELOPMENTAL EFFECTIVENESS .............................................................................................................. 28 6.3 COST EFFECTIVENESS OF AID ...................................................................................................................... 30 Conclusions ......................................................................................................................................... 33 Annexes ................................................................................................................................................ 35 ANNEX 1: WATER SECTOR SUPPORT IN NORTHERN PROVINCE ........................................................................ 36 ANNEX 2: PRODUCTION , FINANCE AND TECHNOLOGY PROJECT ....................................................................... 40 ANNEX 3: SOUTHERN PROVINCE WATER SUPPLY AND SANITATION PROJECT .................................................. 45 ANNEX 4: WATER SECTOR PERFORMANCE IMPROVEMENT PROJECT ................................................................ 48 ANNEX 5: ZAMBIA NATIONAL PROCUREMENT SYSTEM .................................................................................... 53 ANNEX 6: REFERENCES ..................................................................................................................................... 56 ANNEX 7: LIST OF PEOPLE AND ORGANISATIONS INTERVIEWED ....................................................................... 58 ii __________________________________________________ The views expressed in this Report are solely those of the authors and do not necessarily reflect the views of the sponsoring organisations. iii Executive Summary Introduction In the 2008 Phase I study The Developmental Effectiveness of Untied Aid, it was found that aid to LDCs is now overwhelmingly untied (excluding exempt categories, technical co-operation and food aid). However, it was also found that there existed very little formal analysis of both the donor practices in partner countries and the actual consequences of untying aid at a country level. The Phase II study is in response to the proposals of the Working Party on Aid Effectiveness and the Development Assistance Committee (DAC) Network on Development Evaluation and the reporting requirement in the 2001 DAC Recommendation on untying ODA to LDCs. Phase II of the project is intended to provide evidence-based conclusions about the implications of untying aid and its impact on aid effectiveness in selected case-study countries, for presentation to the DAC by December 2009. This report provides the results of the Zambia Country Study. This study aims to highlight key issues through a short statistical review of the available data and through the assessment of a limited number of project case studies. The focus of the case studies was on the procurement practices of the donors, governmental executing agencies and implementing agents, that may have a significant impact how goods and services are purchased, with implications for aid effectiveness. The four projects selected as case studies were: • the Water Sector Support in Northern Province (WSSNP) supported by Irish Aid • the Southern Water and Sanitation Project (SWSP) funded by Germany • the Water Sector Performance Improvement Programme (WSPIP) financed by the World Bank • the district focused agricultural development Production, Finance and Technology Project (PROFIT) funded by USAID. Statistical and econometric analysis Zambia has received significant levels of external assistance and currently ranks among the top 10 African country recipients of ODA. Aid flows, as a share of overall public expenditure, peaked at 53% in 2001 (i.e. the year when the DAC Recommendation on aid untying was passed). Since then, the contribution of ODA to public expenditure has declined steadily, to around 24% in the 2008 budget. In absolute terms, total ODA commitments halved between 2005 and 2007. The fall in the contribution of aid flows to Zambia can largely be explained by improved external conditions, arising from both debt relief and rising copper prices. According to OECD/DAC statistics from 2005 to 2007, bilateral aid accounted for just over 90% of total ODA commitments. Almost all of this bilateral ODA takes the form of grants, with no new loan commitments made in 2007. The top bilateral donors, in terms of their commitments to Zambia, are Japan, the USA, Germany, the EC and the UK (in that order). Together, these five bilateral donors accounted for 70% of the total bilateral ODA to Zambia over this period. The vast majority of bilateral ODA to Zambia is reported as untied (86%), with around 4% of bilateral ODA reported as tied and 9% as partially tied. But there are large discrepancies in approach between the different donors. Whereas the UK, Sweden, Austria, Ireland and Luxembourg reported all of their aid as untied, Switzerland reported that 46.1% of its ODA is tied. Among other major bilateral donors, Japan reported 94.2% of its aid to Zambia as untied; the USA 81.8%, Germany 94.5%; and the EC just 17.7% untied. The largest proportion (82.3%) of EC aid is reported as partially untied. Aid modalities and tying Donors currently adopt
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