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OECD DAC – PDE Thematic Study on Untied Aid: Ghana Country Study

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OECD DAC – PDE Thematic Study on Untied Aid: Ghana Country Study OECD DAC – PDE Thematic Study on Untied Aid: Ghana country study October 2009 Matthew Geddes, Emmanuel J. Mensah, Luisa Natali, and Peter Quartey Overseas Development Institute 111 Westminster Bridge Road London SE1 7JD, UK Tel: +44 (0)20 7922 0300 Fax: +44 (0)20 7922 0399 Email: [email protected] I ACKNOWLEDGEMENTS The authors would like to thank all those in the Government of Ghana and Development Partner Agencies in Ghana for their cooperation during the country study investigations between October 2008 and February 2009 listed in Annex G. The authors would like to express their thanks to Dr Edward Clay who supervised the study, to Dr Florian Wieneke at KfW and Niels Dabelstein of the Secretariat for the Evaluation of the Paris Declaration for the generous advice and assistance they have provided over the course of this study. The Study has benefitted from the advice of those responsible for the CRS database in the OECD. At ODI the advice of Isabella Massa and Dirk W. te Velde has been helpful. The preparation of the study has drawn extensively on ideas discussed and information provided during Phase One of the OECD DAC and PDE Thematic Study on the untying of aid, especially by development cooperation agencies in Australia, Canada, Denmark, Norway and Switzerland, and the management group for the study. This report prepared as part of the DAC-PDE Thematic Study is also partially based on the earlier paper by Edward J. Clay, Matthew Geddes, Luisa Natali, Emmanuel J. Mensah and Peter Quartey, The trade implications of aid instruments and tying practices: Ghana country study, Overseas Development Institute (ODI), London, July 2009. The country study is partly funded under a research grant from the KfW to the Overseas Development Institute (ODI), London, and partly by the Secretariat for the Paris Declaration Evaluation and the DCD of the OECD in supporting the Thematic Study on Untying of Aid. None of the agencies supporting the study or consulted are in any way responsible for the content and any possible errors contained therein. I Contents 1. Introduction 1 2. Review of aid and its untying status 3 3. Econometric analysis of the implications of bilateral aid for donor exports 18 4. The process of untying – project analysis 23 5. Untying and aid delivery 29 6. Untying and aid effectiveness 32 7. Conclusions 36 Annexes A Project Process Analysis of Damanko-Kpassa project 39 B Project Process Analysis of NORST/NORWASP projects 49 C Cost comparison: Odaw Drainage Works 63 D Data issues and definitions 64 E Econometric Analysis in detail 68 F Project characterisation 72 G Contacts 73 II List of Tables Table 2.1 Bilateral donor commitments and individual untying status (2005-7) 8 Table 2.2 Bilateral donor commitments and untying across donors (2005-7) 9 Table 2.3 Untying status and aid instruments (2005-7) 10 Table 2.4 Untying status and aid type (2005-7) 10 Table 2.5 CIDA response to modalities questionnaire 12 Table 2.6 Total disbursements by modality (2003-8) 13 Table 2.7 Budgetary Support disbursements by donor (2005-07) 13 Table 2.8 Sectoral distribution of ODA and untying status (2005-7) 15 Table 2.9 Untying in the Water & Sanitation sector 16 Table 3.1 Econometric analysis of donor exports during 2002-2007 20 Table A.1 Damanko-Kpassa: Recommended Construction Firms 43 Table A.2 Damanko-Kpassa: Number of Responses to the Tender Process 43 Table A.3 Damanko-Kpassa: Result of the Price-Difference Analysis 47 Table B.1 NORWASP: Budget Summary 52 Table B.2 NORWASP: Summary of Training Provided to CWSA Staff 56 Table B.3 NORWASP: Canadian Advisory Services during the Project 57 Table B.4 NORWASP: Ghanaian Advisory Services during the Project 58 Table C.1 Odaw Drainage Channel Works: Cost Comparison 63 Table E.1 Econometric results for Burkina Faso 68 Table F.1 Project ‘packages’ and likely untying status 72 List of Figures Figure 2.1 ODA to Ghana from 1980 to 2007 4 Figure 2.2 Untying bilateral ODA in Ghana 1980-2008 6 III SUMMARY Introduction In the 2008 Phase One study The Developmental Effectiveness of Untied Aid1, it was found that aid to LDCs is now overwhelmingly untied (excluding the 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 Two 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 Two 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 Ghana Country Study. This study is a contribution to Phase Two of the wider OECD DAC – PDE Thematic Study on Untied Aid1. The Thematic Study on Untied Aid is designed to provide both a comprehensive assessment of current donor policies and practices regarding the tying status of aid and an assessment of the effects of the untying status on aid effectiveness. The Ghana Country Study is funded partly under a grant from KfW to the Overseas Development Institute (ODI), London, and partly by the Secretariat for the Paris Declaration Evaluation and the DCD of the OECD in supporting the Thematic Study on Untied Aid. The Phase One report2 focused on the HQ level and the extent of the formal untying that has been reported by donors. Phase One concluded that ODA to LDCs, and to developing countries more generally, is now overwhelmingly formally untied, excepting exempted categories under the 2001 Recommendation. However, there has been very little systematic investigation into the effectiveness of untied aid, or even into understanding how untying works at the country level. This country study is part of a wider attempt to address this gap, and was designed to serve as the pilot for the subsequent series of five further recipient country studies. In selecting Ghana to be a pilot Country Study, several factors were taken into account: • African states make up a large share of aid recipient countries. • Ghana is widely regarded as having relatively good governance, and has not suffered any recent large-scale humanitarian crisis or other shock that would have resulted in a high proportion of non-development aid. • Donors employ a wide range of instruments and modalities. • Ghana has a recently reformed procurement law and, in addition, a range of procurement options should be available. • The Government is strongly committed to the PD process for aid effectiveness, as reflected in it hosting the Accra summit in 2008, therefore ensuring the requisite co-operation for a study focussed on the effectiveness of donor practices. 1 The full title is: The Developmental Effectiveness of Untied Aid: Evaluation of the Implementation of the Paris Declaration and of the 2001 DAC Recommendation on Untying ODA to the LDCs. 2 http://www.oecd.org/dataoecd/5/22/41537529.pdf IV Ghana has a population of approximately 23 million and in recent years has enjoyed steady and increasing economic growth, as well as being the first Sub-Saharan African country to achieve the Millennium Development Goal (MDG) on poverty. GNI per capita was US$ 450 in 2005, and ODA was 10.4% of GDP in 2005. ODA to Ghana amounted to US$ 1,236 million in 2007, equivalent to 10% of GNI and over $50 per capita. Ghana is regarded as a ‘star’ partner of the development co- operation community. Support is broad based: the World Bank provided 20.4% of ODA disbursements in 2007; Netherlands, 12.8%; UK, 11.9%; USA, 9.4%; EC, 6.7%; AfDB, 5.4 %; and Denmark 5%, with five other donors - Canada, France, Germany, Japan and Spain – each contributing between 2.5% and 4.7%. Bilateral donors increasingly dominate aid support in Ghana. As the pre- Accra aid performance review recognised, this multiplicity of donors exemplifies the need for action on implementation of the Paris Declaration on aid effectiveness. Methodology Untying in practice involves the relaxation of just one constraint on the provision of aid – on the sourcing of goods and services. The approach adopted is to consider the question of effectiveness in terms of five sequential issues. Firstly, the study examines the association between formal untying and aid modalities and uses in statistical terms. Secondly, it looks at the connections between newer and potentially better practices in the PD aid effectiveness sense, for which untying is a necessary condition. Thirdly, it investigates the effects of untying on procurement, in terms of procedures used, the sourcing of goods and services, and the implications for the local and wider regional economy. This leads to a provisional exploration of both the cost efficiency and, finally, developmental effectiveness implications of untying. It is hoped that this study will provide a benchmark against which further moves towards untying could be assessed. In an initial review, including documentation and discussions with stakeholders, it became clear that to ensure focus and comparability between projects the study should concentrate on one sector. Water and Sanitation (W&SS) was selected, because it is an infrastructure and growth sector with a strong social orientation, which involves procurement of substantial amounts of both physical goods and services, as well as a significant TC component and a variety of approaches.
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