Evaluation of the implementation of the Paris Declaration The Developmental Effectiveness of Untied Aid (1) Thematic Study The Developmental Effectiveness of Untied Aid: Evaluation of The Developmental the Implementation of the Paris Declaration and of the 2001 DAC Recommendation on Untying ODA to the LDCs Effectiveness Phase I Report of Untied Aid (1) This report presents the results of Phase I of a thematic study being un- dertaken within the framework of the Evaluation of the Paris Declaration, and in response to the request for an evaluation in the 2001 DAC recom- mendation to untie ODA to the LDCs. A second phase comprising field studies will be conducted in 2009. October 2008 Ownership, Alignment, Harmonisation, Results and Accountability Evaluation of the Paris Declaration thematic-omslag.indd 1 26/11/08 17:31:26 THEMATIC STUDY THE DEVELOPMENTAL EFFECTIVENESS OF UNTIED AID: EVALUATION OF THE IMPLEMENTATION OF THE PARIS DECLARATION AND OF THE 2001 DAC RECOMMENDA- TION ON UNTYING ODA TO THE LDCs Phase One Report ISBN: 978-87-7087-071-9 e-ISBN: 978-87-7087-072-6 © Ministry of Foreign Affairs of Denmark Suggested citation: Clay, Edward J., Matthew Geddes, Luisa Natali and Dirk Willem te Velde 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 The LDCs, Phase I Report. Copenhagen, December 2008. Photocopies of all parts of this publication may be made providing the source is acknowledged. Graphic Design (Cover): ph7 kommunikation, www.ph7.dk Print: Ministry of Foreign Affairs, Printing Office The report can be downloaded directly from http:///www.oecd.org/dac/evaluationnetwork and ordered free of charge online at www. evaluation.dk or from: DBK Logistic Service Mimersvej 4 4600 Koege Denmark Telephone +45 32 69 77 88 Contacts: Dr E J. Clay [email protected] and Ms Dani Phillips [email protected] Overseas Development Institute (ODI), 111 Westminster Bridge Road London, SE1 7JD, UK Phase One of the Thematic Study is being undertaken with the support of the Secretariat for the Evaluation of the Paris Declaration and the OECD/DCD. The views expressed are solely those of the study team and do not reflect the views of the sponsoring organisa- tions. The study makes extensive use of information from the OECD Creditor Reporting System (CRS) database as updated on 19 June 2008. The views expressed are solely those of the study team and do not reflect the views of the sponsoring organisations. THEMATIC STUDY THE DEVELOPMENTAL EFFECTIVENESS OF UNTIED AID: EVALUATION OF THE IMPLEMENTATION OF THE PARIS DECLARATION AND OF THE 2001 DAC RECOMMENDA- TION ON UNTYING ODA TO THE LDCs Phase One Report Edward J. Clay, Matthew Geddes, Luisa Natali and Dirk Willem te Velde October 2008 Contents Summary............................................................................................................................ vii List of Acronyms ............................................................................................................... viii 1 INTRODUCTION ..........................................................................................................1 1.1 Background .........................................................................................................1 1.2 Purpose, scope and timetable ............................................................................2 1.3 Stage I: approach, activities and outline of report ..............................................2 2 THE INTERNATIONAL RULES AND AGREEMENTS CONCERNING THE TYING STATUS OF ODA................................................................................................................4 3 A STATISTICAL ANALYSIS OF THE UNTYING/TYING STATUS OF ODA ..............7 3.1 An incomplete picture of untying and tying status of ODA .................................7 3.2 Tying status: trends and recent donor performance...........................................9 3.3 Donors responding to the 2001 Recommendation...........................................11 3.4 A multivariate analysis of the relationships between tying status and other aid and donor characteristics...............................................................................................17 4 DONOR POLICIES AND PRACTICES: HOW DOES UNTYING WORK? A SURVEY OF FIVE DONOR EXPERIENCES OF UNTYING ............................................................20 4.1 Objectives and scope........................................................................................20 4.2 Preliminary findings...........................................................................................21 4.3 Donor country experiences of untying ..............................................................23 5 THE IMPACTS OF TYING AND UNTYING: A LITERATURE REVIEW....................35 5.1 Introduction: objectives and scope ...................................................................35 5.2 The effects of tying: conceptual issues.............................................................35 5.3 The effects of tying: evidence ...........................................................................36 5.4 The impacts of untying aid ................................................................................39 6 Preliminary findings and implications for design of Phase II......................................43 6.1 Responding to the 2001 Recommendation ......................................................43 6.2 Implications for Phase II....................................................................................45 Annexes to Phase One Draft Report.................................................................................47 Annex A: Statistical tables .............................................................................................47 Annex B: Explaining the share of untying in bilateral ODA: a regression analysis ......50 Annex C: Bibliography...................................................................................................56 Annex D: Terms of Reference for Study........................................................................63 iv List of Tables Table 2.1 DAC definitions of tying status of ODA, other official flows and officially supported credits.............................................................................................4 Table 2.2 Chronology of OECD agreements on tying status of aid including credits that qualify as ODA.................................................................................................5 Table 3.1 DAC donor countries: tying status of bilateral ODA to LDCs and non-LDCs.7 Table 3.2 CRS and DAC aggregate data coverage of tying status in 2006 1 .................8 Table 3.3 DAC donor countries: tying status of bilateral ODA in 2006 (% of bilateral ODA)1 ............................................................................................................10 Table 3.4 DAC donor countries: tying Status of aid in 20061........................................12 Table 3.5 DAC donor countries: tying status of bilateral ODA to LDCs according to grant/non-grant status and technical cooperation component in 20061 .......13 Table 3.6 DAC donor countries: bilateral ODA by consolidated sectors in 20061 ........14 Table 3.7 Global cereals food aid by source of supply in 2001 and 2007....................14 Table A.1 DAC donor ODA overview for 2006 (US$ million)1 .......................................47 Table A.2 DAC donors bilateral ODA by sector in 2006 (US$ million) 1.......................48 Table B.1 Dependent variable correlation matrix...........................................................51 Table B.2 Independent variable correlation matrix........................................................52 Table B.3 Preliminary regression analysis of the extent of untying...............................55 List of Figures Figure 3.1 Share of total bilateral aid that is untied 1985-2005...................................9 Figure 3.2 DAC donor countries’ effort-sharing – ODA and untied ODA as a percent 1 of Gross National Income in 2006 ...........................................................16 Figure 3.3 Relationship between share of untied bilateral ODA and share of bilateral ODA received by LDCs in 2006 (commitments in current US$ millions) .19 1 Figure 4.1.1 Norwegian bilateral ODA: tying status 1996-2006 ..................................23 1 Figure 4.2.1 Danish bilateral ODA: tying status 1996-2006 ........................................25 1 Figure 4.2.2 Danish bilateral ODA: tied aid by sector in 2006 ....................................26 1 Figure 4.3.1 Swiss bilateral ODA: tying status 1996-2006 ..........................................28 1 Figure 4.4.1 Canadian bilateral ODA: tying status 1996-2006 ....................................30 Figure 4.4.2 Canadian bilateral ODA: tied aid by sector and non-reported tying status in 2006 ......................................................................................................31 1 Figure 4.5.1 Australian bilateral ODA: tying status 1996-2005 ..................................32 Figure 4.5.2 Australian bilateral ODA: tied aid by sector and non-reported tying status 1 in 2005 (percent of total bilateral ODA) ..................................................33 Figure 5.1 Logic model: consequences of aid untying from the viewpoint of a bilateral donor ...........................................................................................42