Review of the Development Co-operation Policies and Programmes Canada

> Full report

This year’s peer review of Canada’s development co-operation programme highlights Canada’s renewed commitment to Africa; a promising approach toward fragile states, such as Haiti and Afghanistan; initiatives to make Canadian aid more effective, focusing on accountability and explaining results to the Canadian public and parliament; and strong commitment to good humanitarian donorship (GHD). Canada still faces some challenges, including: (i) strengthening the mandate for development co-operation and for CIDA, while addressing some of the agency’s fundamental structural issues; (ii) producing a policy for development co-operation which focuses on reducing poverty; (iii) articulating an approach to policy coherence for development; (iv) continuing to increase aid to meet Canada’s commitments made at Monterrey; (v) focusing its aid on fewer partner countries in order to generate stronger impact and voice; and (vi) galvanising the implementation of the Paris Declaration on Aid Effectiveness. These steps are needed if Canada’s performance is to match its ambition to become a leading player in the donor community.

Overall framework and new orientations

Significant developments since the last peer review

Commitment to Africa

Canada continues to support Africa strongly. The government is on track to meet its commitment of doubling assistance to the continent by 2010 and is working with G8 and African partners to fight HIV/AIDS, tuberculosis and malaria; to build African capacity to address peace and security challenges; and to support economic development and governance reforms. The DAC appreciates these initiatives and encourages the government to develop a clear and coherent strategy for focusing its aid on key areas for Africa’s development, e.g. agriculture, governance, investment, trade, health or peace and security. Canada’s engagement in Africa should be long term and combined with substantial amounts of development aid in order to make aid more predictable and to generate economic opportunities, reduce poverty and foster political stability.

Promising approach toward fragile states and countries in conflict

Global peace and security is a defining element of Canada’s foreign policy, with implications for development and the geographic allocation of aid. In fragile states and countries in conflict, the whole-of-government approach is bringing together the Department of Foreign Affairs and International Trade (DFAIT), the Department of National Defence and the Canadian International Development Agency (CIDA) with some success. The approach is the outcome of a government-wide shared view and holds significant potential for policy coherence and co-ordinated programming across Canada’s federal departments and agencies. Since the review was undertaken, Canada has re-engaged in Latin America, including the Caribbean.

More effective aid

The DAC acknowledges Canada’s efforts to make its aid more effective, in particular:

• Canada has forgiven most ODA-related debt and increased its proportion of untied bilateral aid to the least developed countries (LDCs) from 32% in 2001 to 66% in 2005.
• The government changed its food aid policy in 2005 so that up to 50% (previously 10%) of its food aid could be purchased locally in certain LDCs and lower income developing countries.
• Canada has opened its market to duty-free and quota-free imports of most goods and services from poor countries and passed legislation to make generic HIV/AIDS drugs and other medicines more accessible.
• CIDA has begun concentrating aid in fewer countries and is experimenting with modest decentralisation in six African countries, moving away from traditional projects toward more programme-based approaches. The agency has made its operations more results-oriented and efforts are underway to reduce administrative costs.
• Canada has volunteered to chair the international Advisory Group on Civil Society and Aid Effectiveness. Canadian thinking on this topic will feed into the deliberations leading to the 2008 High Level Forum of Aid Effectiveness to be held in Accra, Ghana.
• CIDA is engaged in strengthening multilateral institutions’ ability and effectiveness, in particular to meet the Millennium Development Goals for health, education, gender equality and environmental sustainability. The government is also intensifying its collaboration with multilateral and other federal partners to support effective aid through the Good Humanitarian Donorship Initiative.

The DAC appreciates Canada’s initiatives and the processes which they have set in motion. However, challenges remain. Canada needs to demonstrate stronger commitment to the principles of the Paris Declaration on Aid Effectiveness; along with the MDGs, this declaration should be a key element of Canada’s development co-operation. Canada should also broaden its aid effectiveness agenda beyond focusing on accountability and demonstrating results to the Canadian public and parliament as is currently required by its Treasury Board Secretariat. The Federal Accountability Act and its Action Plan, introduced in April 2006, reinforce that focus, with potential implications for learning, innovation and risk-taking. While the DAC welcomes the government’s reforms of financial management, accountability and audit, they could increase the amount of paperwork both in Canada and in partner countries. In rolling out these reforms, Canada should consider the trade-offs between increasing corporate efficiency and avoiding risk, and ensuring accountability to Canadian taxpayers and partner countries.

Strengthening Canada’s development co-operation mandate and CIDA

Canada’s development assistance programme is a key element of foreign policy and should be given a stronger foundation, whether through legislation or other means. The programme is based on a number of federal statutes which do not establish a strong legal status for development co-operation. While CIDA is responsible both for policy and for implementing the major portion of Canada’s development assistance, its mandate is weak and its reports to parliament are not sufficiently development results-oriented. Consequently, the agency has been particularly affected by changing political circumstances and leadership, changes which have brought frequent policy pronouncements rather than stable and clear directions.

Producing a policy for development co-operation

Canada needs a development co-operation policy that puts poverty reduction at the heart of its international development assistance. Whilst the government has produced several sector policies, strategies and reports which cite Canada’s goal of reducing poverty, these documents generate a diffuse set of orientations. There is no clear single point of reference for Canada’s development co-operation. A development co-operation policy with a clear focus on poverty would also give direction to Canada’s federal departments and other partners working in areas such as security and trade. The policy should: (i) be set in the context of the Paris Declaration, endorsed by the government; (ii) clarify Canada’s plans to scale up aid to achieve the commitments made at Monterrey; and (iii) spell out the priority countries, sectors and themes for Canada’s engagement, based on clear development criteria.

Further mainstreaming gender equality and environment

Gender equality in policy work and programming represents a sizeable share of Canada’s bilateral aid, with CIDA implementing most gender-related activities. The agency can pride itself in its leadership role in pursuing gender equality and women’s empowerment and for bringing gender issues onto the global policy stage. CIDA’s Framework for Assessing Gender Equality Results is the first assessment tool for a cross-cutting issue to be developed by an OECD country. This framework should help respond to criticisms expressed in an internal evaluation that gender equality is not sufficiently mainstreamed into programming. CIDA is currently reviewing its 1999 gender equality policy to take stock of lessons learned.
CIDA is also reviewing its 1992 Strategy on Environmental Sustainability. The agency’s monitoring and tracking system ensures that Canada’s Environmental Assessment Act is applied to projects. While this may avoid negative impacts, it will not necessarily ensure positive environmental benefits from programme or project interventions. The new Investment Monitoring and Reporting Tool, recently developed for performance monitoring and reporting at the project/investment level, can capture how the environment is positively integrated into all investments.. Canada should allow the use of partner countries’ environmental impact assessment systems where they meet internationally accepted levels, rather than relying on its own. This would help build capacity and strengthen national systems, in line with the principles for more effective aid. The agency should also take environmental concerns more into consideration when evaluating projects and programmes: an internal review found that the environmental performance of development initiatives was not addressed in 61% of CIDA’s evaluations.

Developing a communication strategy

Most Canadians support development co-operation, although public understanding of development issues is rather basic. Whilst the government tries to build public development awareness through its corporate communication and outreach programmes, it does not have a communication strategy that links development co-operation, effective aid and the MDGs. Applying the Paris Declaration principles implies changing how aid is delivered; thus it is important that the Canadian public and parliament understand what local ownership and mutual accountability mean and how they can be applied so that both Canada and the partner country can benefit from the latter’s increased control over its development process and outcomes.

Recommendations

• Canada needs a clear, simple and consistent vision for development assistance - whether through legislation or other means - which would give CIDA a clear purpose and specific objectives that can be monitored by parliament. The vision should give proper importance and profile to reducing poverty and to the principles of the Paris Declaration on Aid Effectiveness.
• Canada should broaden its perspective on aid effectiveness to strengthen the focus on outcomes in partner countries.
• CIDA should integrate environmental sustainability more systematically into programming, including in evaluations, as it is now doing in gender equality.
• The Canadian government is encouraged to share with the DAC good practice in implementing the whole-of-government approach, as in Afghanistan, Haiti and Sudan.
• CIDA would benefit from a communications strategy that strengthens its outreach to the public and promotes a wider understanding of the efforts and outcomes of development co-operation and of the reform agenda embodied in the Paris Declaration.

 

Policy coherence for development

Developing a clear framework for policy coherence for development

Policy coherence for development has also suffered from the lack of policy continuity and consistency. Canada’s political and policy discussions reveal a debate at two different levels in relation to policy coherence for development. At the first level, development co-operation is expected to be coherent with foreign policy; the emphasis is often on what development can do for foreign policy rather than the reverse. For example, Canada’s assistance to Afghanistan is perceived as helping to combat poverty and extremism and ultimately contributing to Canada’s national security. At the second level, the primary focus is on internal policy coherence for making aid more effective. For example, CIDA wants to improve the coherence between its partnership and bilateral programmes in the context of the partner country ownership principle on which the Paris Declaration is founded.

At the same time, Canada recognises that coherence is needed in economic, social, political and environmental policies to achieve the strategic goals of reducing poverty, respecting human rights and making development sustainable. The whole-of-government approach now largely addresses the challenge of policy co-ordination. DFAIT implements a broad range of policies relevant to development and this facilitates policy coherence. Outside the foreign affairs remit numerous committees at different levels, including parliamentary and inter-departmental committees, co-ordinate policy on a range of issues. For example, to understand how migration and related policies affect developing countries, Canada is engaged in interdepartmental dialogue through the International Migration Group involving CIDA, Citizenship and Immigration Canada and Health Canada, among others. This approach ensures that Canada speaks with one voice at international discussions. Nevertheless, Canada does not have a clear statement promoting policy coherence for development, which hinders CIDA’s leadership on development issues in government discussions and negotiations.

Recommendation

Canada needs to articulate its approach to policy coherence for development to implement the whole-of-government approach more systematically, involving all relevant departments and agencies.

Aid volume and distribution

Upward trend in Canada’s ODA

Compared to net official development assistance of USD 1.92 billion in 2001, Canada’s 2006 ODA amounted to USD 3.71 billion. This was 9.2% less in real terms than in 2005, when aid had been boosted by significant debt relief to Iraq and humanitarian aid following the Indian Ocean tsunami. Canada’s assistance fell from 0.34% of gross national income (GNI) in 2005 to 0.30% in 2006, ranking Canada ninth out of 22 DAC members in terms of aid volume and fifteenth in terms of aid as a share of national income.

Canada’s ODA has risen in line with the DAC average since 2001 but is nevertheless significantly lower than the UN 0.7% ODA/GNI target. Successive governments have committed Canada to doubling international assistance by 2010/11 from the 2001/02 level and have subsequently increased aid budget allocations by 8% annually.

Country aid allocation is becoming more selective

The Canadian programme has for a long time been dispersed over a large number of countries. In 2003, CIDA undertook to focus more of its bilateral aid in nine countries (Bangladesh, Bolivia, Ethiopia, Ghana, Honduras, Mali, Mozambique, Senegal and Tanzania) and in 2006, six out of these nine countries were among the top 20 recipients of CIDA’s bilateral aid after Afghanistan, Haiti and Sudan. Spending to the top 20 increased to 68% of bilateral aid allocable by country in 2005-06 compared to 60% in 1999-2000. Predicting future Canadian aid allocations will be difficult, however, until the government specifies and makes public a list of core countries and more aid is allocated on a medium-term basis.

The need to restructure the International Assistance Envelope

The International Assistance Envelope (IAE) is Canada’s financial and policy tool for monitoring the whole-of-government approach. It enables ministers to review how various programmes and expenditures combine to create the Canadian response to global challenges. The IAE provides for both ODA and other types of assistance that do not meet the ODA definition, e.g. G8 Global Partnership Programmes, counter-terrorism capacity-building initiatives, support for non-UN mandated peacekeeping and peacemaking missions and security. There is no separate and transparent ODA framework incorporating the activities of the federal departments and agencies concerned. Furthermore, over a third of Canada’s bilateral ODA on average is not allocated to a particular region and over 40% is not allocated to a particular income group.

A renewed partnership with civil society organisations

Canada has a vibrant civil society and substantial ODA funds flow to and through Canadian civil society organisations (CSOs). CIDA’s Partnership Branch manages the overall relationship with Canadian private and voluntary sector partners, except for relations with democratic governance partners, which are managed by the Office of Democratic Governance. Canada has been involved in policy work and dialogue with Canadian CSOs on the role of non-state actors in programme-based approaches and aid effectiveness. New application forms for CIDA’s Voluntary Sector Fund and the Voluntary Sector Programme ask Canadian partners to clearly indicate how their proposed projects will support country-led poverty reduction strategies. The agency has also engaged in “partnership renewal” involving Northern and Southern civil society and private sector organisations. The process has been accompanied by high-level engagement with CSOs in Canada as well as with Southern and Northern CSOs in the work of the DAC Advisory Group on Civil Society and Aid Effectiveness. The DAC welcomes this initiative to engage CSOs in the implementation of the Paris Declaration. At the same time, Canada should be mindful that working with a large number of CSOs may incur excessive administrative costs.

The need for a stronger strategic approach to multilateral aid

Canada’s management responsibilities for multilateral assistance are somewhat dispersed:  DFAIT manages the political relationship with the UN system, the Finance Department manages the relationship with the IMF and the World Bank, in consultation with CIDA and DFAIT, and the departments of Health, Environment, Agriculture and Agri-Food Canada manage Canada’s relationship with UN agencies. This spread of responsibilities calls for a stronger strategic approach that spells out the specific role and objectives of the federal departments and agencies dealing with multilateral assistance. This is particularly important given Canada’s whole-of-government approach to fragile states and countries in conflict.  To encourage the coherence of its bilateral and multilateral policies in fragile states, CIDA could engage with multilateral aid agencies in its processes for programming aid to these states.

Recommendations

Canada is encouraged to fulfil its aid objectives for 2010/11 and to draw up a timetable for achieving the UN 0.7% ODA/GNI target. It should continue to scale up its development aid to help achieve the MDGs, in line with its ambition to become a major donor.
The International Assistance Envelope should be refined to facilitate clear reporting of ODA in accordance with Canada’s aid policy and to allow greater transparency.
The Canadian government should allocate aid in fewer countries on the basis of development criteria that maintain the focus on reducing poverty and give greater predictability to its aid partners. It should also specify the list of core countries and priority sectors for Canada’s international development assistance.
Canada should step up efforts to be more strategic in allocating multilateral aid and harmonise its own initiatives for multilateral aid effectiveness with existing frameworks, such as the Multilateral Organization Performance Assessment Network .

Organisation and management

Delegating authority to the field and reviewing the organisational structure

 CIDA’s staff are concentrated at headquarters, and all significant policy and spending decisions are taken in Ottawa. The DAC finds this organisational structure incompatible with emerging programme-based approaches and Canada’s ambition to gain influence at the country and international levels. International assistance reform, embodied in the Paris Declaration, provides a new impetus for CIDA to restructure and to decentralise its operations to the field. Shifting authority to the field will allow the agency to react both flexibly and quickly to local needs and to develop and nurture relationships with a broad range of stakeholders at the country level, in the spirit of the Paris Declaration. The structural transformation which CIDA has begun since this review was undertaken, could address these concerns.

Clarifying the evaluation policy

In April 2007 the government announced a reform of its evaluation policy to strengthen its evaluation function and its independence from operations. The DAC welcomes this step. However, as all activities will now have to be evaluated, the reforms will have resource implications, including for CIDA. Whether the Treasury Board has made sufficient allowance for this is unclear. CIDA’s present list of evaluation reports includes mostly programme evaluations. The agency has performed key evaluations in Afghanistan and on gender equality which had an impact at the corporate level; as well as joint institutional evaluations of UNICEF, the World Food Program, and the International Fund for Agricultural Development; and joint country evaluations of Egypt, South Africa and Tanzania. However, the Committee questions whether CIDA will be able to meet its requirements for internal, strategic as well as joint evaluations, given the size of its evaluation unit. The DAC encourages the government to clarify how the central evaluation policy will address these concerns.

Simplifying the accountability system

At present, CIDA integrates results-based management, evaluation, internal audit and knowledge management into its Performance Management Branch. The agency’s Results and Risk Management Accountability Framework sets out the approach to monitoring and provides the basis for evaluation and risks assessment. The articulation of results and risks is an important aspect of the system. However, that system is cumbersome, with limited differentiation in the indicators required and the processes involved for large and small programmes. While this helps to compare results between different activities, efficiency is compromised.

Taking further steps to implement the Paris agenda

Galvanising the principles of the Paris Declaration

CIDA should introduce corporate incentives to galvanise the implementation of the Paris Declaration principles, e.g. rewarding country managers for progress made on harmonisation and alignment, and developing some guidance and training to mainstream good practice. The agency has begun working with other donors and could do more joint country and sector analysis, programming and evaluations. Other possible options, which CIDA is also testing in the field, include delegating more aid management responsibility to other donors and making better use of existing local harmonisation plans. To reduce transaction costs in the long run and to help increase partner countries’ ownership of their own development, Canada should progressively integrate its parallel implementation units into partner countries’ line ministries, in consultation with other donors involved. In the spirit of mutual accountability, Canada should encourage and enable its partner countries to be accountable to their beneficiaries, parliaments and to Canada for the proper use of funds.

Consolidating a consensus on capacity development

Both CIDA and the International Development Research Centre (IDRC) are actively engaged in strengthening capacities in partner countries. CIDA’s flexible, learning-by-doing approach relies on ongoing monitoring and dialogue rather than on ex ante capacity assessments and planning. IDRC has developed tools and typologies to help staff and managers conceptualise, plan, monitor and evaluate capacity development in research. The DAC encourages CIDA to help consolidate a consensus on capacity development with national governments and other donors, making it a central topic of the policy dialogue; and to address the systemic factors discouraging country-led capacity development. A strategic and co-ordinated approach to building local capacities is even more necessary in fragile states where weak administrative and management capacities can lead donors to substitute for the national administration.

Recommendations

• CIDA should review its organisation and consider adapting structures that enable increased management and financial authority to field directors/heads of aid.
• CIDA should provide appropriate incentives to strengthen Canada’s commitment to implementing the Paris Declaration and commit firmly to working with other donors at field level.
• Canada should streamline and simplify its monitoring and reporting system for results-based management as part of its performance management reforms.
• Canada should encourage strategic approaches to capacity development, working together with other donors to strengthen partner countries’ ability to formulate and co-ordinate their own capacity development frameworks and technical assistance needs.
• The Committee encourages CIDA to build on IDRC’s unique approach to capacity building in developing countries. CIDA could draw further on the Center’s research to enhance its policy formulation and evidence-based programming.

Humanitarian action

Canada regards humanitarian action as an important part of its ODA and foreign policy. It is consistently in the top ten of humanitarian aid donors by volume and its influence matches this level of funding. Canada is closely associated with pursuing and promoting GHD and the wider strengthening of the international humanitarian system through its active participation in the GHD initiative and agency governing bodies.
Humanitarian action in Canada is characterised by a well co-ordinated whole-of-government approach, a systematic process for needs-based resource allocation and an emphasis on multilateral and unearmarked funding channels. Canada has been at the forefront of implementing funding modalities to strengthen the humanitarian system, channelling 80% of its contributions (mainly core or unearmarked contributions) through the United Nations.

A policy document is being prepared to formalise a number of established aspects of Canada’s approach underpinned by GHD and International Humanitarian and Human Rights Law. This forthcoming policy balances material assistance with the protection of civilians in armed conflict, as well as focusing on disaster risk reduction. Canada should ensure the policy document reflects the whole-of-government consensus that gives Canada’s humanitarian action a firm foundation, while maintaining its independence from other government objectives.

While Canada funds all humanitarian sectors, a relatively high proportion (47%) of CIDA’s humanitarian expenditure was on food aid in 2006. Canada should consider whether this level of support to food aid always matches the level of need in a particular crisis or a particular year. It should consider whether more flexibility can be built into sectoral allocations, subject to Canada’s current commitments under the Food Aid Convention and without reducing total contributions. The DAC appreciates Canada’s recent efforts to reduce the tying of its emergency food aid and encourages the government to consider untying it entirely.

Canada was among the first contributors to the new Caribbean Catastrophe Risk Insurance Facility which will provide participating governments from the Caribbean region with immediate access to liquidity if hit by a hurricane or earthquake. Being better prepared for disasters, and reducing risk and vulnerability to disasters, is expected to be an area of focus in Canada’s forthcoming humanitarian policy. CIDA should continue to use the opportunities created by disasters to leverage interest in planning for future disasters.

Recommendations

• Canada should formalise its humanitarian action framework after consulting across government and with stakeholders. This will help to ensure a consistent institutional response and to implement its commitment to good humanitarian donorship. This will also enhance understanding of how Canada approaches humanitarian action, including important principles such as the protection of civilians and disaster risk reduction.
• Canada should consider untying its emergency food aid entirely.
• Canada should ensure that good practice in disaster risk reduction is integrated into programming and that high level buy-in encourages all appropriate geographical desks to be proactive in disaster risk reduction.