Development Co-operation Review 2000: Summary and Conclusions

Overall rationale and policy

With its geographical location and its international role as a member of the Group of Seven Leading Industrialized Countries (G-7), the European Union (EU) and all of the major multilateral institutions, Italy is an important actor in the international development co-operation system. The rationale for Italy's development co-operation programme is not only set out in its basic law of 1987 and governmental guidelines; it also inescapably emerges from current realities, which call for comprehensive action by Italy:

• To provide effective, poverty-oriented, partnership driven development co-operation programmes in countries with strong political and economic ties to Italy in the Mediterranean, Southeastern Europe, the Horn of Africa, Southern Africa and other developing areas where Italy has traditionally played a key role. This includes contributing to humanitarian aid disaster relief activities.
• To contribute to the stabilisation and economic development of countries that are important to Italy's security and well-being, and be targeted to prevent and solve conflicts in developing countries and regions that might affect Italy's security (e.g. the Balkans).
• To support Italian foreign policy aimed at protecting the environment, addressing global population problems, and fighting drug trafficking, AIDS and other diseases.
• To meet demographic challenges arising from an ageing and declining population. Italy attracts immigrants from developing countries. The role of development co-operation in this equation is subject to analysis both by the government and academic researchers. This is a complex and sensitive issue with important ramifications for Italy and partner countries.

Considerable progress has been made in the management of Italian aid

Considerable progress has been made since 1996, during a reform process in Italian development co-operation concerning, primarily, some of the basics of its aid management. The reforms include:

• The launching of a USD 120 million programme for poverty reduction.
• Development of specific guidelines in a number of areas and sectors and a decision to mainstream poverty reduction in the Italian aid programme consistent with the International Development Strategy.
• The improved and generalised application of project cycle management.
• The institution of strict quality control of projects at the approval stage.
• The beginning of a programme of country strategies in partnership with recipient countries.
• The gains made during the recent reform process based on a more results-based management system.
• Enhanced policy coherence through better co-ordination between the Ministry of Foreign Affairs and the Treasury.
• More open and competitive bidding procedures.
• The establishment of field offices in 20 countries.
• Stronger participation in aid co-ordination at the local level.
• Closer co-operation with multilateral institutions.
• Supporting peace and conflict resolution activities with humanitarian and development aid.

Development Assistance Committee (DAC) field missions to Ethiopia and West Bank and Gaza (WBG) determined that, particularly since the establishment of the UTLs in 1998, Italy has developed stronger partnership relationships, intensified work in aid co-ordination and developed country strategies in those two recipients of Italian official development assistance (ODA), with more underway. Italian aid programmes reflect more involvement of non-governmental organisations (NGOs), participation of women and local communities, in addition to the building of partnerships with other actors through decentralised co-operation. Italy is backing some well-chosen projects in basic education, reproductive and primary health and food security. These types of activities, which reflect sound gender sensitivity, are in-line with the international development strategy, are impressive and should be replicated.

The gains made in the reform process over the past three years are however still fragile and not yet firmly institutionalised. Systematic problems remain:

The Italian authorities have concluded that the systemic problems that hold back the development co-operation programme need to be tackled by a major institutional reform. This is urgently required if Italy is to have a well-adapted organisational framework fostering professional development management capabilities and decentralisation.

A major reform would give the Italian programme a strong boost. By remedying the major bottleneck: professional staffing within a well-adapted organisational framework, the Italian aid system would be in a position to manage a significant increase in ODA. Once sufficient professional staff can be assured, in headquarters and in the field and appropriate career incentives are established, many of the longstanding problems of Italian aid can be solved. Not only could the basics of aid management be more firmly institutionalised, including country programming, project appraisal and evaluation, project cycle management, competitive procurement, and evaluation and feedback mechanisms, but also improved and more flexible field management could be introduced. Of equal importance, a culture of modern aid management based on a sense of common purpose and esprit de corps, with a high degree of accountability and professionalism, could be more strongly embedded into the Italian aid management system.

The proposed new law

Italian Parliamentarians have drafted a new law embodying such a reform. This has involved a major commitment of time and effort and wide consultations with civil society in Italy. The Parliamentarians visited the OECD/DAC in their preparations to study, from a comparative standpoint, the organisational and legal frameworks of other DAC Members. The Senate has passed the new law. The legislative process has been inaugurated in the Italian Chamber of Deputies, but remains pending at this point. If approved, the law would establish a new agency under the MFA to implement the Italian aid programme and enhance Italy's ODA in many ways, inter alia, through more adequate staffing structures, decentralised management and additional NGO programmes.

Establishment of the new agency would pave the way for recruiting additional professional staff to carry out the development co-operation programme and permit Italy to strengthen the entire development co-operation effort, which in recent years has been channelled, to an exceptional extent, through multilateral organisations. In fact, for 1996-98, Italy provided 62% of its ODA through the multilateral channel, the highest percentage among DAC Members. While the MFA would continue to provide policy guidance, the new agency would be responsible for all phases of implementation and evaluation of the programme.

Reform if the new law is not passed in the near future

If the new law is not passed in the near future, the Italian authorities are giving some thought to how to proceed. Without tackling the constraints and deficiencies of the current aid system, it must be recognised that the scope for expanding the current stock of direct bilateral programmes and projects is extremely limited. Continuing and accelerating the reform process seen in the past three years, is therefore essential. There is scope within the present legal framework to make the system function better through changes in the implementing regulations. Additional staff, further decentralisation of the decision-making, improved feedback and evaluation would be important steps forward.

In 1998, Italy's net ODA disbursements jumped 80% from 1997, from 1.27 billion United States Dollar (USD) to USD 2.28 billion. The ODA/Gross National Product (GNP) ratio recovered to 0.20% after an exceptional dip to 0.11% in 1997 (due to late parliamentary budget approval, many multilateral contributions were made in 1998 instead of 1997), but was still below the DAC average of 0.24%. Italy was third from last among DAC members in 1998 in ODA/GNP ratio, trailed only by Greece and the United States. In absolute volume, Italy ranked seventh in the DAC. Provisional estimates for 1999 show that Italy's ODA dropped over 20% compared to 1998 to USD 1.75 billion, with an ODA/GNP ratio of 0.15%.

In the case of Italy, increases in ODA need to be matched by improved performance through the implementation of management reforms as described above. The passage of the pending legislation and the establishment of a new implementing agency for development co-operation offers a way forward in this respect. However, even without the new law, progress can and must continue to be made in the areas noted.

Summary

To implement the main recommendations resulting from this peer review, Italy should:

• Strengthen the management structure and capacities of the Italian aid programme. This is urgently required if Italy is to have a well-adapted organisational framework fostering professional development management capabilities and decentralisation. A new legislative framework and major innovations in the management structure would be a highly desirable step forward.
• Increase its ODA level in order to reach the DAC average, currently 0.24%, over the next three years.
• Increase the number of long-term professional staff working on development co-operation, and adjust their skill mix so as to institutionalise gains made in the reform process over the past several years.
• Broaden the country strategy programme to involve more partner countries.
• Further refine objectives and criteria of the development assistance programme to guide the selection of partner countries, programmes and projects in coherence with country strategies and partner country plans.
• Pay increased attention to sustainability in project design and implementation.
• Provide greater delegation of authority to field posts.
• Streamline operational and administrative procedures.
• Strengthen the evaluation function with a view to providing feedback on lessons learned and use evaluations to promote dialogue with partners.
• Strengthen the public information programme, in particular to include the close connection between development education and immigration.
  

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