General framework and current directions New commitments to development

See also Italy's aid-at-a-glance

Italy is one of a handful of the world’s key actors in development co-operation. It exercises this role as a member of the G8 leading industrialised countries and of the European Union, and is active in a variety of other international fora. In terms of the volume of its aid, Italy is the seventh largest DAC donor, with a 2003 official development assistance (ODA) volume of USD 2 433 million, representing 0.17% of its Gross National Income (GNI). Italy’s national interests are closely intertwined with many other developing nations in proximity to its borders and elsewhere in the world, a fact that is often recognised in its statements of foreign policy. To address this political reality, Italy has made a range of commitments to development since the 2000 Peer Review. It agreed in Barcelona (2002) to more than double the volume of its ODA by 2006. It has become one of the world’s most active and innovative donors on debt relief since passage of a law on the topic (2000). It similarly took a lead position in launching its support for the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) in 2001, played a lead role in the OECD Bologna process for Small and Medium Enterprise and, at Palermo, hosted an initiative on e government (2002). Finally, it has made active contributions to the crises in both Afghanistan and Iraq, and it hosted the Rome High Level Forum on Harmonisation (2003).

The need for high level political resolve

To implement the Italian political vision on development issues, the 2000 Peer Review saw a need for significant reforms in its system and procedures of development co operation. Four years later, most recommendations contained in the 2000 Peer Review had not progressed significantly. The diplomatic and technical administrators of Italian development co operation stress that most key reforms depend on the national political process. Of particular relevance in this respect is the 1987 Law, which was identified in previous Peer Reviews as too detailed and prescriptive at the level of aid administration (personnel types and levels, management systems, ability to delegate) and too cursory on topics of basic strategy. Extensive parliamentary debate on this topic has not produced yet a clear, alternative legislative framework to date. Appropriate legislative reform is a priority, but this should not delay actions that can be taken within the present framework. Lacking clarity, the national vision for aid now is influenced increasingly by crisis and special initiatives. This approach runs the risk of diluting the direction of Italy’s longer term development co operation and ultimately detracting from effectiveness in the field.

In addition to the need for legislative action to move the strategy reform agenda, the Italian government needs to assert more proactive leadership, both at the political level and at the level of its aid organisation. Current political leadership is located essentially in the Ministry of Foreign Affairs (MFA), with development responsibilities shared among four under secretaries of state. Public dialogue on issues of policy and strategy is limited, although the ongoing dialogue with Parliament appears to be picking up because of the flurry of recent legislative proposals for new directions in aid.

Within the MFA, statements of official development policy have not been updated consistently in recent years. While the current approach to development strategy permits flexibility in dealing with a rapidly evolving political climate, a clearer framework for a more focussed operational strategy within the MFA could help to bring the different parts of Italy’s development co operation system together more effectively. It would also give clearer priority to topics of international consensus such as poverty reduction or the Millennium Development Goals (MDG).

The important role of public awareness

National political support for development co operation depends upon a supportive public. Current Italian public opinion strongly supports development co operation but shows scepticism towards the public aid system. The Directorate General for Development Co operation (DGCS) has begun to take stronger action in this area over the last year, however, it has yet to develop a modern, transparent and effective information policy for development co operation, including strategic alliances with Italian newspapers and television, co ordinated outreach at the level of Parliament, expanded public education and enlargement of public dialogue.

Recommendations

• Italy should define a national vision for development co operation which is derived from a more inclusive and broad reaching dialogue with Italian peers in development.
• Italy needs greater clarity in stating its aid policies, including that for poverty reduction. Such policies should be made accessible to all and described more operationally. Italy needs an operational strategy on how it will contribute to the achievement of the MDGs in view of the 2015 deadline.
• Italy needs legislative reform and, in the short term, continued action within the present framework.
• The Italian government needs a designated focal point for development co operation at the political level, for example a “Deputy Minister” for development.
• The DGCS should continue to develop a better defined strategy to raise public awareness of development issues, including a stronger alliance with other official and non governmental actors.

Aid volume and distribution

The challenge of effectively implementing future ODA growth

Over the last few years, growth in ODA has been restrained due to government wide budget austerity, but has periodically accelerated following special political initiatives. In Barcelona, Italy committed to an ODA/GNI target of 0.33% by 2006. This is estimated to require a 113% budget increase in real ODA (USD 2.7 billion) over the 2003 06 timeframe, representing an estimated 15% share of the global Monterrey undertaking. Simultaneously, the potential for future ODA growth is complicated by the fact that debt relief, which has been a significant factor in recent ODA growth, will be exhausted by 2006. Finally, the current political preference to favour the bilateral channel to absorb these increases will prove challenging, given the shortage of staff resources and limited use of new funding modalities.

Need for a more strategic allocation process

It is important to note Italy’s continuing focus on Africa, however, attention to a more strategic allocation of ODA resources has not taken place since the 2000 Peer Review. Today's list of country recipients of Italian ODA is actually longer than that of the previous review, up from 113 to 118. Only 11 of Italy’s 20 priority recipient countries in the 2000 Peer Review remain on the 2004 list. At the level of individual recipient partners, interest in allocating Italian ODA around substantive, locally-led country strategy planning appears to have diminished.

Italy continues to be the DAC member with the highest percentage of multilateral aid (51% of total ODA in 2003), even though that portion declined from 65% in the previous Peer Review. The trade offs between funding of the multilateral and bilateral channels should be made more explicit and could be based more effectively on strategic considerations related to performance based feedback. In every case they should be consistent with the capacities of aid management in either channel. This may require stronger MFA Ministry of Economy and Finance (MEF) co operation at different levels and an improved MEF capacity to monitor, evaluate and plan its multilateral investments.

At the level of sector priorities, the Italian programme similarly tends to disperse funding. Its attention to a wide range of sectors permits flexibility in taking on the challenges of development cooperation, but the broadening of its portfolio further stretches its already limited staff capacity. Finally, in the bilateral context, cross cutting issues such as gender, HIV/AIDS and poverty reduction tend to be managed through the simpler project modality, rather than being mainstreamed through the programme, despite Italy’s demonstrated intellectual capacity to address their multidimensional complexities.

Recommendations

• Italy should set out an explicit growth path for 2005 and 2006 to fulfil its ODA commitments announced at Barcelona in 2002, as an important part of the global Monterrey undertaking.
• Italy should emphasise more strategic and performance based budgeting in prioritising its funding allocations. This relates to identification of priority countries or sectors and to allocations between bilateral and multilateral channels.

Policy coherence for development

Making policy coherence a priority

Italy is well placed to understand the benefits of a more joined up approach to the wide range of policies affecting the recipients of its development assistance. For example, the approach to inter ministerial policy co ordination piloted in Albania could equally be applied to other prominent aid recipients or to inter ministerial policies in such areas as trade (e.g. olive oil, sugar), foreign direct investment, untying or migration, among others.

Special attention is drawn to the opportunity for revision of Italy’s policy on development co operation and Foreign Direct Investment, away from an approach focused on encouraging Italian FDI through credit schemes and facilitation, to one centred on supporting the enabling environment for investment in developing countries.

Also, it was noted that the current level of untying of Italian ODA does not appear to have improved since the 2000 Peer Review, when it was 62% tied. Conclusions in this respect are difficult, as Italy has yet to provide updated data, but the last estimation was 92% in 2001, a year of limited debt relief. A revision of policy in favour of further untying would contribute to the greater effectiveness of its aid.

In order to increase the scope for a more integrated and regular attention to policy coherence for development issues, several opportunities exist. While Italy regularly considers coherence issues in preparation for major international events, it does not yet have a formal policy for Policy Coherence for Development (PCD), nor does it have specifically allocated analytical talent on the topic. Its institutional arrangements on this topic are limited, primarily to very broad policy debates in the Council of Ministers or in CIPE. Parliament does not have a specific commission on development co operation, whilst the NGO community, normally an active advocate of policy coherence in other DAC member states, so far has refrained from playing a major policy role. As an active member of the European Community, Italy has a special opportunity and even responsibility to proactively encourage all European member states to work in the direction of policy coherence for development in all of the areas noted above.

Recommendations

• Policy coherence should be an explicit goal of the Italian government. This should include a specific public statement on coherence for development, including reference to themes of special interest such as FDI or untying.
• Italy should mobilise expertise and analytical capacities both within and outside government to identify policy areas incoherent with its development co operation objectives. This could include special resources or a unit of government that is dedicated to this task alone. Consultation with civil society and the research community would strengthen these actions.

Aid management and implementation

Working toward efficiencies in Italian aid management

Based on experience elsewhere in the DAC, significant efficiency gains can be realised through improved collaboration and co ordination at all levels, including relationships among all Italian official and non governmental development institutions (Sistema Italia), between headquarters and the field, and even among various entities/representatives in the field. Italian institutions remain compartmentalised at all these levels.

Criticisms frequently are voiced over the complexity of Italian decision making and the timeliness of its funding. In an effort to expedite aid decision making, the DGCS now is attempting to simplify certain administrative procedures at the level of headquarters and to improve official collaboration for private sector activities in the field. Additional system wide thinking is still needed, however. The project and budget approval process inside the MFA remains a major issue for many observers, including the role of the Ragioneria Centrale. Also, budget planning is still based on Italian annual budget procedures, while field needs are shaped on a multi year basis and increasingly demand predictable donor funding. Interestingly, the 1987 Law (Article 15) actually set up a special fund that granted the DGCS a degree of financial autonomy and permitted multi-year funding (an exception to Italian budget law), but the fund was abolished in 1995.

Donors and recipient countries alike agree upon the importance of increasingly harmonised aid implementation procedures in the field. While Italy played an important facilitating role by hosting the Rome High Level Forum on Harmonisation in 2003, it has yet to develop an operational strategy to implement the commitments covered by the Declaration. It needs to open a dialogue with its field missions on this topic.

Personnel needs

Few issues of Italian development co operation are as contentious and persistent as those of human resource management. Though a major issue in the 2000 Peer Review, little reform of the system was registered since that time. The overall size of DGCS staff has slowly declined over the last decade and no technical experts have been recruited since 1994. Its implementation arm (UTC) currently contains only one-half of the modest pool of 120 experts allowed by the 1987 Law and 52% of this group is over the age of 55. DGCS is understaffed in comparison with most other similarly sized DAC members, although it plans to recruit 60 new experts in the coming year. These staff limitations will represent a constraint on Italy’s capacity to absorb future ODA growth through the bilateral channel.

As is true for some other DAC donors, but unlike most other G7 countries, Italy does not have yet a specific personnel system or plan for development co-operation. The assignment process requires substantial advance planning and action, and gaps in staff coverage are frequent, including the key position of UTL Director in the field. Italy has a personnel system which makes rigid distinctions between the roles of diplomats and development professionals. A weakness in this system, is that its leadership (diplomats) and the large category of staff seconded from other ministries (29% of total personnel) rotate in and out of development co operation frequently, while the less empowered experts remain at the core of the national development co operation capability. Italy has yet to develop a personnel system that is characterised as performance based, whether relating to staff assignments of responsibility or to individual merit promotions. Neither does the system have a strategically shaped and regularly used system of training in key themes of development co operation.

Decentralised operations for greater implementation efficiency

Unlike a number of DAC members, no formal process yet has been launched to examine the opportunities for improved implementation efficiency through greater operational decision-making in the field, despite Italy’s formal recognition of the importance of partner country ownership and the fact that several key Italian recipients use the Poverty Reduction Strategy Paper (PRSP) or other similar national priority setting strategy. Examples of very limited project level delegation of authority were noted in both Tunisia and Mozambique field missions, but in general the concept is restrained by the management prescriptions contained in the 1987 Law.

Performance measurement

The 2000 Peer Review advocated substantial improvement in the Italian monitoring and evaluation system. While new initiatives are underway, much remains to be put in place, even as the majority of international donors recognise the growing importance of performance feedback in today’s aid programming and decision making. The DGCS Evaluation Unit contains five persons responsible for maintaining the integrity of Italy’s aid system. They now are essentially occupied with their role in providing pre-project appraisal. In the field, it was found that project feedback is heavily oriented to financial reporting.
Recommendations

• The DGCS should initiate a broad based discussion of the structural and process impediments in its current system of management. Together with field UTLs, ambassadors and the Ragioneria Centrale, it should promote an in depth review of development administration from a greater “team” perspective. This could build upon current DGCS efforts to promote administrative streamlining, while simultaneously addressing the parallel need for a clear implementation strategy on harmonisation.
• Italy should make use of multi-year funding commitments so as to reinforce the predictability of its support and to bring it more in line with the programming needs of recipient countries. Opportunities to introduce a degree of financial autonomy to DGCS budgeting procedures should be explored.
• Italy urgently needs to reform its system of personnel management for development co operation, with special emphasis on personnel planning, placing individual ability more in line with responsibility, and use of a performance-based approach that is properly accompanied by rewards and incentives. The DGCS should expedite recruitment of 60 development experts. At the field level, DGCS also is urged to lend greater advance attention to staffing needs, to avoid gaps in presence, and to consider ways to flexibly contract additional staff, as needed.
• DGCS management should consider stronger decentralisation of decision-making to the field and the parallel adjustments in resources and systems necessary to accommodate these changes, such as an improved local analytical capacity and better communications between Rome and the field.
• Italy must establish a regular system of monitoring and evaluation, consistent with DAC principles on evaluation. To the extent possible, programme decisions (including specific allocations of funds) should be made on the basis of the results generated by this performance feedback system.