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Overall framework for development co-operation
Legal and political orientations
An evolving approach and system in a challenging geographical context
As a Pacific nation, New Zealand feels a particular responsibility towards its immediate neighbours, many of which are low income countries and small island states facing specific development and environmental challenges. To a large extent this drives New Zealand’s foreign policy and its aid programme.
Since the election of the government in November 2008, the New Zealand aid programme has been going through a major change process. The government has revised its aid policy and institutional arrangements to align them with the new foreign policy. This led to the publication of two key Cabinet decisions in April 2009. The first defines a new aid mandate, making sustainable economic development the core focus of the aid programme and confirming the Pacific as the priority region. The second describes the new institutional arrangements. This includes re-integrating the aid programme into the Ministry of Foreign Affairs and Trade, with the former semi-autonomous agency NZAID becoming the International Development Group (IDG). The government considers this integration as a way to better leverage opportunities within the ministry and to link diplomacy, trade and development more closely. The current transition phase offers opportunities to enhance the development dimension of foreign policy, and to develop further the aid programme within the ministry, building on expertise gained in recent years. Meanwhile New Zealand needs to maintain the key strengths of the aid programme, such as development expertise and good practice experience, and make sure that attention is kept on areas whose direct contribution to sustainable economic growth may be less tangible.
Clarifying the strategic vision: remaining committed to poverty reduction while broadening the policy agenda
In June 2010, the New Zealand aid programme was still in transition, and the scope and impact of the policy changes had not yet been translated into clear strategic orientations. The absence of further details concerning strategic directions generated confusion and unease among IDG staff and their partners in New Zealand and in the field. New Zealand should now clarify its strategic vision for development co-operation. It should in particular outline how it will address not only the economic, but also the environmental and social dimensions of its objective of supporting “sustainable development in developing countries in order to reduce poverty and to contribute to a more secure, equitable and prosperous world”. New Zealand is taking positive steps in this direction, and is currently preparing a draft overarching policy. It also plans to use the end of the strategy (2004/05-2009/10) as an opportunity to develop a new medium-term strategy. The Committee was informed that New Zealand is in the process of updating its geographic and sector strategies to reflect the new orientations.
The new aid mandate maintains gender equality, human rights and environment as cross-cutting issues and reaffirms that they should be further integrated into programmes to ensure good outcomes and to manage risks. This reaffirmation provides a strong impetus for New Zealand to build on its progress in policy orientations and analytical, screening and reporting tools for cross-cutting issues, and to be more strategic and efficient in its approach. New Zealand now needs to integrate these further into country programming and further develop guidance for monitoring and assessing results. Given the huge range of, and potential for, natural risks in many Pacific Islands, New Zealand should mainstream further disaster risk management and climate change into the bilateral aid programme. These are areas where IDG should bring greater policy clarity, including on on how development and humanitarian activities connect across the programme, especially as the recent focus on economic infrastructure offers opportunities for further engagement.
The importance of communicating results to strengthen public and political support
Despite increased funding for development education, development awareness and confidence in the effectiveness of aid remain weak among the New Zealand public. Mobilising all domestic stakeholders to support the aid programme is a challenge. Scepticism about the impact of the aid programme seems high among some parliamentarians. Non-government organisations (NGOs) are concerned that the poverty reduction focus may be lost with the new orientations of the aid programme. In this context, the establishment of an Aid Advisory Board in May 2010 should be useful for presenting a variety of development perspectives to the minister. This should be accompanied by an increased effort to communicate the results and impact of the aid programme. This is necessary to build broad political and public support for the programme and for the increase in aid needed to achieve the internationally-agreed target of giving 0.7% of its gross national income (GNI) as official development assistance (ODA). Achieving this support will mean updating the 2005 communication strategy and ensuring that the communication unit maintains enough dedicated resources and appropriate knowledge about the aid programme, despite being integrated into the wider communication office for the Ministry of Foreign Affairs and Trade (MFAT). New Zealand could also integrate communication for development into every programme from the early stages.
Promoting policy coherence for development
New Zealand takes a pragmatic approach to whole-of-government policies and mechanisms. The aid programme benefits from good relationships across government departments and has been able to develop joined-up approaches with good results. A next step should be to review its funding modalities to ensure they enable long-term and predictable engagement that are aligned to partner countries’ priorities. New Zealand should also develop whole-of-government positions more systematically for each priority partner country. This would reinforce its strategic approach to its partners, particularly in the Pacific, and help to ensure a cohesive approach in the field. It would also allow New Zealand to monitor the impact of the overall package of investment in a country. Finally it would help prepare countries for transition in cases where New Zealand plans to replace its aid programme with a partnership relying on economic and diplomatic relations, as guided by the new foreign policy strategy. A promising new approach, developed in 2010, is to start preparing country strategic frameworks covering all New Zealand assistance in a partner country. This should include mutually-agreed priority outcomes, outputs and target results, as well as an accountability framework. For Pacific countries these frameworks will be embedded in the politically-agreed Joint Commitment for Development document.
Pragmatism dominates New Zealand’s approach to policy coherence for development. New Zealand does not see the need for a policy statement that would bind other departments, as it already has a system for ensuring formal consultations on all Cabinet papers, complemented by a framework of inter-departmental meetings and cluster groups which ensure co-ordination on key policies. New Zealand has developed whole-of-government approaches to sectors (e.g. fisheries) and there are examples of win-win policies (e.g. for temporary migration). The aid programme is proactively engaging in policy coherence for development with a medium-term strategy for action focusing on six priority areas. While this strategy is so far an IDG-only framework, IDG could capitalise on its integration within the ministry to promote the policy coherence for development perspective within MFAT and across government more broadly. A key step would be to have New Zealand departments set, in priority areas for policy coherence, joint inter-departmental targets to which each relevant department would contribute. This would reinforce commitment to policy coherence, while an integrated results framework would help monitor progress and assess impact.
Recommendations
To maintain its position as a key development player in the Pacific region, New Zealand should:
Aid volume, channels and allocation
New Zealand’s net ODA was USD 309 million in 2009, equivalent to 0.28% of GNI. This makes New Zealand the smallest DAC donor in volume terms, ranking 17th out of 23 bilateral DAC members for its ODA/GNI ratio. Since 2004, New Zealand has steadily increased its ODA, reaching a peak of USD 348 million in 2008. Despite strong pressure on public spending, New Zealand is committed to raising the level of ODA up to USD 416 million by 2012/13. Yet New Zealand is still falling short of the internationally agreed UN 0.7% ODA/GNI target, and its funding commitments beyond 2012/13 are uncertain. The DAC encourages New Zealand to work towards increasing its ODA to 0.7% based on a clear and strategic forward spending plan with an intermediate target and a timeframe for achieving it.
Continued efforts to concentrate bilateral aid are important
New Zealand delivers a large share of its aid programme bilaterally (74% of its ODA in 2009). Its bilateral aid is provided in grant form and does not include debt relief or substantial funding to refugees. It is strongly focused on the Pacific (84% of bilateral aid in 2009) and to a lesser extent on Asia, two key regions for New Zealand’s foreign policy. New Zealand’s high level of concentration allows it to play an important role in a number of Pacific countries where it is one of the largest donors. Its plan to focus its aid further on this region is positive. This will allow New Zealand to reinforce its key role in supporting low income countries in the Pacific, many of which are off track to achieve the Millennium Development Goals (MDGs). New Zealand needs to focus on fewer priority partner countries in Asia, bearing in mind its comparative advantage. Should there be any reallocations within the aid programme, New Zealand is encouraged to consider carefully issues of continuity, division of labour and absorption capacity, and to take decisions in close consultation with other donors engaged in Asia and the Pacific.
Balancing a strong MDG focus with increased attention to economic growth
The New Zealand aid programme has historically largely focused on social infrastructure and services. Looking ahead, the stronger focus of the aid mandate on sustainable economic development is likely to lead to increasing bilateral allocations to economic infrastructure and services as well as production sectors, including supporting private sector development. Investing in the private sector should be based on sound economic analysis and pre-feasibility studies to ensure economic activities are viable, sustainable and include positive social and environmental impact. However, this should not prevent New Zealand from upholding its strong capital of knowledge and support to social sectors such as education.
Support through multilateral organisations is becoming more strategic
New Zealand recognises multilateral engagement as a useful channel, both as a means to extend its geographical reach, and as a platform to draw attention to Asia-Pacific issues at the global level. It is becoming increasingly strategic in its multilateral allocation processes, focusing its support on 10 priority agency partners that complement its policies. New Zealand is appreciated as a flexible partner and a neutral broker. It could build on good practice in its bilateral and regional programming to introduce greater predictability by extending its practice of making multi-year commitments to all its main multilateral partners.
Recommendations
Planned increases in New Zealand’s aid volume are encouraging. To build further on its efforts and add weight to its international credibility as a development partner, New Zealand should:
Organisation and management
Maintaining development expertise while consolidating the system
Over the last decade New Zealand has built an internationally-recognised aid programme. The bulk of the programme (92% in 2009) is managed by a single entity (now called IDG) which benefits from committed development professionals. Established in 2002, the former agency NZAID lost its semi-autonomous status when the aid programme was integrated, in April 2009, into the Ministry of Foreign Affairs and Trade (MFAT). This reform aimed to clarify lines of accountability, better align development with foreign policy objectives and reduce management overheads in Wellington and overseas. IDG is now one of MFAT’s seven groups. It is headed by a Deputy Secretary who reports to the Secretary of Foreign Affairs and Trade and sits on MFAT’s senior leadership team. The IDG Deputy Secretary has retained some authority over specific development recruitment and accountability, and separate votes for ODA and Foreign Affairs and Trade have been maintained.
The integration of New Zealand's aid programme into MFAT has already yielded positive results both for the programme and the ministry at large. In addition to putting development at the heart of foreign policy, it is an opportunity to share innovative management tools developed by NZAID with other parts of the ministry, which is completing an important organisational change process called Ministry 20/20. However, it is important to retain and strengthen IDG’s professionalism if it is to continue delivering quality aid and results. This requires the integration to be rapidly completed and consolidated. IDG will also need to retain a core cadre of development professionals with clearly defined roles, functions and lines of accountability internally and among headquarters and country offices. IDG is aware of the need to strengthen its internal communication to ensure staff buy-in into this transition process and has taken steps to involve staff in key strategic and organisation processes.
Over the last four years, aid programme staff numbers have increased, including at field level, with strong benefits for the quality of New Zealand’s aid. IDG should now develop a workforce planning exercise, building on its review of staffing levels and needs of missions in partner countries. This would help plan recruitment, training and professional development so that adequate numbers of staff with appropriate skills and experience can be maintained. IDG should also make sure that the ministry appropriately recognises the value of its locally-engaged staff and explores ways to leverage their expertise better, including through better career prospects.
Adjusting the business model for efficiency, delegated authority and learning
The New Zealand aid programme has taken steps to improve its business processes and to enable it to scale-up its aid programme more efficiently. It should build on achievements made in contracting, finance and monitoring processes to streamline further its aid management systems and delegate authority more effectively to country offices. New Zealand has posted more staff in partner countries, enabling it to engage further in policy dialogue and co-ordination. Further decentralisation will require adequate business systems and processes, and relevant staff training.
Looking ahead, IDG is now adapting its business model to the new aid mandate and institutional framework. Its business model should be sufficiently resourced and offer adequate career development prospects to maintain high quality delivery, as recognised by Cabinet. It should also plan for economies of scale as the aid budget grows, in order to achieve the ministry’s efficiency target of reducing the administrative costs share in the aid budget. This efficiency drive, combined with a new emphasis on value for money, calls for a review of the rather dispersed aid portfolio, which comprises more than 800 projects and programmes. IDG is aware of the need to move towards supporting fewer, bigger projects. It is important to apply this new trend in ways that do not undermine New Zealand’s flexibility in delivering aid and its long-term approach to development, including as regards economic activities.
IDG has taken positive steps to strengthen how lessons and knowledge are shared across the programme, setting up thematic “communities of practice” with incentives provided through the performance management system. This should be expanded further across the ministry and to posts in the field. IDG is also moving towards a stronger focus on outcomes rather than outputs, in line with the government’s emphasis on demonstrating results and impact. A new performance reporting framework is in place and quality assurance systems are under construction. IDG has strengthened its evaluation function, but should conduct more strategic evaluations in response to policy and programming needs for evidence, and make more systematic use of them for forward-looking management for both development and humanitarian programmes.
The importance of an inclusive approach to domestic stakeholders
Following a period of close co-operation with domestic NGOs, the aid programme’s relationship with NGOs has gone through a period of uncertainty in the last two years, with a break in the policy dialogue and suspension of the funding arrangements. The publication in July 2010 of a new funding scheme to increase funding through NGOs and better align NGO co-funded projects to IDG’s policies is an opportunity to restore links. IDG should re-establish a solid and confident relationship with NGOs. It should recognise the comparative advantage of using NGOs as implementing partners for specific programmes and the capacity of some of the main NGOs as development partners. In partner countries, it should create a more structured platform for engaging in regular and quality dialogue with NGOs in order to ensure synergies in their work. More broadly, New Zealand should look strategically at how to engage further with other national stakeholders, such as research institutes, interest organisations and the private sector. In particular, IDG needs to develop a strategic approach to the private sector in order to implement the economic growth agenda in its mandate.
Recommendations
In order to maintain the quality of its aid programme, New Zealand should:
Practices for better impact
Implementing aid effectively
New Zealand is committed to the principles of the Paris Declaration on Aid Effectiveness and Accra Agenda for Action. It is leading efforts to raise the profile of the Paris Declaration within the Pacific region through initiating and supporting regional workshops, adopting the Pacific Principles on Aid Effectiveness. New Zealand was also instrumental in the adoption of the Cairns Compact on Strengthening Development Coordination in the Pacific in 2009. Internationally there is scope for New Zealand, along with other donors, to ensure that the Pacific voice is better heard in the global aid effectiveness debate.
New Zealand takes a pragmatic, bottom-up approach to implementation, taking account of the challenging environment in which the majority of its programmes are delivered. Ownership and alignment remain problematic in a number of small island states with weak capacity, some of which are in fragile situations. The ministry has recently adopted an Aid Effectiveness Action Plan to accelerate implementation of the commitments. The plan identifies a number of barriers that MFAT needs to overcome to internalise fully the aid effectiveness agenda into its policies and programming. However, two additional dimensions need to be taken into account: i) while commitment to the Paris Declaration and the Accra agenda is strong among its own staff, IDG will need to promote the same level of understanding and dedication within the broader ministry and other government departments – this could be partly achieved by developing a policy position on aid effectiveness and clarifying the importance New Zealand attaches to this agenda; ii) the aid effectiveness action plan is mostly focused on activities in headquarters, and should be complemented by specific, time-bound activities at the country level, such as developing country-specific implementation plans as part of IDG’s internal monitoring and reporting system.
New Zealand is valued by partner countries for its knowledge and understanding of the Pacific. It is considered a respectful and open partner and appreciated as a neutral broker. It is important that New Zealand continues to promote country ownership as the aid programme is focused more narrowly on sustainable economic growth. Since the last peer review, New Zealand has increasingly moved towards five to ten-year programming frameworks for partner countries, alongside three-year allocations. The New Zealand legislature sanctions annual budgets with inbuilt flexibility to rollover over-spends of up to 10% and under-spends of up to 20%. This level of flexibility is much higher than for most other donors, and provides for a good balance between predictability and flexibility. New Zealand is encouraged to improve delivery on its AAA commitments on medium-term predictability. The current discussion within IDG on a new process for developing strategic frameworks for programmes would be a useful opportunity to examine this further.
New Zealand’s efforts to align to partner countries’ policies and systems and to harmonise with other donors are recognised by these partner countries and donors. It is, however, clear that further delegation of authority would help New Zealand to adapt to evolving partner country priorities. New Zealand should also continue to promote sector-wide approaches and avoid reverting to a free-standing project approach. In progressing towards budget support, it should build upon its positive experience of providing budget support in Samoa to bolster the tsunami recovery. The move to greater use of budget support should be backed by appropriate training and guidance from headquarters, notably on the different accountability and risks management processes associated with these modalities. Finally, New Zealand should look at ways to ensure that its support to regional initiatives in the Pacific responds better to partner government policies. This means integrating the regional dimension more broadly into country programming and monitoring, and revising the way New Zealand co-operates with regional organisations to ensure it improves the regional architecture in the Pacific.
Learning from priority topics
Capacity development
New Zealand supports the Paris and Accra commitment to provide demand-driven, tailored and co-ordinated support to capacity-development efforts. It uses a range of tools, including scholarships, training, technical assistance and dedicated capacity development programmes. However, capacity development is not fully internalised within the New Zealand aid programme. Like many donors, New Zealand does not have a policy on capacity development, and guidelines for activity management do not address this aspect in depth. Good practice in this area is neither sufficiently documented nor shared across the programme. New Zealand should improve the understanding of capacity development across government and beyond, drawing upon efforts of the broader international community to share experiences and identify good practices in this area. Capacity development in fragile states and in micro states in the Pacific is particularly challenging and calls for a more strategic approach. As a first step, New Zealand could conduct an analytical stock-take of its range of delivery mechanisms, and make recommendations for how these may be more effectively linked together. In particular, it should make sure it positions its technical assistance in a way that avoids inappropriate substitution and that it contributes effectively to building partner capacity in the long term. New Zealand should also use the review of its scholarship and training schemes to ensure they build capacity as part of a broader co-ordinated capacity-development strategy. In the Pacific, where government lacks capacity in many areas, New Zealand could consider systematically including a capacity-building component in each programme where this would add value. Finally, New Zealand could consider building the capacity of other stakeholders (e.g. parliament and private sector), beyond the government departments and civil society stakeholders with whom it already works.
Fisheries and food security
Fisheries offer a good example of New Zealand’s whole-of-government approach to a sector of high importance in the Pacific region. In 2005, New Zealand developed a co-ordinated MFAT/NZAID/Ministry of Fisheries strategy for improved and longer-term engagement in Pacific fisheries. The strategy has four connected pillars and combines initiatives at national, regional and sub-regional level. It is complemented by a Pacific capacity-development framework developed in 2006 by the Ministry of Fisheries. Although ODA allocated to fisheries has remained limited so far, the strategy has led to positive results, driving long-term arrangements with partner countries and reinforcing policy coherence in this sector. As an illustration, a co-operation arrangement between the Cook Islands, New Zealand, Niue, Samoa, Tonga and Tokelau seeks to reinforce the links between fisheries administrations. Looking ahead, New Zealand would gain from setting up a cross-department framework for monitoring and evaluating the Pacific fisheries strategy, using indicators, targets and time-bound plans for delivering results. This would help both to boost implementation of the strategy and pull together information and lessons for managing the programme. New Zealand should also consider improving the integration of cross-cutting issues, such as gender equity, into the strategy.
Recommendations
To increase further the effectiveness and impact of its aid, New Zealand should:
Humanitarian action
New Zealand’s five-year strategy for international development (2004/05-2009/10) identifies “humanitarian support” as key for reducing vulnerability to poverty and ultimately reducing poverty itself. While published documents on IDG’s new mandate did not refer specifically to humanitarian action, a rapid and visible response to emergencies in the Pacific region remains a high priority for the government. The Committee was informed that the draft international policy statement includes improving resilience and responding to disasters as one of four priority areas for the aid programme. It is important that the scale and type of response made by New Zealand continue to be driven by the needs of those affected.
New Zealand still needs to clarify what priority it gives to humanitarian needs outside the Pacific, where it previously provided funding through multilateral agencies and the Red Cross movement. It would be useful if New Zealand could further define its strategy for responding to complex emergencies and natural disasters beyond the region.
As a “good global citizen”, New Zealand has punched above its weight in international fora such as the Good Humanitarian Donorship (GHD) initiative, bringing an important Pacific voice to global discussions. However, humanitarian action is programmed by separate teams in two different departments in IDG (the Global and Pacific Groups). Programming could be improved by bringing the humanitarian specialists together into one team.
New Zealand’s humanitarian action policy is currently under review. The existing policy was finalised shortly before the election of the new government in 2008. Though it was never formally launched, it is used as the de facto policy. This policy is consistent with the GHD principles and involves good practice for effective humanitarian action. However it is not clear how comprehensively IDG has been able to put it into practice, and monitoring and evaluation of humanitarian action is acknowledged to be weak.
Recommendations
To consolidate its role as a good humanitarian donor, New Zealand should:
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