DEVELOPMENT CO-OPERATION REVIEW OF PORTUGAL
SUMMARY AND CONCLUSIONS (1997)

Portugal's development co-operation efforts are characterised by its bilateral concentration, reflecting its ties of history, language and culture with its former colonies, the five Portuguese-speaking African Countries (the PALOPs) -- Angola, Cape Verde, Guinea-Bissau, Mozambique and Sao Tome and Principe. Portugal was a Member of the Development Assistance Committee (DAC) at its origin in 1961, when it had extensive programmes of assistance for its then colonies, but left the Committee in 1974. It rejoined in 1991, at a point when it was beginning to assist the important new nation-building processes in the PALOPs, involving peace building, democratisation and economic reform. A strong base of support, extending across the political spectrum, for constructing a significant assistance effort for these countries underpinned this endeavour and remains in place today.
The starting point for this new effort was an essentially traditional set of activities dispersed among different ministries in their respective fields, in particular education (with an emphasis on scholarships and universities) and health (especially hospitals). While Portuguese municipalities were also active, the non-governmental organisation (NGO) sector was weak.
The challenge facing the Portuguese authorities was therefore to modernise and scale up its aid programme. While some important progress has been made, this challenge has still to be fully met. In specific terms the key tasks are:

• to increasingly broaden the scope and objectives of the aid effort beyond its original confines and to construct a development co-operation strategy;

• to increase the scale and improve the composition of the bilateral technical co-operation programme;

• to develop an integrated programme and budget and ensure professional management, co-ordination and evaluation of the programme; and

• to broaden the engagement of civil society and strengthen the NGO sector.

These issues, and the extent to which Portugal is adapting its aid in the light of the DAC's 1996 Policy Statement on Shaping the 21st Century: the Contribution of Development Co-operation, formed the main subject matter of this DAC Review of the Portuguese aid programme.

Scope, Objectives and Strategies

Portugal is now beginning to diversify its aid effort somewhat beyond the former Portuguese colonies. At the same time, helping to ensure that these five countries evolve into well-functioning states is a fundamental foreign policy objective for Portugal. Further, a well-targeted and effective aid programme that works to achieve this result, drawing on Portuguese expertise, can provide Portugal with a geostrategic role that is seen as important and valuable by its European and DAC partners and by the international community more generally.

The development challenges are particularly formidable in Mozambique, where the need now is to build on the emergence of democracy and a market economy, and Angola, where the question is how to nurture and consolidate the new government formed under the peace process so that the difficult tasks of reconstruction and political and economic development can get underway. In the other three countries, Guinea-Bissau, Cape Verde and Sao Tome and Principe, the establishment of good governance and a dynamic private sector based economy are also central to their development agendas.

Against this background, the Portuguese authorities have worked to broaden the objectives and scope of their aid efforts. A programme to strengthen governance systems, focused particularly on legal systems and the administration of justice, has become an important part of Portugal's effort. The growing co-operation between the Portuguese Parliament and the legislatures of the PALOPs is also a significant development.

Programmes to support the private sector have been put in place. Private sector support is provided through the Fund for Economic Cooperation (FCE). This facility finances feasibility studies and training activities. It also provides interest subsidies for investment projects, although this component is so far relatively small. The functioning of this facility is discussed further below.

Portugal places high priority on economic policy reform to provide the macroeconomic stability and policy environment conducive to savings, investment and enterprise development. It supports the work of the International Monetary Fund (IMF) and the World Bank to this end, and has provided a significant amount of debt reduction and refinancing in the context of these programmes. A further growing field of co-operation is environmental management, where activities range from helping to formulate legislation to setting up the administration of national parks.

At the same time, the traditional activities in the areas of tertiary education and hospital-based health services remain major elements in the programme. It is not clear that these programmes have a strong foundation in the development strategies of the developing partner countries, however. A considerable portion of the aid provided in these areas is expended in Portugal itself, through scholarships and other Portugal-based training and services. Without stronger sectoral strategies set by the Portuguese Government, informed by greater consideration of poverty and gender issues, the Portuguese ministries and universities who are the main implementing agents for these activities are unlikely to be able to provide programming adapted to the wider development needs of the populations in the partner countries. This situation, which concerns the capacity of the Portuguese aid system to reflect fully the vision and the partnership approaches of the DAC's work on Shaping the 21st Century, is discussed further below.

On a different level, an important development has been the recent founding of the Community of Portuguese Speaking Countries (CPLP). This organisation has the potential to enrich the development dialogue which Portugal conducts with its partners and to promote mutual learning and co-operation among them. Not least, it brings the perspectives, knowledge and resources of Brazil into the picture.

Volume and Composition

The composition of the Portuguese aid programme and the roles of the various ministries are illustrated in Tables 3-6 below.

Portugal's aid volume has fluctuated sharply in the 1990s. The ratio of ODA to GNP rose from 0.24 per cent in 1989/90 to peaks of 0.35 per cent in 1992 and 0.34 per cent in 1994 before falling to 0.21 per cent in 1996, or $218 million.

This is explained by the large amounts of debt relief provided by Portugal over these years, totalling over $600 million. The share of debt relief in Portuguese aid has varied between 25 per cent in 1990 and 50 per cent in 1992. For no other DAC Member has debt relief constituted such a large share of the ODA total. Excluding debt relief, the aid programme of Portugal has fallen, and amounts in 1996 to just 0.14 per cent of GNP, representing one of the smallest percentages of both national income and government expenditure in the DAC.
The aid totals include both forgiveness of debt and, more importantly, the refinancing as official concessional loans, of private sector loans to the PALOPs made during the 1980s. These loans had been guaranteed by the Credit Insurance Company (COSEC), formerly government-owned but recently privatised. Clearly, as in many other OECD countries, the Portuguese private sector had enjoyed loan guarantees from the State which had not been adequately evaluated and priced in terms of risk. The resulting losses have now been absorbed by the Portuguese taxpayers and qualify as ODA. COSEC is now privatised, but is still acting as an agent for the Government in the assessment and provision of insurance cover for Portuguese exporters. It is now applying rigorous risk analysis and Portugal participates actively in the work of the OECD and the Berne Union in work on export credit disciplines.

While debt relief will not again reach the levels or proportions of recent years, there still remains a significant stock of Portuguese official claims on developing countries, mainly Angola and Mozambique. Portugal plans to participate fully in the new initiative to restore creditworthiness to the Heavily-indebted poor countries (the HIPC Initiative). As noted above, the Portuguese authorities are strongly convinced that only through the establishment of sound macroeconomic policies and a market-oriented economy, a basic aim of the HIPC initiative, can the PALOPs generate a dynamic development process. Portugal thus regards the policy reform assistance of the IMF and the World Bank in these countries as of primary importance for development and the emergence of a thriving private sector.
The second main component of the Portuguese aid effort is the contribution to multilateral institutions. Multilateral contributions are mainly the attributed and assessed amounts for financing the aid programme of the European Commission, representing just over 20 per cent of Portuguese aid. Portugal also contributes to the International Development Association (IDA), the United Nations Development Programme (UNDP) and the United Nations Children's Fund (UNICEF), including through voluntary contributions in the form of Trust Funds; is a member of the African Development Bank, and is considering membership of the Asian Development Bank.

Since its establishment in 1992, private sector support through the FCE has become a major component of the programme, with commitments reaching as much as $27 million in 1994 and $26 million in 1995, declining somewhat to $20 million in 1996. Support from the FCE is governed jointly by the Foreign Ministry and the Finance Ministry. FCE disbursements have in the past few years been large in relation to Portugal's core bilateral aid. An in-depth evaluation of this facility and its impact to date should be a priority.

Finally, technical co-operation grants through a range of sector ministries have accounted on average for around one quarter of total ODA in recent years.

Portugal now faces a basic issue regarding the size and shape of its aid programme. Even with its future participation in the HIPC Initiative, the volume of debt relief is projected to decline substantially. The Portuguese authorities have, however, expressed the objective of an aid effort of around 0.36 per cent of GNP. This would imply that other components of aid should be built up fairly rapidly.

One option under discussion is the development of a mixed credit programme to assist countries such as Mozambique. Some DAC Members considered that such programmes have proved problematic and controversial. They have found it difficult both to ensure that the projects financed are sound projects with high development priority, and to avoid diversion of ODA to the commercial interests of individual firms. This would argue strongly in favour of an untied facility.

From a developmental perspective a higher priority should be to build up the support for core development programmes in the PALOPs (and in other partner countries), centred on the goals and strategies endorsed by Portugal and other DAC Members in the policy statement on Shaping the 21st Century. Portugal has a unique opportunity to make a significant investment to support the literacy and primary education objectives of the new development strategy in Lusuphone Africa. This is a special challenge which cannot be undertaken by other donors. Thus there is now room for a major step forward in Portugal's contribution to the goals of the 21st Century strategy. This, however, would require a determination by the Government, first to increase the core aid budget, and second, to strengthen the Portuguese aid management system.

Integrating the Aid Programme and Professionalising Aid Management

With the dispersion of Portugal's core capacity development efforts among a number of ministries, key issues have been the need to promote an overall strategic approach with a medium-term programme, greater transparency in budget allocations and aid programming, and the use of systematic aid management tools by all ministries involved. The last DAC review of Portuguese aid, published in 1994, made recommendations in each of these areas.
Since then, some progress has been made. The Institute for Portuguese Co-operation (ICP) has been established in the Foreign Ministry to provide an integrated approach to the aid programme; project cycle management techniques are being introduced; an evaluation function is being established (although the first evaluations have still to be conducted); and all ministries are being required to identify their aid activities so that an integrated programme and budget can be presented as a basis for improved strategic management and increased transparency. The DAC Principles for Effective Aid have been translated into Portuguese. An Interministerial Commission for Co-operation (ICC) has been formed to replace previous ineffective mechanisms for co-ordination within the Portuguese government. It has met only twice to date, with subcommissions which have met somewhat more frequently. In the field, there is now a co-operation representative of the ICP in each of the PALOPs and in Côte d'Ivoire (as well as at the UN in New York). It is planned to establish more complete development delegations in the field.

These reforms of aid administration need to be accelerated and pursued with full vigour. Given the importance and the potential of Portugal's assistance to the PALOPs, which include two countries of major significance, Angola and Mozambique, Portugal's aid programme should be regarded as one of its primary foreign relations priorities and managed and staffed to the highest standards of professional competence.

The need to more thoroughly modernise aid management requires increased recognition within the Foreign Ministry, and the quality and pattern of staffing needs to be reviewed accordingly. It is clearly important that the ICP should be sufficiently powerful and respected to support a more integrated management of Portugal's aid through the ICC. At present it seems to be generously staffed in terms of numbers, but lacks competence in some key areas of development policy, including thematic issues such as poverty and gender. As in other DAC Members where the aid programme is managed by diplomatic staff, careful selection and rotation policies are crucial to ensure that managers are adequately qualified and experienced. For this structure to work, it is vital that there also be a strong core of development professionals with satisfactory career opportunities. In this respect, the problems over the status of expert personnel in the ICP need to be resolved.

Overall aid management effectiveness in the rest of the Portuguese administration will be enhanced by a more professionally qualified ICP. More frequent meetings of the ICC, conducting mandatory reviews of all aid budgets and activities, and bringing together a consolidated aid programme would be a major step forward. The basis for such oversight should be a more fully articulated Portuguese development co-operation strategy, in conjunction with the development programmes of the partner countries themselves.
The Portuguese Parliament also has an important role to play here. While there is no regular machinery for parliamentary review of the aid programme, the Foreign Affairs Committee takes an active interest through periodic exchanges with the Secretary of State and there are debates in Parliament itself from time to time. As noted above, the basic rationale and the scale of the aid effort are widely supported across the political spectrum but parliamentary discussion of strategies, priorities and results as well as parliamentary monitoring of progress in aid management reforms also have an essential contribution to make.
Engaging Civil Society and Strengthening NGOs.

The wide public support for a significant Portuguese aid effort is a strength that can be more fully exploited. As mentioned above, there is considerable activity by municipalities and universities as well as by a range of ministries and there is significant news coverage of the PALOPs, reflecting the large proportion of the Portuguese population with links to these countries. It is somewhat paradoxical therefore that the NGO community in Portugal is relatively weak. There are very few NGOs who are professionally capable of undertaking significant roles in aid delivery and almost none who have a large membership. Hence the NGOs are not able to function effectively as a political force or as a strong presence in the field. Furthermore their fund-raising power is limited. Indeed the Government has itself launched public fund-raising campaigns, and in doing so has perhaps inadvertently helped to retard the formation of popularly-based NGOs.

While the Government is by no means unfavourable to NGOs and holds regular discussions with the main NGO coalition, there does appear to be a malaise in the relationship. This may partly be explained by problems in procedures for the financing of NGOs and in the status of volunteer workers in the field. The Government has undertaken to resolve these problems imminently. There may however be more fundamental issues, both on the side of the Government and in the NGO movement itself, which need to be identified and discussed.
In this connection, it seems important that the Portuguese authorities should proceed with their plans to establish an Advisory Council for Co-operation (ACC). A body of this kind has been formally constituted in the past and then dissolved without ever having been convened. With the widespread interest in Portugal in the PALOPs, there is a major opportunity to harness the energies of civil society, including a stronger NGO community, through an active ACC to which the Government gives a serious role.

The Future

While public opinion seems to be solidly behind the Portuguese aid effort, views among those with a close knowledge of the programme vary between relative satisfaction with current directions and reforms on the one hand and a belief that a new vision is needed for Portuguese aid on the other. The gap between these views may not be as great as it may seem, however, if the Government vigorously pursues the reforms it has begun to implement. To recapitulate:

• A more integrated and transparent aid programme and stronger and more strategic interministerial co-ordination should produce a clearer vision and make possible a deeper public discussion.

• A substantial expansion of the bilateral technical co-operation programme as the principal move to fulfil the objective of raising ODA to around 0.36 per cent of GNP as debt relief declines, would allow scope for the emphasis of the programme to shift more decisively over the next few years towards the objectives and approaches set out in the DAC strategy for Shaping the 21st Century. It would also provide scope for further diversification of multilateral aid.

• A more professional aid management staff applying state of the art tools and disciplines, including a monitoring and evaluation process that feeds back into project direction, will increase aid effectiveness.

• A greater delegation of programme design and implementation to well-staffed field offices would allow stronger partnerships with governments and civil society in the developing countries, and facilitate participation in co-ordinated sector programmes with other donors.

• Resolving the problems regarding NGOs and the status of Portuguese volunteers will enable a more active involvement of Portuguese people, including in the field.

• A natural complement to these reforms would be an active public consultation process through a regularly convened Advisory Council on Co-operation, a stronger NGO movement and a more systematic process of examination and debate in Parliament.

A strong effort to implement this reform programme, and to show results within the next year or so, would represent a major step forward for Portugal in realising its full potential to contribute to the successful development of an important group of countries with which it has unique links.

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