See also Switzerland's Aid-at-a-Glance

Review of the Development Co-operation Policies and Programmes of Switzerland 2005

Overall framework and new orientations

Strong political commitment to poverty reduction

Switzerland considers the Millennium Development Goals (MDGs) and the Millennium Declaration as development policy milestones and has made poverty reduction a main objective of its foreign policy. Switzerland’s key foreign and development policy objectives include alleviating hardship and fighting poverty alongside fostering the peaceful coexistence of peoples, promoting respect for human rights and democracy, preserving natural resources and safeguarding Swiss economic interests. A High Level Statement, dated February 2004, makes national poverty reduction strategies (PRSs) the policy and operational framework for Swiss development co-operation and the vehicle for reaching the MDGs. Switzerland’s approach to partner countries emphasizes policy dialogue and persuasion and puts a premium on good governance. Where there are difficult partnerships, Switzerland works through civil society organisations. Switzerland works closely with the donor community in elaborating policies, strategies and appropriate instruments for its international co-operation.

The objectives, strategic thrusts and operational instruments for Swiss development co-operation are set by parliament on the basis of proposals (the Messages to Parliament) made by the Swiss Federal Council. The Messages inform parliament about funding for international co-operation, to be effected through framework credits every four to five years, with budget allocations decided yearly within those frameworks. Multiyear funding, combined with the ability to roll-over funds, provides the government with a medium-term planning horizon and significant continuity and flexibility, all of which enable the Swiss authorities to better fulfil the commitments made to partner countries in terms of aid predictability.

A need for a more unified vision

Two institutions share the responsibility for elaborating and implementing Swiss development co-operation: the Swiss Agency for Development and Co-operation (SDC) of the Federal Department of Foreign Affairs (DFA) and the State Secretariat for Economic Affairs (seco) of the Federal Department of Economic Affairs (DEA). SDC is responsible for the overall co-ordination of development activities, for the co operation with Eastern Europe and for Switzerland’s humanitarian aid. It administers about 87% of the total development co operation budget. As SDC’s main partner within the Federal administration, seco has the main responsibility for sustainable economic development and supporting the integration of developing and former communist countries of Central and Eastern Europe and the CIS into the global economy. Each agency has its own culture, mandate, organisation and development strategy, spelled out as SDC’s 2010 Strategy and seco’s Strategy 2006. Those strategies have different time frames and were drafted independently from each other, albeit in consultation.

A single set of strategic guidelines covering Swiss ODA should be a priority now that SDC and seco have reaffirmed their common commitment to poverty reduction. Having an operational framework built around the principle of aligning Swiss co-operation with partner countries’ poverty reduction strategies would provide the conceptual underpinning for any changes in structure, mechanisms and instruments that Swiss co-operation might adopt to support its poverty reduction efforts. Such a framework could be used to help clarify geographic, sectoral and thematic choices and also serve as a communication tool at both national and international levels.

Maintaining strong political and public support for development co-operation

Both SDC and seco are involved in explaining the interconnection between domestic and foreign policy to the Swiss population, to parliament and in the opinion forming and decision-making process of the Federal Administration. A joint SDC-seco Steering Committee on Information Policy helps to co-ordinate Switzerland’s information policy, with SDC taking a lead role as the agency that is responsible for the broader range of Swiss development co-operation activities and outcomes. There is scope for raising the level of understanding of Swiss decision makers on the links between global challenges such as world poverty, security and aid flows; and showing how Swiss international co-operation helps make a difference. Surveys of the Swiss public opinion and the overwhelming response to the Indian Ocean Tsunami relief and reconstruction efforts - an estimated USD 225 million - tend to confirm the Swiss public’s continuing interest in humanitarian aid and development co-operation. This is in contrast to some Swiss parliamentarians, whose waning awareness of development issues could make it difficult for Switzerland to meet the challenge of further increasing its ODA towards the 0.7% ODA/GNI international target.

Recommendations

• To increase the visibility and transparency of Swiss development co-operation, Switzerland should consider developing a single set of strategic guidelines covering the entire ODA system and linking them to its poverty reduction orientation.
• SDC and seco should scale-up their communication strategy, raising the profile of global challenges linked to poverty and world security as well as highlighting the constructive role that Swiss development co-operation is playing through targeted interventions and in alliance with other bilateral and multilateral donors.

Aid volumes and distribution

Switzerland could do better in terms of ODA volumes

Following a policy decision, effective in 2004, to make full use of DAC reporting rules by including the cost of asylum-seekers during their first year of residence in the host country, Switzerland has met its commitment made in Monterrey to bring ODA levels to 0.4% of GNI in 2010. In 2004, Swiss ODA reached USD 1.55 billion, compared to USD 1.29 billion in 2003, bringing the ODA/GNI to 0.41%. The 0.40% target, which was confirmed by the Federal Council in the Foreign Policy Report 2000, is some distance from the United Nations’ goal of 0.7% of ODA/GNI. In the light of actions taken by most DAC members to reconsider and increase their ODA commitments and targets, a more ambitious Swiss target would be more in keeping with international trends and with the poverty reduction and other development objectives that Switzerland has set for itself.

In 2002 Switzerland joined the United Nations by popular vote. This again suggests a solid foundation of support for efforts by the Swiss authorities to meet not only the 0.4% commitment made in Monterrey, but also to establish a path towards reaching the 0.7% UN target. A higher level of ODA/GNI would build upon the internationally recognized professionalism of Swiss humanitarian and development co-operation and would help to increase the impact of Switzerland’s contribution to fighting poverty and achieving the MDGs.

Switzerland prioritizes low income countries …

Swiss bilateral ODA represents 73% of the total effort in 2003, a percentage which is broadly in line with the DAC average. The least developed countries received the largest share of Swiss gross bilateral ODA between 1999 and 2003: 39.6% in average, compared to 29.2% for the DAC. Africa remains a consistent main target of bilateral disbursements in real terms: 37% in 2003, which is below the level recorded in 1998 (41%) and the DAC average of 40%. However, the percentage of ODA going to Sub-Saharan Africa was 36% in 2003, which is higher than the DAC average of 35% for that year.

 … but strategic allocation continues to be an issue

The list of bilateral partners  for Swiss development co-operation as a whole (45, including  nine “special” programmes) is rather long in relation to the size of Switzerland’s bilateral aid programme. There are opportunity costs in having such a large number as well as questions regarding the critical mass necessary to make a durable impact. Seco has indicated that it will further concentrate its co-operation programme to fewer countries (from 27 in 2004 to 20 by 2010). Switzerland should address the issue of geographic concentration worldwide to improve the management, coherence and effectiveness of its overall development programme.

The Swiss Federal government encourages thematic concentration on no more than three sectors in each priority country. That rule is in fact broadly interpreted, with sometimes a resulting large number of overlapping priorities. Switzerland should follow the recommendations from recent evaluation and portfolio assessments and reconsider the breadth of its operations from the point of view of comparative advantage, effectiveness and potential for impact on a larger scale. Efforts should also continue to be made to reduce transaction costs and achieve economies of scale by combining Swiss activities with other donors involved in the same sectors.

A need for a strategic approach to multilateral institutions

Switzerland’s long-standing interest in multilateral institutions has grown further as a result of its recent full membership in the United Nations. Swiss contributions reached 27% of gross disbursements in 2003. SDC and seco have shared responsibility with respect to multilateral agencies. A Swiss multilateral strategy, approved in April 2005 by both the DFA and the DEA, will be published shortly.

Switzerland should reflect on the desired level and spread of its multilateral assistance. A total of 15 UN organisations benefit from Swiss contributions, in addition to ten or more specialized funds which Switzerland supports, sometimes with modest amounts of money. Playing an influential role within international institutions warrants more clarity on allocation criteria as well as a system for tracking the performance of those institutions. In this respect, Switzerland could join or rely on other DAC members’ efforts to evaluate their performance.

Recommendations

• Because Switzerland has much to contribute as a bilateral donor to poverty reduction,  peace and security, it should revisit the issue of ODA commitments. Sustained ODA increases would provide Switzerland with the means to do more to address the many pressing development challenges in its partner countries.
• Switzerland is encouraged to reassess the number of its priority countries, finding a balance between its broader foreign policy objectives and the needs of poor countries, including fragile states. It should concentrate aid in each country or region on sectors and themes based on comparative advantage, effectiveness and potential for impact on a larger scale.
• Switzerland’s multilateral strategy should give greater weight to supporting institutions on the basis of criteria linked to performance and impact on poverty reduction.

Policy coherence for development

Involving more Federal Departments and agencies in setting the coherence agenda

Ministerial co-ordination is formalised in the Ordinance executing the 1976 Law on Development Co-operation. An inter-ministerial committee - IKEZ - provides a mechanism to discuss issues which straddle development and other areas of the Federal administration such as justice, defence and the environment. Despite having a certain weight, the committee has no decision making power, its force lying in its capacity to initiate a debate within the administration. Other informal mechanisms are in place, such as the interdepartmental working group to discuss the foreign policy implications of migration and smaller groups addressing more specific issues.

As in many other DAC member countries, the challenge for the Swiss authorities remains to ensure that the debate around policy coherence goes beyond development agencies like SDC and seco to include other Federal agencies. In recent years, SDC and seco have successfully introduced a developmental perspective in the discussion on topics such as trade in agriculture, capital flight and export credit guarantees. They now need to develop creative approaches to ensure that Swiss commitments to the developing world are placed more systematically on the agenda. A clear message from the Swiss authorities that other Departments are expected to participate fully at a senior level in a discussion on policy coherence for development would be helpful.

Strengthening policy coherence for development in key sectors

During the Doha Round of trade negotiations Switzerland reconfirmed its commitment to working towards the long-term objective of reaching a fair and market-oriented trading system in agriculture through a programme of fundamental reforms. Under the ‘zero tariffs, zero quotas’ initiative, Switzerland began in 2002 to gradually abolish import tariffs and quotas on LDCs’ agricultural products. Other recent policy decisions include reducing tariff escalation for the food industry and a progressive phasing out of milk quotas between 2006 and 2009.

Despite these efforts, the total amount of public financial support to farming as a percentage of GDP remains high. Agricultural imports in direct competition to domestically-grown produce are still subject to high customs tariffs and the full implementation of the zero tariff, zero quota goal remains still subject to parliamentary approval. Adopting a more liberal policy towards agricultural imports would not only benefit the Swiss consumer and food industry but also poor countries in terms of increasing economic growth and reducing poverty.

Switzerland has implemented the measures drawn up by the Financial Action Task Force on Money Laundering. Concrete steps have been taken to return illegally acquired funds to countries like Nigeria and Peru. Switzerland is encouraged to share its experience in this area with the international community. It could also bring up  the broader issue of capital flight, with the aim of addressing its root causes and impact on developing countries.

Recommendations

• Switzerland should strengthen existing institutional arrangements for policy coherence for development, deepening the involvement of Federal Departments other than development agencies in the debate and enhancing advocacy within the administration and specific interest groups.
• Given Switzerland’s support for a fair international trading system, it should continue to work towards a development-oriented outcome of the Doha Round of trade negotiations, addressing in particular the issues of agricultural subsidies and tariff escalation.
• Switzerland is encouraged to share with the international community, its experience in the area of returning illegally acquired funds to developing countries.
• Switzerland could bring the issue of capital flight to the attention of the international community, with the aim of addressing its root causes and impact on developing countries.

Aid management and implementation

Swiss co-operation is widely respected

Overall Swiss development co operation in all its diversity is considered to be technically sound, with highly committed and professional staff adhering to high standards of integrity. At field level project staff have satisfactory relations with government agencies and representatives at national and sub-national levels based on trust and mutual respect. Partners are consulted regularly and the relations with NGOs and representatives of the private sector are very good. Swiss co-operation is widely respected among peers at both the international and the field levels.

SDC undertakes bilateral actions directly, supports the programmes of multilateral organisations and finances programmes run by other Swiss and international aid organisations. The agency starts with the country context when defining areas of activities. Its operations are highly decentralised in traditionally ‘soft’ domains, i.e. conflict prevention and democratic transformation, governance, environment. Policy dialogue, project aid, some sector work as well as technical assistance, including for capacity building are amongst the agency’s most commonly used forms of collaboration. The agency supports individuals, NGOs and public institutions at the local, national and global levels.

Seco selects activities on the basis of its own economic and trade-related instruments, followed by a thorough analysis of the country context. Macroeconomic issues (e.g. budget support, debt and financial sector development), investment promotion, trade and basic infrastructure are core fields of competence under its purview. The agency works closely with the private sector both in Switzerland and in partner countries.

Better integrated aid management systems would reduce transaction costs

SDC and seco share common principles (e.g. sustainable development, good governance, policy dialogue) and the overall objectives of poverty reduction and aid effectiveness. They collaborate on strategic choices for Switzerland’s international co-operation, including through a joint strategic committee and four joint steering committees - for developing countries, for transition countries, for multilateral co operation and for information policy. Their differentiated approach, modalities and instruments are perceived as complementary. Nevertheless the potential for synergies and increased joint SDC-seco work could be more fully exploited at field level.

Both SDC and seco headquarters are responsible for co-ordinating with other Swiss Federal offices and backstopping the co-operation offices (COOFs) at field level. The COOFs represent seco in 18 of the agency’s 27 priority countries. In the other priority countries, arrangements (including posting of seco staff), are made with the Embassies. In the joint COOFs of Eastern Europe, seco contributes to 50% of the fixed costs but depends on SDC’s headquarters for programmatic/strategic matters, administration and personnel management. A written agreement between SDC and seco covers issues such as the nomination of Country Directors, their terms of reference, qualification procedures, and co ordination and representation. In all cases Swiss Ambassadors remain in charge of political matters.

Notwithstanding the value of SDC and seco’s respective approaches and the complementarities of their instruments, the agencies’ management and operational differences inevitably translate into some unnecessary transaction costs, overlap and duplication of know-how. The systems needed at headquarters to co-ordinate between them take up resources that might otherwise be available to strengthen critical field operations. From the limited perspective of the two field visits, it would appear that the agencies’ ability to work together depends to a large extent on personal engagement and motivation. Under those circumstances, promoting standards uniformly is a challenge that Switzerland needs to address in order to better meet the compelling demands of the international agenda, for example on harmonisation.

Decentralising more comprehensively to the field level

Country directors enjoy some flexibility to allocate the funds according to priorities decided jointly with partner countries on an annual basis. Viewed from the field, they could benefit from larger financial envelopes, biennial planning and a higher level of delegated authority. General programme management tasks could be decentralized more comprehensively to the COOFs and some advisory resources might be transferred from headquarters to support the aid effectiveness agenda at country level. The COOFs could also take a stronger leadership role in key areas where their intellectual and operational competences and achievements are clearly recognized (e.g. governance and private sector), and more actively pursue joint arrangements with other donors, such as delegated/silent partnerships and sector work where feasible.

Encouraging greater emphasis on results and institutional learning

SDC’s revamped monitoring and evaluation system with increased manpower as well as a ‘community of practice’ network to encourage lessons learning throughout the organization, is in line with OECD/DAC standards. The system now has the opportunity to evolve towards a greater focus on outcomes and impact. Efforts are being made, e.g. to monitor SDC’s Strategy 2010, including through a rapid self-assessment method to track the agency’s contributions to the MDGs. Though informative, this method is limited to tracking inputs and has yet to link the system to quality improvements in terms of outputs produced. Other challenges include closer scrutiny of cross sectoral issues, raising the quality of evaluation reports for all divisions and making all reports public. To avoid a proliferation of external evaluations and reviews, consideration should be given to strengthening planning and to seizing opportunities for combining different assessments. This would save resources without necessarily impacting negatively on the quality of the evaluation programme.

A quality assurance management system (Certification ISO 9001) was established in 2000 to monitor seco’s work on an ongoing basis and ensure the integration of ‘lessons learned’ into the decision-making process. A comprehensive monitoring tool for seco’s Strategy 2006, the Strategic Assessment and Review (STAR) system was also designed to continuously improve programming. Thanks to those efforts seco was able to document some success in reaching the objective of having at least 80% of country specific expenditure in seco’s priority countries in 2002-2003. However, as is the case of most other DAC members, challenges remain such as (i) designing performance indicators and defining minimum requirements for project-based performance agreements with the COOFs; (ii) linking projects objectives to the MDGs as well as country-owned poverty reduction strategies; (iii) identifying and collecting poverty related data; and (iv) integrating partners in assessing performance.

SDC and seco are planning to undertake more joint thematic assessments and portfolio reviews. The DAC strongly encourages them to pursue this line and to step-up efforts at increasing the integration of actual field experiences into decision making processes. As for other DAC members cases of lessons learned tend to be isolated and knowledge exchange within the agencies and between them does not translate easily into institutional learning. Staff should be encouraged to adopt a more systematic approach towards accounting for results and additional resources and technical advice could be provided to the COOFs or developing country partners to support this if and when needed. Switzerland could also consider ways of strengthening the exchange of knowledge through regional institutions and through brainstorming with other donors.

The dilemma of local ownership versus visibility

A number of challenges remain with respect to programme implementation. The process leading to the recruitment, monitoring and evaluation of technical assistants on which Swiss co-operation relies for implementing its activities should be more transparent, involving partners in the identification and performance assessment of those agents. The spectrum of implementing agencies could include more regional and national institutions. Increased responsibility for programme implementation should be given to local partners to strengthen local ownership and ensure sustainability. Regarding training activities, Switzerland should explore pooling funds with other donors and then asking the local authorities to take the lead in tendering processes. This would save transaction costs and could substantially improve the overall efficiency of the collective training effort. But it would also require a genuine commitment from all concerned to ‘lower the flag’.

Carrying the aid effectiveness agenda forward

Switzerland is committed to implementing the Rome and Paris Declarations on aid effectiveness and has made a credible start in moving ahead on harmonisation and alignment. As a result of this engagement, many COOFs are now involved in PRSP processes, and SDC and seco are elaborating a common action plan to bring Swiss procedures closer in line with those of other donors, as well as to match Swiss aid delivery with partner countries’ priorities and systems. The two agencies are currently working together on a common approach based on the Paris Declaration. A joint statement and implementation plan will be publicized shortly.

Evidence from Vietnam and Bosnia and Herzegovina suggests that operational staff need encouragement from headquarters to follow-up on the declarations and further their work in developing common frameworks for working together with other donors. A ‘joint SDC-seco platform’ for poverty reduction strategies will facilitate exchanges and co ordination on conceptual and operational PRS-related issues as well as a clearer division of labour on how to contribute to the implementation of those strategies. Each agency should also review its internal mechanisms for dealing with poverty strategies in countries where those exist and designate focal points to enhance the coherence of their response. To encourage a culture of aid effectiveness different training options and seminars could be envisaged, including with other DAC members facing similar challenges. Those efforts may lead naturally to the exchange of staff between the two agencies (and with other DAC agencies) to meet specific needs or for more extended periods.

A common SDC-seco operational strategy or action plan towards reducing poverty would make it easier for the COOFs to take a strategic view of what Swiss co operation can achieve in specific contexts and how to exploit the potential for positive synergies between the bilateral programmes, national poverty reduction strategies, Swiss and local NGOs. In the context of PRSs the COOFs could still increase their engagement with other donors, for example in joint country assessments and diagnostics, monitoring reviews, evaluations and capacity building interventions, pooling funds as much as possible, including for technical assistance. Together with other donors Switzerland should also explore ways to let go of approaches (for example, project management units) that are slowing, if not undermining, the harmonisation process and examine other options like collective support for public service reform. Finally, staff from the field should be brought together on a regular basis with colleagues from SDC and seco headquarters to exchange experiences and lessons learned. As well, more efforts should be made to find sustainable solutions to the challenges of programme and activity management, for example to provide ODA resources through strengthened government systems, including local levels of government.

Recommendations

• There may be scope for rethinking the overall structure and organisation of the Swiss development co operation system, in particular to face the challenges of poverty reduction and aid effectiveness at field level. As an initial step in this direction, Switzerland should consider the advantage of consolidating SDC and seco’s services dealing with multilateral institutions, including the International Financial Institutions.
• Switzerland should ensure that all co operation offices represent both SDC and seco and are granted the appropriate authority over financial and human resources to manage the Swiss programme effectively.
• Switzerland’s evaluation culture should be scaled-up to give even greater focus on the poverty reduction impact of Swiss interventions. This implies greater efforts to link the monitoring and evaluation system to quality improvements in terms of the information and data needed to measure outcomes.
• In contributing to the aid effectiveness agenda, SDC and seco should actively pursue their efforts at elaborating common operational approaches and adopt aid modalities that reduce transaction costs for partner countries, including delegated/ silent partnerships and sector and budget support where conditions permit.
• Switzerland should provide more opportunities for developing country partners to manage development activities directly. It should increase the use local and regional technical expertise whenever possible and the involvement of partner authorities in the selection and performance assessment of technical assistants.

Switzerland’s humanitarian aid

A strong and centralised system

Humanitarian action holds a distinct position in Swiss foreign affairs and Switzerland has a strong tradition of humanitarian aid, being a valuable contributor to the international humanitarian system. The Federal Law on International Development Co-operation anchors this dimension in International Humanitarian Law (IHL) and the humanitarian principles. A humanitarian strategy further defines the mandate, principles, tasks and operational activities, translating the federal law’s provision of humanitarian aid into a strategic approach. Switzerland identifies the promotion of IHL as a core area of its humanitarian policy and is also firmly committed to the “Principles and Good Practice of Humanitarian Donorship” (GHD). Its humanitarian system is advanced, with innovative and complementary approaches in disaster risk reduction and cash distribution projects.

Switzerland allocates humanitarian aid based mainly on needs. Detailed principles are not formalised. Traditionally, 20% of the ODA budget was earmarked for humanitarian aid. Since 2000, however, the share of humanitarian aid, including expenditure on refugees in donor countries, has not exceeded 15% of ODA. The humanitarian budget is divided into three parts: one third is allocated to bilateral programmes and programmes managed by Swiss NGOs; one third is committed to the International Committee of the Red Cross/International Federation of Red Cross and Red Crescent Societies; and one third is divided between United Nations agencies.

Management of Swiss humanitarian aid is centralised in the SDC within the Federal Department of Foreign Affairs, which also holds authority over the advanced national rapid response mechanism. Co ordination and consultations with units responsible for other political areas are in general well developed. Humanitarian responsibilities or funds are not delegated to embassies or co-operation offices. These can be strengthened with humanitarian specialists. Special co-ordination offices may also be established in affected regions. Switzerland’s national response mechanism and Swiss NGOs hold a prominent position in implementing Swiss humanitarian aid. However, the cost of using national mechanisms should be weighed against that, and some of the other benefits, of using local capacities.

Addressing further improvements

With an increase in ODA level Switzerland could contribute even more to humanitarian action. The global multiyear framework credit could provide measures for predictable funding arrangements which should be explored further. Switzerland could also consider developing directives for making funding more timely. The budget structure could be simplified and better reflect (i) allocations to multilateral agencies; (ii) support to Swiss and local NGOs; and (iii) Swiss response capacity. The present division of budget lines also indicates limitations in terms of the untied status of food aid items.

Swiss humanitarian policy is clear but could be reflected more consistently in other SDC strategies. Humanitarian aid is considered a separate discipline within SDC but is sometimes referred to as a component of crisis prevention and crisis management. Hence there is a risk of overlapping policies and conflicting positions between divisions of the FDFA in the area of complex emergencies. Switzerland should continue to ensure that policy debates on migration do not influence humanitarian allocations and could consider evaluating its voluntary return programmes.

Switzerland could also develop further its management system for humanitarian strategies. To strengthen the needs-based approach and promote harmonisation and alignment in complex emergencies, it could explore further how to take full advantage of its country operations and develop humanitarian strategies based on the UN Common Humanitarian Action Plans (CHAP). Strategies focused on implementation could also better address how to ensure involvement of beneficiaries as well as environmental and social (including gender-related) perspectives.

Recommendations

• Switzerland should ensure that humanitarian aid remains an independent policy discipline, albeit interlinked to crisis prevention and management in operational terms.
• SDC could clarify multilateral and bilateral strategies in the field of humanitarian aid and make them focused on operations. The methodology for involving beneficiaries in humanitarian response and addressing environmental and social aspects of humanitarian aid should be further addressed in strategies for implementation.
• When increasing its ODA, Switzerland should maintain the percentage allocated to humanitarian aid. The budget structure could be further clarified and the food aid component should be untied.
• SDC should take advantage of having humanitarian aid as an integrated part of the aid system. It should ensure that the Humanitarian Aid Department is a full participant in development co-operation processes.
• SDC could develop its management system for humanitarian strategies and their alignment to the UN Common Humanitarian Action Plans. The use of humanitarian specialists in embassies and SDC co operation offices could be evaluated to further strengthen this function in field operations.

The full Secretariat report is forthcoming.

Visit the OECD country web site for Switzerland.