Development Co-operation Review (2001)

See also The Netherlands' Aid-at-a-Glance

A tradition of development co-operation leadership and performance

Dutch development co-operation has historically evolved flexibly with the challenges of the changing times, and has traditionally played an important and very active role among donor nations in shaping the world agenda in development assistance, particularly in policy coherence areas. The Netherlands put in motion an ambitious sequence of internal reforms in 1995, then again in 1998. Many of them, such as the decentralisation and delegation of authority to the field, the promotion of host country ownership of the Dutch programmes, and the emphasis of sector approaches, have put Dutch field missions in a role that is applauded by many of their local foreign donor counterparts. The Netherlands has designated poverty reduction as the overarching rationale for its development assistance, and is playing a strong role in testing operational approaches to this theme.

Dutch official development assistance (ODA) has averaged an ambitious 0.8% of gross national product (GNP) since the last Peer Review, and even before, putting it in the select group of Development Assistance Committee (DAC) Members who meet or exceed the United Nations (UN) target goal of 0.7%. DAC statistics show the Netherlands to be the second most generous bilateral donor among its Members. This laudable achievement was undoubtedly greatly facilitated by the strong and widespread Dutch public and political support for development assistance. The formal shaping of Dutch development co-operation by the Parliament is similarly influenced by many civil society groups, including non-governmental organisations (NGOs), private enterprises, municipalities, research institutes and universities.

Dutch development co-operation since the last Peer Review (1997) has been carried out in a manner highly compatible with most aspects of DAC guidelines in key sector and theme areas, including those in poverty, environment, evaluation, governance and conflict, gender and the private sector. The Netherlands vision of aid has been heavily influenced by DAC strategic principles, and by the International Development Goals (IDGs) and indicators, which, over the last year, were integrated into official reporting to the Dutch Parliament. The Netherlands was able to successfully address some, but not all, aspects of the key issues raised in the 1997 DAC Peer Review.

The shape of aid

Managing a growing budget: The fact that Dutch annual ODA is benchmarked against a fixed percentage of GNP means an automatically expanding level of ODA in a situation of national economic growth. This, in turn, places increasing pressure on Dutch management systems, which, simultaneously are under pressure due to staff constraints. Additional funds tend to be absorbed through flexible use of macroeconomic assistance, partially in cofinancing agreements with multilateral institutions.

Country targeting: The Netherlands has made a substantial effort since 1998 to reduce the dispersion of its assistance by more clearly defining its 17+4 "partnership" countries, in conjunction with some 30 other, more thematically defined recipients. This was a politically difficult and courageous step toward creating the conditions for more efficient development co-operation. Nevertheless, the number of beneficiary countries still remains rather high and the justification for placing some countries in certain theme categories is debatable. With the ever-evolving situation of the developing world, as well as the politico-economic situation of the Netherlands and its developed world partners, Dutch authorities need to maintain clarity in country selection policies.

NGO targeting: Dutch development assistance makes extensive use of private and non-governmental organisations (representing some 20% of overall Dutch ODA) in implementing its programmes. Ten percent of overall ODA is traditionally allocated to the "Four Pillars+1" group of NGOs. The Dutch government is currently attempting to improve upon the logic and nature of this allocation process along performance, efficiency and transparency lines. This will result in an opening up of the former allocation system which is felt to be beneficial to all parties.

Policies and approach

Policy coherence focus: The concept of broad-based policy coherence is not new to the Netherlands development assistance approach and the importance of having a Minister for Development Co-operation in the national cabinet is critical in this respect. The Dutch are very actively engaged in the linking of the Dutch perspective on developing world issues to key international fora such as the European Union (EU) and World Trade Organization (WTO), and over a wide variety of themes, including trade, environment, and private sector policies. As in other donor countries, some domestic issues such as debt relief and export credit policies, require additional attention. Policy coherence is a complex task, and a more systematic approach requires an adequate analytical capacity to better identify and address this task.

Ownership and poverty focus: The Netherlands builds its approach to development co-operation on three principles: ownership, utilisation of domestic resources and poverty reduction. As is true with several DAC Members, it promotes the use of country-owned strategies, in particular, the Poverty Reduction Strategy Paper (PRSP), as a framework for implementation, monitoring and evaluation, donor co-ordination and policy dialogue in priority countries. Because of the major importance of this new system, based on over 30 years of lessons learned of development co-operation, Dutch leadership faces a challenge in terms of risk management whenever the implementation of such models proves difficult. Options for reducing interim risks include the further development of sector approaches (which can feed into a PRSP framework), and the pursuit of priority collaboration with key partners, bilateral and multilateral, to help ensure that poverty approaches are rendered operational as soon as and as effectively as possible.

Multilateral focus: In light of its interest in striving towards greater policy coherence, the Netherlands has been actively involved in co-ordinated action with its major multilateral partners. Because the Netherlands is a strong supporter of the European Union (EU) and because of its historical interest in engaging the development of future European policies, it is appropriate for Dutch leadership to continue its active involvement in European policy dialogue and co-ordination.

Alliance with civil society: Because Dutch development co-operation derives its strength from the strong support of civil society and the Dutch political process, a continuing engagement of civil society is necessary, especially the Dutch NGO community, academic and research institutions, and the business sector. The Minister for Development Co-operation maintains an active dialogue with Dutch civil society. It would seem desirable to build from this framework to further operationalise collaboration between civil society and the Ministry of Foreign Affairs (MFA), and between Dutch civil society and its partners in Europe and elsewhere. Such an approach will allow for a more action-oriented dialogue on policy coherence issues, as well as other relevant issues affecting the Dutch system of foreign aid and its field operations.

Untying: The Netherlands has provided strong political leadership and support for untying of development assistance. Given the DAC High Level Meeting agreement reached in April 2001 on untying aid to least developed countries (LLDCs), the Netherlands has now decided to re-allocate the funds previously used for tied-aid projects in LLDCs to a special facility for infrastructure development in those countries.

Management considerations

The MFA provides an organisational framework which permits it to pursue the various and inter-related foreign policy objectives of the Netherlands, one of them being sustainable poverty reduction through development co-operation. This integrated organisational setting has undoubtedly improved the coherence of policy emanating from these two sides of the ministry. From a management perspective, however, this association of functions appears to have generated some operational challenges. The Minister for Development Co-operation, while responsible for some 80% of the overall MFA budget, lacks authority in several critical organisational areas, not the least of which is personnel. In the recipient country embassies in the field, the aid portfolio usually represents the majority of official Dutch funding in-country, while delegations of authority to the field remain with the ambassador. The operational issues created by this situation have not been entirely resolved. The Regional Bureaus have a key role here, but suffer staffing constraints.

Improved communications: Perhaps one symptom of the somewhat unclear chain of authority and responsibility (although not the only reason) is an apparent problem with communication between headquarters and the field. It would seem important to initiate action to address evidence of a psychological separation of the field and headquarters, when convergence and communication are so critical to successful decentralised management. In a similar vein, recent strong statements from headquarters on new policies on sector approaches, budget support and technical assistance, seem to have generated misunderstanding which can best be mitigated by a strengthening of communication and a sharing of field experiences in these areas.

Need for modern personnel policy: Another side effect of this system would appear to be at the level of personnel management. Relatively little attention is given to specialised management needs of the development assistance side of overall staffing. While a survey is planned in 2001 to estimate the size and composition of the development assistance work force, current figures only show the global numbers of employees within the MFA, leaving an absence of basic data against which normal personnel policy and planning for development assistance can be derived. It is important for the incentive system of the developmental side of the ministry, and for its appropriate future staffing (skill mix, location, size), to develop a forward-looking personnel policy which is optimally responsive and supportive of the development co-operation side of the ministry.

Financial vs. management decentralisation: Despite the principle of decentralisation of development co-operation to the field level, only a part of overall Dutch ODA in any given recipient country is actually managed by the local embassy. A more holistic re-examination of the various budget flows of Dutch ODA to any individual recipient could be undertaken so as to more strategically place the local Dutch representative in transacting the use of these funds. One specific intention expressed by the Minister for Development Co-operation in this respect is the delegation of more authority for macro support funds, all of which are currently controlled out of headquarters. A result of this will be the reinforcement of the authority of the Dutch field missions and the better use of local experience to focus these considerable funds more in line with local developmental policy and logic.

The recurrent issue of an effective monitoring and evaluation (M&E) system: This Peer Review, as was the case in both the 1994 and 1997 reviews, found a continuing need for the Netherlands to strengthen its M&E system. While some efforts are being made in this respect, the current system still appears conceptually disconnected and minimally co-ordinated operationally, resulting in an overall feedback system which is uneven in quality and with a tendency to be informal and anecdotal. It is suggested that, perhaps under the aegis of the evaluation office (IOB), a comprehensive review of overall Dutch M&E systems be undertaken so as to identify the range of options in this area which are before Dutch leadership. Failure to redress these deficiencies hold the potential to undermine the credibility of the ministry's widely announced results orientation in the eyes of the public, and will continue to permit a management style which does not have a system of feedback for learning.

Recommendations

Based on these findings, the DAC encourages the Netherlands to:

• Continue to maintain the current strong commitment to high ODA levels, combined with high quality and creative approaches to development programmes.
• Continue to use developmentally appropriate allocation solutions to a regularly growing ODA budget and give special attention to adequate staffing.
• Strengthen MFA analytical capacity to pursue greater policy coherence among Dutch actors and on the international scene.
  Initiate the actions necessary to effective communications between headquarters and the field, so as to redress any Perceptions of separation and to ensure that perspectives from both ends are fully understood and utilised.
• Ensure that policy-making is fully informed by the field perspective. Special note is made in this sense of the need for policy clarity relating sector assistance to budget support and on the appropriate uses of technical assistance in the field.
• Continue to actively collaborate with Dutch civil society so as to address policy coherence issues and other issues of mutual interest concerning Dutch development co-operation in headquarters and abroad.
• Pursue current intentions to bring Dutch policy on tying in line with the April 2001 DAC agreement on untying to the LLDCs.
  Maintain its active involvement in co-ordinated actions with selected multilateral agencies as well as in European policy dialogue and co-ordination.
• Develop a personnel policy for the development co-operation operations of the MFA that provides a useful framework for the recruitment and assignment of appropriate staff and generates accurate information on developmental staff.
• Undertake the actions necessary to creating an overall monitoring and evaluation system which allows for well informed management decisions and which is structured conceptually around learning.
• Further develop sector approaches and continue to engage key international partners in collaborative efforts to ensure that country-owned approaches such as the PRSP are rendered operational as soon as possible.
  

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