The Reality of Aid 2016 Report Theme Statement: Technical Cooperation and Capacity Development as an Aid Modality

A. Background what is technical cooperation?[1]

1. Technical cooperation has a long history in development aid, and therefore continues to play an important role. It is still one of the most heavily used forms of aid, accounting for between a quarter and a half of all ODA.

2. But over these years there has been some confusion in the use of terminology, shifting from technical assistance to technical cooperation. In the 1990s, the World Bank defined technical assistance as the transfer or adaptation of ideas, knowledge, practices, technologies, or skills to foster economic development. The purposes of Bank technical assistance are classified as follows: a) Policy development, b) Institutional development, c) Capacity building, d) Project or programme support.[2]

3. The term technical cooperation has become more popular in the last twenty years as a way of describing this knowledge transfer activity, with cooperation implying a change in attitude towards a more equal partnership.

4. More often, though, ‘technical cooperation’ is the more common term for describing overall strategy and as a broad description of any activity aimed at enhancing human and institutional capabilities through the transfer, adaptation and utilisation of knowledge, skills and technology while ‘technical assistance’ is used more narrowly to describe specific operational aspects of technical cooperation[3], as in this definition from the European Commission:

Technical Cooperation is often associated with actions aimed at strengthening individual and organisational capacity by providing expertise (short and long term technical assistance personnel, institutional twinning arrangements, mobilisation of diaspora, etc.), training and related learning opportunities (peer exchange, tertiary education, etc.), and equipment. Technical Assistance (TA) refers to the personnel involved in the implementation and the management of technical cooperation services.[4]

5. There are also some occasions when technical cooperation is used interchangeably with technical assistance, generally acknowledged to include the traditional aid categories of technical assistance, training and educational grants these potentially quite different support actions have the common (and sometimes overlapping) objective of supporting the capacity development of the partner country.[5]

B. The Reality of Aid 2016 Report Theme

6. The theme of the 2016 ROA Report is technical cooperation and capacity development as an aid modality. It was argued that underdevelopment was caused by fundamental gaps in poor countries, including a capacity gap, in which poor countries lacked the necessary skills and technical know how to develop their economies. As donors provided finance to fill other gaps, they similarly poured in technical cooperation to fill the capacity gap.[6]

7. Over time, there has been a fundamental shift in discourse within the development community on the role and function of aid, in part a response to developing country governments criticisms against donor policy conditionalities because these constrained the policy space available to them for pursuing country appropriate development strategies. Owing largely to the failure of blueprint approaches that did not contribute to sustainable change, there is now a far greater emphasis on participation, local ownership, and locally developed solutions.

8. But while this shift has resulted in some improvements in the practice of development cooperation, it remains largely unfulfilled. Many donors still provide finance in ways that restrict, rather than promote, the ability of poor countries and poor people to make their own policy choices. More so, reforms in the use of technical assistance have seemingly lagged far behind.

9. Technical cooperation is heavily criticized for its widespread use by aid providers as a soft lever to oversee and direct the policy agendas of developing country governments, or to create ownership for particular reforms donors deem suitable. An example is how bilateral donor spending on consultants, training and research has often served to undermine poor countries efforts to reduce poverty. The presence of so many experts in developing countries has not done enough to give poor countries the ability to stand on their own feet. The effectiveness of technical assistance provided by major bilateral donors like the US, Japan, UK, Australia, and France as a means to build capacity within developing country governments has been questioned for many years.

10. Another increasingly common focus for donor technical assistance is in the area of aid for trade, the stated aim of which is to help countries develop their trade policies and regulations, and build the physical infrastructure needed for trade. While seemingly a valid objective, it has focused uncritically on building trade-related capacity for implementing country reforms intended to facilitate closer integration in the multilateral trading system. Much less attention is being paid to alternative trade policy choices and building negotiating capacities in developing country ministries to promote their interests in this trade system.

11. An examination of technical cooperation should focus on the relationship between technical cooperation and capacity building initiatives by aid providers and commitments towards strengthening democratic country ownership. Policy space for democratic ownership, where peoples voices and interests can shape government development initiatives, is vital if technical assistance is to be effective in building capacity for sustainable poverty reduction.

Multilateral Development Banks Technical Assistance

12. Providing technical assistance to member countries particularly developing countries and countries in transition is a major component of the work of multilateral development banks (MDBs) that remains relatively unknown to the public at large.

13. Technical assistance is identified as one of the World Banks main pillars of activity. The Bank serves as executing agency for technical assistance projects financed by the United Nations Development Program in agriculture and rural development, energy, and economic planning. It also provides technical assistance for institutional development and macroeconomic policy formulation.[7] The World Banks Technical Cooperation Program (TCP) plays a prominent role in policymaking in developing countries. It continues to assist across the entire range of governmental functions, including sectoral policy reform, economic integration, privatization, public sector enhancement, labor market competitiveness, investment climate enhancement, e-government, soft infrastructures for developing a knowledge economy, macroeconomic management, and effective long range planning.[8]

14. Developing member countries (DMCs) also look to regional development banks as a source of technical assistance. A case in point is the Asian Development Bank (ADB) its technical assistance operations facilitate the flow and utilization of development finance to DMCs and recipients within DMCs to enhance their development capacity. Through its technical assistance operations, ADB assists in (i) identifying, formulating, and implementing development projects, (ii) formulating and coordinating development strategies, plans, and programs; (iii) improving recipients institutional capabilities; (iv) undertaking sector-, policy-, and issues-oriented studies, and (v) improving the knowledge about development issues in the Asia and Pacific region.[9] Similarly, the African Development Bank provides technical assistance and capacity building to African governments in implementing development projects and programs, including on energy resource management and exploitation, in developing robust energy/power infrastructure development strategies and operations, in implementation of the AfDBs private sector development strategy, among others. Meanwhile, the use of advisory services and technical assistance of the European Bank for Reconstruction and Development (EBRD) have been a prominent element of its operational toolkit to promote transition to free market economies in countries of the former Soviet Union. The ultimate aim of the EBRDs technical cooperation programme is to increase the pace and sustainability of the transition process in its countries of operation by creating a sound basis and environment for direct investment, trade, and financial intermediation.[10]

15. Technical assistance and training are also an important complement to the International Monetary Funds (IMF) core functions of surveillance and lending. Technical assistance accounts for about one quarter of the IMFs operating budget, of which approximately two-thirds go to low income and lower-middle income countries.[11] The IMF transfers knowledge about economic and financial policymaking to member countries. Typical activities include advice on particular macroeconomic policy issues, technical advice on practices and institution-building in the IMFs core areas of responsibility mainly central banking, monetary and exchange rate policies, public finances and budgeting, tax policy and administration, and statistics.[12]

16. Evidence suggests that the bulk of technical assistance from MDBs remains donor-driven.[13] Technical assistance is provided by MDBs alongside conditionality to promote reforms they consider to be important. It is used to ensure that there is sufficient capacity for conditions to be met, or to buy support for, and promote ownership of, reforms by government. In many cases, these conditions have included many sensitive policy areas, including trade liberalization, water privatization, and power sector reform in developing countries.

• How well integrated are technical cooperation initiatives with national development strategies?
• Under what conditions can the process for identification of technical assistance needs in project design, terms of reference design, procurement, reporting, and monitoring and evaluation be transparent, inclusive and not donor-driven?

Technical Cooperation for Infrastructure Development

17. Infrastructure development is deemed crucial to economic growth and poverty reduction. There is currently a strong push for accelerated investments in infrastructure, especially as it becomes a focus in development policy for multilateral institutions and developing emerging economies. Several facilities have been established that seek to provide support to growing infrastructure needs, including the World Banks Global Infrastructure Facility, China-led Asian Infrastructure Investment Bank, Asian Development Banks Infrastructure for a Seamless Asia program, Africa 50 Fund, among others. With these initiatives, there is also increased attention to augmenting technical assistance and capacity building mechanisms to support quality investments in infrastructure.

18. Reports from MDBs indicate that technical assistance given to recipient countries often involves developing and implementing policy and regulatory reforms, and building the institutional and social foundations needed to enable, promote, and facilitate investment in infrastructure. It also includes dispatching consultants to conduct feasibility studies required to provide infrastructure, environmental impact assessment, and other plans prior to construction.

• What is the scope and breadth of technical cooperation for infrastructure development at the global and national levels?
• What is needed to ensure that capacity development mechanisms are country-driven and country-owned?
• How do we ensure that contributions of technical cooperation for infrastructure are consistent with human rights based approaches and the countrys sustainable development objectives?

Technical Cooperation and Tied Aid

19. Technical cooperation is being heavily criticized as expensive, and this has been exacerbated by the exclusion of technical assistance from commitments to untie aid.[14] Tying increases aid costs for all forms of aid including technical assistance. It also distorts local priorities and denies local contactors the opportunity of using aid money to boost employment and develop their own skills and capacity.

20. Untying of aid was one of the main commitments contained in the Paris, Accra, and Busan declarations. In 2013 DAC donors reported that 86.2% of their bilateral ODA was formally untied. It is likely that much of the remaining 14% is composed of technical assistance. While it is difficult to find accurate statistics, it will be important to assess the degree to which technical assistance contracts are awarded to firms from donor countries, including sub-contracts to large foreign and transnational corporations.

21. A major concern in the heavy use of expatriate consultants is the dependency culture it fosters. Government officials can have reduced incentives to develop their skills and abilities because they assume that international experts will always be there to do the job. The very presence of foreign experts can lead to the degradation of local capacity and encourage the mistaken view that Southern countries are unable to manage for themselves. Essentially, how this contributes in developing local institutions and strengthening local capacities remains unclear.

• Is the hiring of nationals, local firms and suppliers prioritized over foreign contractors and consultants?
• Are technical assistants directly accountable to donors, and not local governments counterparts?
• Is the mandate for technical cooperation more focused on meeting donor needs and demands rather than building sustainable local capacity?

South-South Technical Cooperation

22. As the UNDP 2013 Human Development Report documents, Brazil, India, China, South Africa, Turkey, and a number of Arab countries are playing an increasingly important role in the provision of technical support as South South Cooperation (SSC) assistance providers. As Reality of Aids 2014 Reports Aid Trends chapter pointed out, SSC has grown $23.6 billion, an amount that has been growing significantly in the past five years, during a period when many North-South donors have largely flat-lined or reduced their aid. However, SSC is also highly concentrated, with four SSC aid-providers (Turkey, Saudi Arabia, the UAE, and China) account for 90% of these flows.

23. One major advantage of Southern donor countries in technical cooperation is that they are able to draw on their own experiences that more closely resemble program country contexts than those of Northern donors. South-South technical cooperation is informed by the fact that all developing countries have diverse and varying degrees of capacities and experiences that can be potentially shared with other countries. For some countries such as Brazil, technical cooperation initiatives are also driven by the legal restrictions on the Brazilian aid agency for the transfer of funds to other countries. They rely heavily on financing Brazilian technical assistance already paid in Brazil.

24. It would be enlightening to also examine South-South capacity development initiatives by other stakeholders, including civil society, academe, and media. Are there initiatives where SSC by these other actors contribute to the empowerment of the poor and marginalized to claim their right to development through grassroots capacity development?

25. However, South-South technical cooperation is not without challenges. Southern providers are not exempt from practicing tied aid in technical cooperation, albeit Southern consultants are less costly than Northern counterparts. The Reality of Aid 2010 Special Report on SSC pointed out how project assistance from Southern donors is primarily tied to the purchase of goods and hiring of contractors from the donor country.[15]

26. Similar to the framework of North-South cooperation, there is also a tendency for SSC to degenerate into political and economic patronage. Recipient countries play the role of beneficiaries rather than stakeholders, raising questions as to whether the two-way street exchange is but a mirage. This RoA report might want to highlight some positive examples of the use of SSC technical cooperation. In this regard, some important questions may follow.

• How can technical cooperation initiatives from the South truly cater to the real needs and priorities of partner countries?
• What principles and in what ways can technical cooperation between and among Southern countries be equitable and mutually beneficial?

C. Contributing to the 2016 Report

27. When provided in the context of respect for democratic country ownership, technical cooperation can support the needs for capacity development in partner countries, and can make significant contributions to poverty reduction efforts. However, to date it seems that technical cooperation remain to be largely insulated from donors efforts to improve the quality and effectiveness of their aid, largely ignoring the principles of democratic ownership and partnership.

28. The 2016 Reality of Aid Report will take stock of technical cooperation in the national, regional, and global levels, in their many varied forms. It will draw learnings from the positive and problematic practices, and develop key messages on the preconditions and principles for the contributions of technical cooperation to development effectiveness. The key messages will be framed by the networks focus on maximizing contributions of ODA to poverty eradication, within a framework that is defined by human rights standards.

29. For the 2016 Report, contributors can explore some of the following themes:

• Multilateral Development Banks technical assistance Based on examples and evidence of MDBs in particular developing countries, are recipients of this technical assistance been free to decide, plan, and sequence their economic policies to fit with their own development strategies? Has technical assistance been used as a form of soft pressure to unduly influence developing countries policy options? What conditions are important to avoid the use of technical assistance to facilitate the country policy-making process in an MDB pre-determined direction for reforms?
• Technical cooperation for infrastructure development What is the degree to which information on technical cooperation is transparent and open to public participation? What are the preconditions for technical assistance that is country-driven and country-owned? How can technical cooperation in infrastructure contribute to positive development outcomes?
• Donor priorities for technical cooperation and tied aid How are bilateral donors employing technical assistance in their aid modalities, particularly with the poorest countries? To what ends? How much of this donor technical assistance remains tied? What policies can be put in place to enable greater participation of nationals in contracts for technical cooperation projects? What do country experiences say about the impact of technical assistance, and in particular donor supported capacity development efforts, on poverty focused outcomes for aid, including the impact of continued tied aid on the effectiveness and cost of technical assistance? What mechanisms are in place to ensure coherence with human rights norms and standards?
• Trade-related technical assistance How can trade-related technical assistance respond to recipient countries sustainable development needs and priorities?
• South-South experience in technical cooperation What lessons can be drawn from South-South technical cooperation and capacity building, including from other stakeholders such as civil society? How can SSC take capacity development to the grassroots and contribute to the empowerment of the poor and marginalized to claim their right to development? How do recipient countries apply its country systems and standards to SSC projects as appropriate to their priorities and needs? In what ways can South-South technical cooperation be equitable and mutually beneficial? Is tied aid in the context of South-South Technical Cooperation any different than traditional North-South tied aid?

 

[1] This section on definition of technical cooperation is primarily derived from the Helpdesk Research Report: Changing approaches to technical assistance prepared by Governance and Social Development Resource Center (GSDRC), 24 April 2009. http://www.gsdrc.org/docs/open/HD586.pdf
[2] World Bank, 1991, Managing Technical Assistance in the 1990s: Report of the Technical Assistance Review Task Force, World Bank.
[3] Governance and Social Development Resource Center (GSDRC), Helpdesk Research Report: Changing approaches to technical assistance, 24 April 2009, http://www.gsdrc.org/docs/open/HD586.pdf
[4] European Commission, 2008, Reforming Technical Cooperation and Project Implementation Units for External Aid provided by the European Commission: A Backbone Strategy, EuropeAid, Directorate E, European Commission.
[5] Technical cooperation: Introduction, LenCD, http://www.lencd.org/topic/technical-cooperation-introduction
[6] ActionAid, 2006, Real Aid: Making Technical Assistance Work. http://www.aideffectiveness.org/media/k2/attachments/real_aid.pdf
[7] David Driscoll, The IMF and the World Bank: How do they differ?, https://www.imf.org/external/pubs/ft/exrp/differ/differ.htm
[8] http://web.worldbank.org/archive/website01019/WEB/0__MEN-8.HTM
[9] Asian Development Bank (ADB) Operations Manual Bank Policies on Technical Assistance, December 2013, http://www.adb.org/sites/default/files/institutional-document/31483/omd12.pdf
[10] Synthesis: Findings and insights from technical cooperation evaluations, July 2012, http://www.ebrd.com/documents/evaluation/2012-synthesis-paper-findings-and-insights-from-technical-cooperation-evaluations.pdf
[11] IMF Technical Assistance, 31 March 2014, http://www.brettonwoodsproject.org/2014/03/inside-institutions-imf-technical-assistance/
[12] IMF Technical Assistance: Transferring Knowledge and Best Practice, https://www.imf.org/external/pubs/ft/exrp/techass/techass.htm#whatis
[13] ActionAid, 2006, Real Aid: Making Technical Assistance Work. http://www.aideffectiveness.org/media/k2/attachments/real_aid.pdf
[14]  Free-standing technical assistance was excluded in the DAC 2001 and 2008 DAC Recommendation on Untying ODA to the Least Developed Countries and Heavily Indebted Poor Countries, http://www.oecd.org/dac/stats/documentupload/DCD-DAC%282013%2915-ADD2-FINAL-ENG.pdf#page=23
[15] Reality of Aid, “South-South Cooperation: A Challenge to the Aid System?” A Special Report on South-South Cooperation, 2010. http://www.realityofaid.org/roa_report/south-south-development-cooperation-a-challenge-to-the-aid-system/