On November 2, as part of the continuing Innovations in Aid series, GMF hosted Kermal Derviş, administrator of the United Nations Development Programm (UNDP) for a discussion on the UN's contributions to development cooperation and aid effectiveness. The event was moderated by GMF senior transatlantic fellow Jim Kolbe.

To listen to a podcast interview with Mr. Derviş and Jim Kolbe, click here.
(Additional GMF audio is available on the Multimedia page) 

The conversation was framed by giving an overview of the economic context in which UN development efforts are operating.  At more than three percent, 2001 to 2006 has witnessed the fastest surge in economic growth since the immediate post-WWII era.  On the face of things, it appears that developing markets are quickly catching up with the more developed ones. Together, China, India, and Korea account for 22 percent of global growth.  Two-thirds of purchasing power parity growth is in developing countries today, and this share is increasing.  Nevertheless, this proportion corresponds to only 40 percent in market prices, but it is heading towards a 50 percent threshold.  And while the United States is a net borrower, these higher growth countries, including some in the Middle East and the "developing East" have high savings rates, and are making substantial investments abroad, including through sovereign wealth funds.

This growth in the developing world suggests a pattern of convergence of the rich and poor countries. The ratio of the GDP per capita of the top 10 richest to the top 10 converging developing countries was six in 1950, four in 1990, and three in 2005.  But, the ratio of per capita GDP in the top 10 richest countries to the 10 poorest countries shows a startling pattern of divergence: from three in 1820 to 50 in 2005.  In other words, globalization is passing over the poorest nations.

Development assistance generally takes two forms: official development assistance (ODA), which fulfills a purely localized goal, such as delivering bed nets to children in a malaria-prone country, and global issues management, which provide global public goods that benefit society as a whole, including donors, which include working to eradicate global communicable diseases).  We are beginning to see more provisions of global public goods embedded in ODA, such as for assistance to a country in finding more efficient means of energy production to mitigate climate change, and assistance in financial regulation to reduce the likelihood of a major financial crisis. 

The UN's role in coordinating donors on the ground is becoming more complex.  While many donors point to large increases in aid, these statistics can be deceptive as much of the increase in OECD countries can be accounted for by debt forgiveness, which has increased over $13 billion since 2004.  This means that the underlying flows in countries' budgetary appropriations are not necessarily increasing or even assured going forward.   Still, the United States and the UK have increased their ODA while Japan has had major budget problems and China does not share its aid flow statistics. Overall, the OECD Development Assistance Committee (DAC) countries have increased their contributions to multilateral banks from $25 billion in 2004 to $28 billion in 2006. 

In this context, the UN development system is undergoing major changes and pursuing innovative approaches to coordination across its 38 agencies.  Last year, a high-level UN panel recommended that the UN must "Deliver as One," coordinating all UN development efforts both system-wide and at the country level.  To this end, the UN is initiating a pilot "One UN" initiative to be carried out in eight countries (Albania, Cape Verde, Mozambique, Pakistan, Rwanda, Tanzania, Uruguay and Viet Nam) with the purpose of assessing how the diverse UN family can maximize its efficacy at the country level in a more coordinated way.  In each country, there will be one UN leader, known as a resident coordinator, one UN budget, and one UN program, with each agency working through this office. Should implementation of the program in these pilot countries prove successful, the UN may expand the initiative more broadly.

Although "One UN" is an important step towards a more cohesive effort on the ground, the question of broader coordination among donor countries, multilateral agencies, and bilateral initiatives remains up in the air. Along with vertical funds, multilateral organizations, the private sector, and philanthropic initiatives, there are numerous aid agencies operating in parallel.  The UN can make every effort to coordinate among member countries on the ground, but, it was noted, country-wide coordination with all donor countries and organizations is essential in order to improve effectiveness and limit duplication of efforts.  For this reason, the UN helps each recipient country develop a strategic plan, around which it can urge bilateral, multilateral, NGO, or philanthropic donors to coalesce. This can reduce the recipient country's administrative burden of working with and reporting to numerous donors. There are also steering groups of donor country ambassadors in some countries, who try to meet regularly.

Another question centered around which aid instrument is preferred: budget support or project support.  While there was some consensus around budget support, participants argued that it cannot be a blank check: there must be transparency and accountability.  Generally either budget support or at least specific portions of a budget that can fund sets of projects were recommended during discussion as with the MCC.