Final Draft December 2009 Bhavna Sharma, Marta Foresti and Leni Wild Table of contents

Section 1: Background and introduction to the study

1.1. Background

The Paris Agenda on Aid Effectiveness has highlighted the importance of national ownership, alignment and mutual accountability in development cooperation alongside donor harmonisation. Whilst the Paris declaration does not specifically advocate the sole use of new aid modalities such as general budget support (GBS) and sector wide approaches (SWAps or SPSP in EC terminology), many have begun to see GBS and SPSP as the main funding instruments that can deliver on these key principles of aid effectiveness. They include the OECD-DAC which emphasises the benefits of GBS for strengthening ownership, improving Public Financial Management (PFM) systems and reducing transaction costs in its good practice guidance¹ and the 2006 evaluation of GBS which found that budget support can be an effective tool to support sustainable poverty reduction strategies, particularly capacity building in PFM².

New aid modalities are central to the EU’s development cooperation framework. The European Consensus outlines the EU’s commitment to channel 50% of government to government assistance through country systems, including by increasing the percentage of EU assistance through budget support or sector-wide approaches³.
The increased focus on the state and its role as the key recipient of the majority of development aid is considered by some as having the potential to undermine the role of non-state actors (NSAs) in development cooperation and the level of support that they receive from donors, including the EC. The fear is that increasing levels of aid channelled through the state will lead to a rationalisation of funds channelled to NSAs, weakening their ability to engage in policy dialogue, deliver services and hold the state to account. This would also entail a limitation of the diversity of organisations and actions supported and increased state control and influence on NSAs, with the use of country systems leading possibly to a re-centralisation of development processes and preventing alternative voices and needs to be heard.
The Accra Agenda for Action concluded last September tried to counterbalance this evolution and calls for the provision of an enabling environment for NSA engagement and appropriate models of donor support, combining collaboration from country governments and engagement of a wide range of NSAs. This study is therefore timely as it aims to address concerns raised in Accra and provide EC staff with guidance on how to support NSAs to participate in GBS and SPSP processes more effectively. The guidance highlights a series of entry points where NSAs can participate in policy dialogue, implementation and monitoring in the context of new aid modalities (including the complementary use of other EC aid instruments) whilst also serving to broaden the concept of national ownership and strengthening domestic accountability and demonstrate the added value of NSA participation in GBS and SPSP processes.

1.2. Aims of this study

Whereas the EC has gained much experience in using thematic programmes and more recently geographic programmes strengthening specifically the capacity of Non-State Actors, there is a need to operationalise their engagement in macroeconomic or sector programmes in order to enable them become effective development partners. Indeed, the last evaluation of EC Aid Delivery through Civil Society Organisations⁴ calls for the definition of a strategic engagement framework with civil society at country level. Very much aware of the necessity to invest in this new field of reflection and action, the EC has commissioned in 2008 a methodological document on civil society and new aid modalities to INTRAC⁵. On the basis of this initial study, the EC commissioned a follow up study with a more methodological and operational focus for EC staff.

The study aims to produce a methodological document providing EC staff with guidance on how to engage with civil society in order to enable them to participate in dialogue, implementation and monitoring of global and sector development policies of their countries⁶.

1.3. Structure of the report

Section 2 of this report provides an overview of the EC policy context for this study and of recent EC work related to NSA engagement in development processes. Section 3 reflects on the nature and role of NSAs and their added value in development processes. Section 4 begins with a brief introduction into the aid effectiveness agenda with a focus on the role of NSAs in that process. Whilst the Paris Agenda on Aid Effectiveness is seen as placing greater emphasis on the state, the Accra Agenda for Action is seen as having provided a corrective to the state centric focus of Paris. It has done this by looking at the role of NSAs in creating democratic ownership, strengthening domestic (and mutual) accountability and demanding increased transparency of not only the state, but also donors.

Section 5 introduces the new aid modalities of General Budget Support (GBS) and Support to Sector Programmes (SPSP)⁷, also known as Sector Wide Approaches (SWAps). This section includes an overview of definitions on these financing modalities and experience in implementing them. The second part of section 5 focuses on the added value of NSAs engagement in new aid modalities and we provide practical guidance on entry points and examples of good practice for NSA engagement in GBS and SPSP.
Section 6 provides an overview of some of the existing EC tools which could support NSA engagement in new aid modalities, including mappings, consultations, complementarity and capacity development, as well as examples of the mobilisation of EC instruments so as to enhance the participation of NSAs in the definition, implementation and monitoring of reforms. The final section contains case studies of EC support for the education sector in a number of different countries using a combination of instruments and financing modalities and different forms of NSA engagement.