Effective aid coordination in lao PDR policy implication for power sector development

ĐÓNG GÓP MỚI CỦA LUẬN ÁN Chủ đề: Hỗ trợ điều phối hiệu quả tại Lào: Chính sách Ảnh hưởng Đối với phát triển điện khu vực chính: Kinh tế đầu tư (Kinh tế phát triển) Tiến sĩ sinh viên: Khammany Inthirath Supervisor: PGS Tiến sĩ Nguyễn Thanh Hà Đóng góp lý thuyết mới Luận án đã cung cấp: 1. Một đánh giá toàn diện của nền văn học có liên quan về việc sử dụng viện trợ nước ngoài tại Lào nói chung và trong lĩnh vực năng lượng nói riêng. 2. Một bức tranh tổng thể của viện trợ như thế nào bên ngoài là chúng tôi và phối hợp tại Lào nói chung và ngành điện nói riêng. 3. Một số bài học có thể là Lào có thể tìm hiểu để sử dụng viện trợ hiệu quả nhất. Khuyến nghị mới từ nghiên cứu Luận án đã đề xuất một số chính sách đặc biệt cho sự phát triển của ngành điện: 1. Tiếp tục cải thiện và an toàn của khí hậu chính trị ổn định, an sinh xã hội. 2. Cải thiện và duy trì các hoạt động mà có thể hỗ trợ đầu tư. 3. Nâng cao hiệu quả quản lý ODA và đầu tư trực tiếp nước ngoài. 4. Cải thiện cung cấp viện trợ và phối hợp tại Lào. (I) một chương trình dựa trên cách tiếp cận mạnh hơn là cần thiết. (ii) một ngành rộng cách tiếp cận, cần được thực hiện tương tự như các chương trình tiếp cận dựa trên nhưng áp dụng cho một khu vực cụ thể. (iii) một hệ thống hỗ trợ ngân sách trực tiếp là bắt buộc. (iv ) làm giảm số lượng của các cơ quan làm việc trong một lĩnh vực để cải thiện điều phối viện trợ ở LAO

Khammany INTHIRATH Khammany INTHIRATH

EFFECTIVE AID COORDINATION IN LAO PDR:

POLICY IMPLICATIONS FOR POWER SECTOR DEVELOPMENT

Specialty : Investment Economics (Development Economics)

Code : 62.31.05.01

Supervisor: Assoc.Prof.Dr Nguyen Thanh Ha

A dissertation submitted to the National Economics University in

fulfillment of requirements for the Degree of Doctor of Philosophy in Economics

Vientiane, 2013

DECLARATION

I hereby declare that this dissertation is my own work and effort The dissertation has not been submitted anywhere for any award All the sources of information used have been well acknowledged

Khammany INTHIRATH

I would like to sincerely thank many people whom provided much support into producing this thesis and paving the way for the research topic to be one of the significant findings I wish to express my profound gratitude to my supervisor Associate Professor Dr NGUYEN Thanh Ha, National Economics University (Vietnam), for his great support and guidance throughout my study His encouragement and constant attention contributed significantly to the outcome of this research

I am grateful to my sponsors such as the Ministry of Energy and Mining and the National University of Laos in enabling me to achieve a higher education at National Economics University, Vietnam

Many thanks to all interviewees whom shared knowledge and ideas My sincere thanks out to the Lao Government officers from the Government Office, Ministry of Energy and Mines, H.E Mr Soulivong DARAVONG, Minister of Energy and Mines, etc and many other officers whom were involved in my research The European Commission Lao PDR Office international staff, the World Bank residential office and United Nations Development Programme staff who are involved in the aid effectiveness agenda in Laos and friends from development communities were all of assistance in this reseach

Last but not least, many thanks are due to my wife and my family who provided me endless love with support and strength through out of my life

TABLE OF CONTENTS

DECLARATION ii

ACKNOWLEDGMENT iii

TABLE OF CONTENTS iv

ABBREVIATION vi

ABSTRACT Error! Bookmark not defined RATIONALE xi

CHAPTER 1 LITERATURE REVIEW 1

CHAPTER 2 THEORETICAL FRAMEWORK ON ODA COORDINATION EFFECTIVENESS 6

2.1 Development Theory 6

2.2 Development Aid 7

2.2.1 Donor Motives 7

2.2.2 Defining Official Development Assistance (ODA) 9

2.3 Aid coordination and its effectiveness 10

2.4 Dimensions of Development Assistance Coordination 13

2.5 Sector Wide Approach and Programme Based Approach 14

2.6 Principles of Effective Aid Coordination 15

CHAPTER 3 KEY LESSONS LEARNT FOR LAO PDR 16

3.1 Lesson from Vietnam 16

3.2 Lesson from Timor L’Este 20

3.3 Comparative Lessons 23

CHAPTER 4 HOW ODA COORDINATION IMPLEMENTED IN LAO 26

4.1 Millennium Development Goals (MDGs) 26

4.2 Paris Declaration 28

4.3 Vientiane Declaration and Country Action Plan (CAP) 28

4.4 The Round Table Meeting/Process (RTM/RTP) 30

4.5 Sector Working Groups (SWGs) 31

4.6 Critiques 34

4.7 Current ODA in Lao P.D.R .39

4.8 Effort of Government of Lao PDR 44

4.9 Coordination in Practice 45

4.10 Sectorial Working Groups (SWGs) 46

4.11 Evolution of Current Coordination System 47

4.12 OECD DAC Survey 49

4.13 International Development Agencies 51

CHAPTER 5 POLICY IMPLICATIONS FOR POWER SECTOR DEVELOPMENT 55

5.3 Power Sector Policy 74

5.4 Power Sector Strategy towards 2025 74

5.5 Recommendations 78

5.6 Regional Coordination Effort 80

CONCLUSION 82

REFERENCES 84

INTOSAI International Organization of Supreme Audit Institution

Lao NCAW Lao National Commission for the Advancement ofWomen

MCTPC Ministry of Construction, Transport, Post and Communications

MoFA Ministry of Foreign Affairs

MTEF Medium Term Expenditure Framework

NSEDP National Socio-Economic Development Plan

OECD Organization for Economic Cooperation and Development

PACSA Public Administration and Civil Service Authority

PEMSP Public Expenditure Management Strengthening Program

PGAE Partnership Group on Aid Effectiveness

PrMO Procurement Monitoring Office

RTIM Round Table Information/Implementation Meeting

SIDA Swedish International Development Agency

STEA Science, Technology and Environment Association

UNCT United Nations Country Team

UNDP United Nations Development Program

UNFPA United National Population Fund

Lao PDR has a lengthy history, abundant and natural-resource-rich country with plenty of minerals, rivers and creeks which are seen to be hidden strengths for the development of power, particularly hydropower, thermal, wind power, and solar energy

Total energy demand of the Lao People's Democratic Republic was 2.4 million tons of oil equivalent (Mtoe) in 2010, with an annual increment of 3 to 4% in parallel.with stable economic growth Therefore, it is estimated that total energy demand in 2025 will be 6.4 million tons, approximately 2.6 times current demand In terms of sector-wise demand, the industrial sector accounts for about 31%, the transportation sector for about 29%, the residential sector for about 29%, the commercial sector for about 10%, and the agricultural sector for about 1% Among these, the industrial sector and the transportation sector, in particular, show higher annual increases of l5% and 8%, respectively These are sectors where remarkable growth of demand is expected

Currently, the major energy supply sources are firewood/charcoal (about 47%), petroleum (about l9%), and hydropower (about 19%) However, in view of a sharp rise in energy consumption in the transportation and the industrial sectors, it is thought that the petroleum contribution of overall energy sources will be about 60%

in 2025 In addition, the share of electricity is expected to grow substantially as the electrification rate increases from the current level of abofi 70% to 90% in 2020, and electricity consumption will increase sharply due to increasing use of home appliances

The Government of Lao PDR is expected to establish institutions to secure energy efficiently by making reliable energy demand forecasts and formulating an appropriate energy policy and supply pian

The purpose of this research is to find what is “effective aid coordination” particularly drawing from the case study of Lao PDR and lessons from successful cases

and what possible recommendations for power sector development are The study explore extensive literature in aid effectiveness, with an in-depth interview with the managers, leaders, practitioners etc Information synthesis is used in to analyze the data It is proposed that a solution to the problem of poor delivery of ODA is that the Lao PDR governement, in general and power sector, in particular must improve its ODA spending systems and incorporate aid budgets into the national budget and development plans It is vital to encourage the Government of Lao PDR to lead their own development agenda and support development according to local priorities

The results suggest that it is not just a matter of coordinating aid effectively, but the aid industry needs the right capacity and people to be involved Capacity building is much needed within the recipient national offices as well as many of the international donor agencies This would allow the local government to take the lead and prioritize the commitments signed in the Paris Declaration, the Vientiane Declaration and the Millennium Development Goals

It is recommended by many practitioners that the number of agencies working

in decision making processes in the aid effectiveness agenda in Lao PDR should be limited to reduce transaction costs and promote clear communication within the development community However different environments such as Timor L’Este, suggests that civil society should be involved more and that donor agencies should not take the lead in aid delivery

The key point to be learnt is that ODA needs to enhance its efficiency through the best use of limited resources, aligning with national planning, programming, monitoring and reporting processes, strategic documents, and priorities There should be flexibility to establish and abolish donor coordination groups, avoiding administrative overburden of public administration staff, while attempting to comply with donor requirements, established systems and procedures for programming of donor’s funds The effective use of existing national planning, monitoring structures, equipped with national leadership and ownership in aid coordination should be taken into account

As a country condition of mountainously and rich of water resources, Lao PDR is having 23,000 MW exploitable hydro power potential With a quick development of economic and government policy on attraction of the foreign investment, those hydropower potential has been step to step developed for both domestic consumption and export for country income generation Continue of economic growth is needed to alleviate poverty and achieve social development goals but the policy options for achieving this are constrained by the small domestic economy and limited trade opportunities Therefore, hydropower projects are a development opportunity for both local and central of Lao PDR in overall development The power policy of Lao government aim to establish a priority policy

of developing the country’s potential energy resources to provide a low cost source

of energy that can meet export and domestic policy objectives and promotion of sustainable development

The country now has installed power generation capacity of over 3,000 MW,

of more than 13 hydro power projects or about 6,000 MW are under construction and more than 6,000 MW are under various stages of development by 2025, it is expected that export would be 80-85% of developed capacities To transmit of those power there are a strategy of domestic and international grid development where it can be divided into domestic interconnection (connection of Northern to Southern part of Lao PDR) and regional interconnection (connection of Lao PDR to neighboring countries for power exporting) The Memorandum Of Understanding (MOU) was signed for supply of power between Lao and Thailand are 7,000 MW and 5,000 MW between Lao and Vietnam by 2020

For Lao PDR, Official Development Assistance (ODA) is very important mechanism to promote the potential of investment fund, technology, marketing, management experiences, take part of job creation, increase of income level, upgrade of country development level Therefore, promotion and attraction of ODA

and FDI is become one of priority policy of party and government of Lao PDR Promotion of the ODA into Lao for development of important sectors; potential sectors are essential necessary for current situation, especially for development of energy sectors because this sector is an major part of country socio-economic development; it is a necessary of living condition of the people, generate income from export of surplus power from domestic use to neighboring country, creation for income from job opportunity for workers Together with those, it is also a factor contribute to promote other sector development as well

Currently in the world, there are many type of energy; for Law PDR, with geographic condition, we are having of river which is potential of hydropower development According to survey, Lao PDR is potentially of 23,000 MW of energy can be developed, in there; 13,000 MW could be generate from development of potential from Mekong river tributary and another 8,000 MW are from Mekong river tributary and 2,000 MW is from the other type of energy potential At the moment, Lao is having 14 officially hydropower plants with generating of 2,558 MW, in their Electricite Du Laos (EDL) is direct managed of 9 hydropower plants with 385 MW installed capacity and there could generate of 1,700-1,800 million KWh Now; every provincial city; district are already electrified and more than 72% of households are also electrified EDL is also supply power to irrigation project for more than 24,000 projects which is further supply of water to production area of 200,000 hector and supply of power to heavy and light industries of more than 30,000 Unit In the past five years, revenue of EDL business operation could reached 1,600-1,800 Billion Kip; where increased 20-36% From 1988-2007 Foreign Investment is approved of 1,800 projects with total fund of 9.2 Billion US Dollars, particularly in year 2006 is

a year that development of hydropower is highest with 13 projects and 1.7 Billion

US Dollars fund In the past 20 years from 1988 to present implementation of foreign investment policy in Lao PDR were approved from more than 9.2 Billion US Dollars and in there total investment of energy sector are 4 Billion US Dollars covered very high proportion compare to the other investment sectors From 2007-

2010 EDL are working with other foreign business investment partners of 5 projects with total capital investment cost of 1.8 Billion US Dollars

However, for promotion of the ODA are still having several limitation for example: understanding of the ODA is still different, recent year Lao PRD is announced for use of the Investment Promotion Law and many other legal documents concerning ODA and how to use such aid effectively In the same time management, selection, approval and opening of the investment form, investment form of the government into different sectors in particular for the join investment of the government into energy sector is not yet having a proper package system, thus this make a difficult to prepare a policy, policy and detail implementation, this become a limitation of the research on ODA, therefore it make an investment environment is complicated, legal system, policy is not yet in a one full set system There are many policies concern with ODA are regularly adjusted, not clear and thus this impact to business operation Further to that policy system on the ODA, foreign direct investment, etc between government, ministries and local authority is still not harmonized and break through, This make difficulty to donors and investors Those limitations are making investment climate and environment are liquidity

Official Development Assistance (ODA) has a long history, yet its effectiveness and efficiency has always been a concern of both the donor and the recipients In order to enhance the efficiency and effectiveness of ODA, the Paris Declaration has been identified as the key development frame work in leading the aid effectiveness agenda It is a contract between members from various developed and developing countries in an effort to reduce poverty This dissertation draws attention on the aid effectiveness agenda and the search for better ways to use such aid most effectively

Effective Aid Coordination, as the topic suggests, is all about how to bring development communities together as one and propose that poverty reduction work should be incorporated into one master plan When development institutions work independently, projects are duplicated and already limited resources are wasted With aid coordination, the local government can monitor and outline the priorities

needed for Lao PDR and allow interested parties to contribute to the government plan However the aid coordination system in Laos is not working well at present Examples from case studies drawn from Vietnam and Timor L’Este may provide some useful lessons

The author has been working in the energy sector for a long time Through out the working live, from being a provincial staff on electricity supply management, to being the Director of Electricity Du Laos State Enterprises, and currently the Deputy Minister of the Ministry of Energy and Mines, I have seen and dealt with several aid programs through out the country The author also has

an extensive network in the ODA administrators and the receipient organizations Therefore, the inspiration for this topic was driven by personal experiences During

my work life, I was overwhelm by the enormous amount of ODA in flows in to Laos Observing the aid industry I can see the benefits that aid does for the local people, at both the central government and provincial government levels, as well as for expatriates working in development agencies, donors, NGOs and particularly the poor whom ideally are beneficiaries, which is the prettier side of aid

The down side of aid is “the operation of aid.” Within the UN agencies themselves, aid money is not entirely spent for its best use There are duplications of projects within the UN system, as well as the entire aid industry Some projects adversely affected the beneficiaries more than benefited them The capacity of development experts locally and internationally are not always competent to deliver The local government is often puzzled but takes aid with open arms

Since the Millennium Development Goals (MDGs) were set for the year

2015, Laos has signed up to commit to meeting the deadline There is however, very little optimism regarding meeting the commitment to aid coordination in Laos If only aid could be coordinated and allocated correctly the output of aid could yield favorable outcome

Research Aims and Objectives

The aim of this dissertation is to investigate a working model of aid coordination for Lao PDR with a focus of the country’s ODA status This will provide a better understanding of how the aid environment system operates within

the country In addition to Lao PDR, lessons from Timor L’Este and Vietnam will

be discussed to briefly outline what these countries are doing with regards to harmonizing ODA and what best practices could be suggested for Lao PDR It is assumed that coordination is the key approach for aid effectiveness The dissertation objectives are:

1 To evaluate the current working model for aid coordination efforts in Lao PDR With this model it can be analyzed whether the current existing approach is effective or not

2 To find alternatives for aid coordination for Lao PDR for improvement

3 To recommend possible policies and solutions to promote effective use

of external aid in the field of power sector development

Collecting data (i) Primary data were collected from different aspects

regarding power sector The samples from each view were taken from different sides of the sector The author had deep personal interviews with different managers, leaders, practitioners of related institutions/ organizations within the Ministry of Energy and Mines, MPI, international offices, etc

(ii) Secondary data were obtained from different sources (Office of the

government of Lao PDR, international sources, etc) but mostly from research work done by international offices from which I myself had been involved to some extent Some relevant literature were also reviewed

Data and information analysis Data and information obtained are used to

analyze current situation of ODA use in Lao PDR

Recommendations Possible policies and solutions regarding the

development of the power sector of Lao PDR in years to come will be outlined in the last chapter based on previous analysis

CHAPTER 1 LITERATURE REVIEW

Official Development Assistance (ODA) has a long history, yet its effectiveness and efficiency has always been a concern of both the donor and the recipients In order to enhance the efficiency and effectiveness of ODA, the Paris Declaration has been identified as the key development frame work in leading the aid effectiveness agenda It is a contract between members from various developed and developing countries in an effort to reduce poverty This thesis draws attention the aid effectiveness agenda and the search for better ways to work in the development field, including governments and development professionals

1.1 According to A McCarty and A.Julian [1], (Bilateral) ODA to Lao

PDR originated in the early 1960s, and multilateral ODA was first recorded in the late 1970s Since then, total ODA has shown a strong increasing trend up to the present, although there has been some fluctuation year on year, with bilateral donors traditionally contributing the larger proportion of ODA Total ODA in 2007 stood at US$ 280 million, which is approximately 7% of GDP - a large percentage relative

to other aid recipients Japan, France, and Sweden are Lao PDR’s largest bilateral donors, contributing respectively 40.1%, 16.8% and 11.8% of total bilateral aid between 2005 and 2007

Lao PDR is classified as an LDC and is, therefore, covered by the 2001 DAC Recommendation to untie aid Between 2005 and 2007 DAC donor countries formally untied over 70% of their ODA commitments to Lao PDR (CRS) Meanwhile, for the same period, 22% of bilateral ODA remained unreported with regard to tying status The process of untying aid has improved over the last decade, despite the hesitation of some donors to move to non-project based aid modalities, such as budget support and pooled funding, which are often associated with untying Lao PDR receives largely grant aid as an instrument (98% of DAC ODA in 2007) and project based aid modalities Several donors also provide project based or free-standing technical co-operation, in many cases alongside grant funding for projects, which is often tied For example, grants which involved no free-standing technical cooperation (FTC) reported a 96.8% untied share, whereas grants which

had a whole FTC component reported an untied share of just 27.8% (CRS, 07) The three largest DAC donors to Lao PDR; Japan, France and Sweden, all reported a high proportion of their ODA as untied for 2007: 68.9%, 62.3% and 98.5% respectively Lao PDR also receives substantial aid from non-DAC donors that is considered to be largely tied and not necessarily conforming to OECD definitions of ODA

2005-The aim of the econometric analysis is to determine whether ODA, the tying status and the instruments by which aid is provided (loans and grants) have any significant impact on aggregate donor export flows to the recipient, in this case to Lao PDR Overall, the results show that aggregate ODA, and grants in particular, have significant trade distorting effects through the increase in donor-recipient

exports This empirical evidence suggests that aid flows could be informally or de facto tied, when analysis of data from a cross section of donors to Lao PDR is

performed However, as outlined in the econometrics investigations this analysis has some caveats

1.2 Soudalie Silaphet [81] conducted a study to find out solution to the

problem of poor delivery of ODA is that the development industry must improve its ODA spending systems and incorporate aid budgets into the national budget and development plans It is vital to encourage national governments to lead their own development agenda and support development according to local priorities He found that it is not just a matter of coordinating aid effectively, but the aid industry needs the right capacity and people to be involved Capacity building is much needed within the recipient national offices as well as many of the international donor agencies This would allow the local government to take the lead and prioritise the commitments signed in the Paris Declaration, the Vientiane Declaration and the Millennium Development Goals

He also recommended that the number of agencies It is recommended by many practitioners that the number of agencies working in decision making processes in the aid effectiveness agenda in Laos should be limited to reduce transaction costs and promote clear communication within the development community However different environments such as Timor L’Este, suggests that

civil society should be involved more and that donor agencies should not take the lead in aid delivery

1.3 According to OECD [61], Lao PDR, in 2006, had a gross national

income (GNI) per capita of USD 2050 (in purchasing power parity terms) Lao PDR

is a low-income country with high poverty rates The most recent poverty survey, conducted in 2002, estimated that 27% of the population lived below the dollar-per-day international poverty line, with 74% living below the two-dollars-per-day line The country is on track to meet three of the eight Millennium Development Goals (MDGs): MDG 2 on universal primary education; MDG 4 on reducing child mortality; and MDG 5 on improving maternal health In 2006, total net official development assistance (ODA) amounted to USD 364 million, with the Asian Development Fund (ADF), Japan and the World Bank were the top three donors for 2005-06 Lao PDR was not included in the 2006 Baseline Survey for the Paris Declaration Thus, the country’s 2010 targets will be based on the results of the 2008 Survey

Sixteen donors responded to the 2008 Survey, with their aid constituting 75% of total ODA provided by members of the OECD Development Assistance Committee (OECD-DAC) Aid accounts for some 12% of GNI in Lao PDR; thus, it

is vital that government and donors work together to enhance aid effectiveness

In order for aid to be effective, it must be aligned with national development strategies, institutions and procedures The Paris Declaration envisions donors basing their support fully on country partner aims and objectives Indicators will examine several dimensions of aid to assess the degree to which partner countries and donors achieve alignment The data for Lao PDR suggest that there is substantial room for progress for most indicators, especially with regards to improving the reliability and use of country systems, for which the baseline is very low Although reforms are being made, there is a lack of financial and human capacity to implement and reinforce these reforms, which calls for long-term commitment from donors The limited use of these systems also contributes to low levels of aid reliability which further lowers aid effectiveness

Capacity constraints significantly undermine the ability of partner countries

to capture, co-ordinate and utilise aid flows more effectively Under the Paris

Declaration, donors committed to providing technical co-operation in a manner that

is co-ordinated with partner country strategies and programmes This approach aims

to strengthen capacities while also responding to the needs of partner countries Likewise, there is greater recognition that successful capacity building is

endogenous – e.g is led by the partner country

To this end, the partner country defines clear objectives to ensure that existing capacities are used effectively and that external support is harmonised within this framework Some indicator focuses on the extent to which donor technical co-operation – an important input into capacity development – is moving towards this country-led model It measures the degree of alignment between donor technical co-operation and the partner country’s capacity development needs and strategies The Paris Declaration 2010 target is that 50% of technical co-operation flows are implemented through co-ordinated programmes that are consistent with national development strategies Data for 2007 shows that 54% of technical co-operation to Lao PDR was co-ordinated with country programmes This is encouraging The remaining gap may be the result of the NSEDP’s overall lack of

an articulated strategy for dealing with capacity bottlenecks The Vientiane Declaration has given attention to this issue and has formulated capacity development frameworks for the NSEDP’s priority sectors Co-ordination of technical co-operation is now taking place in the education sector and is an important component of the PFMSP

The Paris Declaration 2010 target is that 50% of technical operation be ordinated with country programmes The data suggest that Lao PDR has already exceeded this target although further progress can be made A government-commissioned report on the impact of technical co-operation was recently conducted: the lessons learned from this report will provide a platform for further improvement

co-On aggregate, 38% of scheduled disbursements in 2007 were accurately recorded by the government, although only 65% of scheduled aid was actually disbursed For the average donor, the ratio was an even less encouraging 24% These gaps can result from several factors: inconsistencies and gaps in the legal and institutional framework for managing ODA; weak co-ordination between donors

and the government in preparing realistic disbursement plans; and donors and government using different PFM and procurement systems The government is taking steps to improve the predictability of aid by establishing a comprehensive ODA database and by working with donors to develop ways to improve overall project and financial management

1.4 According to Travis Harvey [84], the government of Lao PDR and donor

counterparts have a good understanding of the steps required for success and ownership of the process DG’s experiences have taught us to adopt a collaborative approach in designing and implementing processes for aid management, and to ensure they build on existing ones rather than seeking to replace them Regular introductory and refresher user training for key staff has proven critical, as has the identification of advanced users who can play a role in supporting others in the future During this mission the team conducted group training for desk officers and one-on-one training for senior government officers

Connectivity between government offices and the AMP server has been an issue over the past few months because the government data center was being moved into a new building During this time DG hosted the system off-site to maintain access for users This issue was resolved during the mission by re-establishing a stable hosting arrangement and fiber-optic connection to the Ministry Development partners will access the system via the internet when they begin using

it later this year

Broad stakeholder buy-in is key to success in AMP country programs During this mission the team held a workshop to sensitize other government agencies and development partners to the program and the workplan This will be especially important in the lead up to the national Round Table Meeting (RTM) to be held in October The RTM will be a major opportunity to raise awareness of the program, and

DG will be there to support MPI in preparing and demonstrating the AMP system

CHAPTER 2 THEORETICAL FRAMEWORK ON ODA

to the economic and democratic development of the wider world

Development has a connection with poverty reduction The early focus of development concentrated on the reduction of poverty primarily through the promotion of economic growth [21] Development, in this sense, or otherwise known as Modernisation Theory, was seen as developing countries following the same growth path as pioneered by Western nations [41] Proponents of this view, for example Walt Rostow (1960) [98], understood development in a linear economic fashion that was measured through such narrow indicators as Gross Domestic Product (GDP) Des Gasper [26] notes that in its crudest form, development equates to economic growth However, this narrow understanding of development raised criticisms from other academics David Hulme and Andrew Shepherd [96] noted that it understood “the poor as a single homogeneous group whose primary problem is low monetary income and has led policymakers and their advisors to search for ‘the policy’ that increases the income of ‘the poor’” John McKay [41] remarks that new theories on development emerged in the 1960s due to the persistent failure of developing countries to actually develop These theories looked at wider development issues such as the structure of the international system

in dependency theory; or the expansion on this idea in World Systems theory; or proponents of ‘wider development’ posit the expansion of liberty to the individual

Nevertheless, new theories developed over time, with two of them being prominent today; Neo-Liberalism and Human Development The former emerged in the 1980s and can be seen as a resurgence of modernization theory It proposes the liberalization of international trade and sees development in economic terms that occurs through market and private investment It requires developing nations to undergo structural adjustment programmes to configure their economies to the western formats [41] [21] [35] Conversely, Human Development posits that

“development can be seen as a process of expanding the real freedoms that people enjoy focusing on human freedom” [76] This approach emphasizes the improvement in individual capabilities [68] It considers other factors beyond the economic progress such as the ability to attain education, health and security Moreover, security, in this sense, is the concern of the individual; human security It

is measured by the Human Development Index from the United Nations (UN), with the 1994 report being a turning point in linking development and (human) security

Human security came to prominence in the mid 1990s, owning to it being seen as an alternative to the narrow economic growth models of the International Monetary Fund (IMF) It was developed along with many other security theories as academics began to analyse security beyond the traditional state centric military approach that was dominant, and rarely challenged, during the Cold War [66] [96] One such theory, developed primarily by Barry Buzan and Ole Wæver at the Copenhagen Peace Research Institute (COPRI), is securitization theory This theory has sought to ‘broaden’ and ‘deepen’ the security concept, however, the state remaining as the primary object; a fundamental disparity from human security

2.2 Development Aid

2.2.1 Donor Motives

Despite of aid had existed long ago, President Truman’s speech is considered

to be the commencement of the modern era in development and consequently, development aid Riddell [68] notes that the United Kingdom (UK) and France both provided aid to their colonies in the 1920s and 1940s Therefore, while President Truman’s speech was not a revolution in designing a new concept, it did shape the existing concept It conveyed the idea more broadly to the developed

world and beyond aid solely to colonial territories The principal that underpins foreign aid, according to Riddell [68], is “[t]hose who can should help those who are in extreme need” The underlying assumption of this principal is that it is the donor’s responsibility to selflessly help Initially, US aid cannot be seen in this light President Truman (1949) stated that the motives for US assistance lay in helping poor people “realize their aspirations for a better life” Additionally, President Truman [84] linked the success of these developing countries to the success and security of the US Consequently, any aid that was provided went to nations supporting US views [82] As aid is rarely given solely for altruistic reasons [9], when examining aid, it is essential to understand the motives of the donor as they can often conflict with the altruistic principal Riddell proposes Riddell [68] outlines eight motives in donor decisions to give aid; (1) to help address emergency needs; (2) to assist recipients achieve their development goals; (3) to show solidarity; (4) to further the donor national political and strategic interests; (5) to help promote donor-country commercial interests; (6) historical/colonial ties; (7) to strengthen global public goods; (8) aid based on human rights decisions While simultaneously appeasing to many motives, most donors have strong tenets to a few The UK and France have traditionally been large sponsors to their former colonies; in 2006, eight of their top ten recipients of aid were former colonies [62] Scandinavian aid is focused towards reaching the poverty goals of their target countries [20] In this regard, Scandinavian aid is often rated highly for its effectiveness by the Commitment to Development Index [16] while other countries receive an unfavourable review; US, Italy and Japan Aid from these countries is often criticised for being highly tied , with a principal focus on developing donor commercial interests and/or dependent on national, political and strategic interests [75] [68] [65] Unsurprisingly, these motives can be recognized in the donor’s public discourse and delivery of aid Taro Aso [8], the then Japanese Minister of Foreign Affairs, stated that aid was given to enhance the Japanese national interests and that the first use of the Japanese people’s money was to benefit the Japanese later on

US aid is also explicit in stating that its purpose is to “furthering America's foreign policy interests” [95] This discourse is reflected in the delivery of their respective aid

Japanese aid is highly concentrated around East Asia and highly tied to Japanese companies and interests [49] During the 1980s and 1990s US aid was greatly linked to the promotion of the Washington Consensus With the exception of US special interest

in Egypt and Israel, Alberto Alesina and David Dollar [7] note that US aid in the 1990s was focused on poverty, democracy promotion and encouraging economic openness In addition, over 70% of US aid has been tied to promoting US commercial interests to the extent that this practice was formalised in US law in 2002 [68]

2.2.2 Defining Official Development Assistance (ODA)

Craig Burnside and David Dollar [14] stated that when aid is given with a high regard for donor self-interest then it is often ineffective in achieving development Accordingly, in such incidents, aid can be seen as a foreign policy tool of donors Jean-Claude Berthelemy [9] concurs and in his study notes that all donors, with the possible exception of Switzerland, are egoistic in the delivery of their aid to differing degrees Riddell [68] remarks that definitions of aid are driven and shaped by those (invariably donors) who have an interest in particular types and forms of aid Therefore, any definition of aid is dependent on the motives of donors and will have a self-interested edge to it Consequently, in defining development aid, this dissertation seeks to utilise the Organisation for Economic Co-operation and Development (OECD) definition The definition is not absolute, as it is formulated by the members of the 30 developed countries in the Development Assistance Committee (DAC) of the OECD and, therefore, donor driven However,

it is widely cited, reached by consensus by the major donors and utilised by the UN OECD defines Overseas Development Assistance (ODA) as: “Grants or Loans to countries and territories on Part I of the DAC List of Aid Recipients (developing countries) which are: (a) undertaken by the official sector; (b) with promotion of economic development and welfare as the main objective; (c) at concessional financial terms [if a loan, having a Grant Element (q.v.) of at least 25 per cent] In addition to financial flows, Technical Co-operation (q.v.) is included in aid Grants, Loans and credits for military purposes are excluded Transfer payments to private individuals (e.g pensions, reparations or insurance payouts) are in general not counted.”(OECD, No Date)

This definition is still contested by certain members of the OECD Governmental Organisations (NGO) are concerned as some OECD member states seek

Non-to expand the definition Non-to incorporate additional donor security spending [11] Since all OECD members are committed to meeting the UN Resolution 2626 in 1970 of providing 0.7% of their Gross National Income (GNI), and currently, as many states are failing, any expansion of ODA would facilitate donors in achieving this goal [92] [68] [12] By linking development aid to conflict, some donors want to include spending on the removal of landmines, prevention of child soldiers and even international peacekeeping British Overseas NGOs for Development [11] is concerned that the inclusion of military/security costs into ODA would permit a diversion of funds away from non-strategic countries Riddell [68] affirms that aid is a tool used by the donor to promote development During the Cold War the different sides of the ideological divide used aid as a self-serving tool to promote their conception of development, establish commercial interests and/or as a coercive instrument [69] The fall of the Berlin Wall did not change this [36] Donors focused their aid toward either the Washington Consensus (USA, IMF and World Bank), thereby instilling the neo-liberal model upon developing states, or, to a lesser degree, Human Development/Security strategy (Canada, Norway and United Nations)

2.3 Aid coordination and its effectiveness

Aid coordination comprises activities of two or more development partners that are intended to mobilize aid resources or to harmonize their policies, programs, procedures and practices so as to maximize the development effectiveness of aid resources

This definition focuses on the two long-standing goals of aid coordination: resource mobilization and increased development effectiveness The literature distinguishes several levels of aid coordination:

- Information sharing and consultation, to understand the activities, plans,

and perspectives of other actors

- Strategic coordination, to reach a consensus on policies, strategic

objectives, and key procedures and practices

- Operational coordination, to reach agreement on a common program or

project to be carried out and financed jointly

While level one can be viewed as the precursor to aid coordination, it lacks the active harmonization element embodied in the definition adopted above A key distinction between the second and the third levels of aid is that under strategic coordination, projects continue to be financed by separate donors (although in a manner better integrated with national priorities), while under the latter, donors and the recipient country pool resources to carry out a joint set of activities or programs Not surprisingly, the literature indicates that aid coordination becomes more difficult for participants as they try to move from one level to the next

According to Arne Disch [8], the so-called “Pearson Commission” presented

its report entitled Partners in Development Report of the Commission on International Development 30 years ago Key themes in that report remain valid

today: the recipient must be responsible for its own development policies but donors have a right to be consulted; the interaction between the parties should be based on

a partnership where predictability and performance based resource flows are integral parts Aid coordination has subsequently become a key dimension in the

operation of the partnership concept Donors and recipients alike are allocating increasing resources for aid coordination activities, with the understanding that efficient aid coordination generates efficiency gains It is not clear, however, how to measure these efficiency gains, nor is there a good understanding of what a “least

cost” strategy for aid coordination improvements should look like

Two kinds of aid coordination take place at the international level Focused events such as the international conferences help generate consensus on overarching

policy issues, largely on specific issues like the environment (Rio), education (Jomtien) etc On the other hand, more permanent institutions like OECD/DAC or process-oriented force like the SPA work with systemic and implementation problems Most of the latter institutions are donor-driven, however, with recipient countries having limited influence Coordination at the recipient country level usually includes overarching development issues and financing of national priorities through Roundtable or Consultative Group meetings, held abroad or in-country

There are often a variety of inter-donor coordination mechanisms in place as well as government-donor force, both at macroeconomic and sector levels The number of such coordination activities has grown rapidly over the last years without clarity as

to what the outcomes of them have been There thus seems to be a lack of focus and results-orientation regarding the aid coordination activities themselves, which represents a major challenge both to donors and recipients

Aid coordination can be de-composed along several dimensions: geographic

(international coordination on general issues versus recipient country-specific);

content (policies, principles and priorities versus procedures versus practices); degrees of intensity/commitment (general consultation versus cooperation at the

strategic level versus collaboration at implementation level); national issues versus

sector and sub-sector issues; at geographic/regional level within a given country; and along functional lines (technical assistance versus general balance of payments

support, for example) By de-composing aid coordination efforts along these various dimensions it may be possible to identify which cells in the multi-dimensional coordination matrix yield the higher pay-off to effort

Regarding mechanisms for aid coordination, the most common one –

infor-mation meetings – may also be the least efficient and could be streamlined/ downsized At the other extreme, formal contracts often represent cost-efficient

coordination because while they may be costly to establish – investment costs are high – they generate lasting and potentially substantial reductions in recurrent transaction cost, and these are the real problems for local administration

Successful aid coordination implies structural changes to resource flows – in particular that central agencies like ministries of finance take on a coordinating and thus a stronger role This may often generate resistance from those within the local administration that feel they will lose out, such as aid-favored units in line

ministries – a problem that should not be underestimated Understanding the politics

of aid coordination is therefore as important as understanding the economics of it

If there is no coherent government development program and strategy in place, donors cannot substitute for this by coordinating their own strategy processes, but should rather support government’s efforts at developing a credible program

This position arrived at for example in the context of a Mozambique survey, is not accepted by all donors, who believe that many recipient governments are not serious about addressing key structural issues and that donor conditionality is still required Recent studies note the failure of conditionality as a means for attaining policy changes, however, and this points to the need for more imaginative and constructive support for recipient-managed strategies

2.4 Dimensions of Development Assistance Coordination

International community recognizes different dimensions of development assistance coordination:

• Donor coordination refers to the specific mechanisms and arrangements

agreed within the community of development partners to improve their effectiveness

as partners in the development process It is a subset of aid coordination

• Aid coordination refers to the established mechanisms and arrangements

that country governments and their development partners have agreed on in order to maximize the effectiveness of external aid for development at national or sector levels It is a subset of development coordination

• Development coordination (at national or sector levels) refers to the

combination of aid coordination and the national government systems making and implementation, governance, accountability, etc.) that ultimately deliver development results

(policy-The integration between the receipient national plan and donor coordination is necessary Donor or aid coordination efforts alone will not achieve significant development results unless they are effectively integrated within national development planning and governance structures and systems In other words, the aim of coordination is not just “aid effectiveness” but “development effectiveness”

The above definitions are useful because the three dimensions of coordination can be seen as three “stages” with different characteristics Stage one is donor coordination In this stage, the main drive usually comes from the development partners, while government usually plays a passive role at this stage (lack of systems to deal with aid or to engage with the donors in policy dialogue, etc.) Stage two is aid coordination This stage deals with more proactive engagement of government

counterparts and setting up of the foundations of improved aid forecasting, accounting and aid management systems on the government side Stage three is development coordination In this stage, the government increasingly takes the lead in policy design and implementation, employing effective mechanisms for management of all government resources There are efficient mechanisms of cooperation between the government and the community of development partners integrated with government mechanisms and systems All three types of coordination use different instruments and

at different level (national, cross-sector, sector, local, programme, etc.) Major challenge lies in adequate definition of sectors and appropriate levels of coordination

2.5 Sector Wide Approach and Programme Based Approach

Programme-based approaches (PBAs) and a sector-wide approach (SWAp) differs in its forms and targets PBAs have been defined as a way of engaging in development co-operation based on the principle of coordinated support for a locally owned programme of development SWAp is a programme-based approach operating at the level of an entire sector It is a method of working that brings together governments, donors and other stakeholders within any sector It is characterized by a set of operating principles rather than a specific package of policies or activities The approach involves:

• Government leadership

• Developing a single sector policy (ideally a policy that addresses private and public sector issues) and a common realistic expenditure program (budget framework);

• Formalized process for donor co-ordination and harmonization of donor procedures for reporting, budgeting, financial management and procurement

• Efforts to increase the use of local systems for programme design and implementation, financial management, monitoring and evaluation

A sector-wide approach (SWAp) is an increasingly widespread approach to development assistance in low-income countries The SWAp model is seen as an important approach to enhancing aid effectiveness, mostly through improved efficiency that would result from better aid coordination where the focus is put on

developing and strengthening sector policies and institutional arrangements However, it is important to keep in mind that a SWAp and programme-based approach can be implemented without any external funding at all, with the purpose

of strengthening coordination, coherence and efficiency in relation to desired results

in a certain area

2.6 Principles of Effective Aid Coordination

OECD monitoring survey 2006 [42] reported that for aid to be effective, each country needs to determine its own priorities, pace and sequencing of reform The monitoring identified that transaction costs of managing foreign aid and the place of change is slow in donor practices There is a strong disconnect between headquarters policies and in-country practices It is recommended that demonstrating tangible changes in practices is fundamental in sustaining momentum and achieving further progress

The main principles that serve as basis for defining improved aid coordination mechanism are:

1 Efficiency which refers to the best use of limited resources,

2 Alignment with national planning, programming, monitoring and reporting processes, strategic documents and priorities,

3 Flexibility to establish and abolish donor coordination groups per need and avoiding administrative overburden of public administration staff,

4 Complying with donor requirements and established systems and procedures for programming of donor’s funds,

5 Using existing national planning, programming and monitoring structures and procedures,

6 National leadership and ownership in aid coordination,

7 Improved harmonization and coordination among donors activities and priorities in each sector

CHAPTER 3 KEY LESSONS LEARNT FOR LAO PDR

This chapter will detail lessons for the aid effectiveness agenda from two neigbour countries, namely Vietnam and Timor L’Este Vietnam has been selected

as a case simply because it has been an important template for the improvement of aid effectiveness in other nations in the region Vietnam has a model for Laos to be learnt since both of the countries have political similarities and are neighboring countries with special relationship agreement

While Timor L’Este is different from Lao PDR, in terms of context, political situation and it said coordination model, it offers some important lessons from a different environment The lessons to be learnt from international agencies based in Timor L’Este are essential It shows that it is not just a matter of government taking ownership in the aid effectiveness agenda but also how the international development community can work together for good aid delivery outcomes

The chapter will illustrate how aid coordination is pursued in both ways The Vietnam section will examine how the Paris Declaration is localized at the country level, and analyses how the overall aid effectiveness agenda is organized It will be shown why many international development agencies recommend that Vietnam is

an example for region to follow Timor L’Este will be looked at in terms of reviewing aid reports from the existing literature that is currently accessible through the internet

The case is drawn from multiple sources on aid effectiveness monitoring reports and Soudalie Silaphet [81]

3.1 Lesson from Vietnam

Before the Paris Declaration, UN agencies were fully involved with the Vietnamese government in coordinating aid A good partnership has been illustrated since 1993 with improved aid management Vietnam has under gone a remarkable transition from a closed economy oriented toward the former Eastern Bloc countries

to a market oriented economy with rapidly growing trade and aid relationships with

its Asian neighbors and Western donors The growing influx of foreign capital, both private investment and Official Development Assistance (ODA), has helped fuel high rates of economic growth but also created a series of challenges for the government In the past several years, the government has taken a series of steps to strengthen its ability to define priorities for development assistance, coordinated on

or support, and manage aid more effectively

Since the Paris Declaration, the Vietnamese government has realized that localization of this agreement is essential The Prime Minister’s Decree on the issuance of the regulation on the management and utilization of aid from international non-governmental organizations has been effective since April 26,

2001 This resulted in the Ministry of Planning and Investment (MPI) and Ministry

of Finance (MOF) becoming the sole aid coordinators [79] MOF has the role of organizing public expenditures and managing budgets while MPI has had the overall role in aid coordination and management

The Ministry of Planning and Investment has a department which is responsible for aid coordination MPI helped to establish the Partnership Group on Aid Effectiveness (PGAE) and is a core member of the ‘Friends of the Co-Chair’ group who produced the Hanoi Core Statement (HCS) which consists of representative of government and donors PGAE act as a forum for partnership groups and donor groupings and provides frequent opportunities to discuss and monitor implementation of the HCS

Although the Task Force that is the PGAE for aid effectiveness working group is organized, it has a weakness in practical use because the concept of it is lost The HCS spells out in the local context the implications of the Paris Declaration The success factors resulted from strong leadership of the Vietnamese government, a continuous effort to ensure that the donor community commit on the agenda with a balance of a competent group of visionaries and strategic thinkers This is important because, if these involving representatives do not have the right capacity to be involved in the aid coordination agenda; it is unlikely that coordination process will be successful The PGAE continue dominating the processes in aid effectiveness agenda in Vietnam and putting the Hanoi Core

Statements in to implementations

Vietnam became the first partner country in the world to localize the Paris Declaration on Aid Effectiveness in the Vietnamese Context

The Hanoi Core Statement scents reason the following principles which includes 14 indicators and targets that have been agreed by the Government and the donors These indicators are used to monitor the progress achieved in improving aid effectiveness in summary [46]

1 Ownership: The government is the leader and owner of the development agenda

2 Alignment: Donors use government plans and government systems

3 Harmonization: Donors and government harmonize ways to deliver aid

4 Managing for Results: The government manages for results and donors use the government’s results framework where possible to measure success

5 Mutual Accountability: donors and government share accountability for aid effectiveness

In order to translate commitments in to concrete practices, the PGAE continues being the focal point The group meets on a monthly basis under the co-chair of the Ministry of Planning and Investment with the European Commission A base line survey was conducted twice to measure progress towards meeting the Hanoi Core Statement and to compare data for accuracy

To make the HCS practical the Vietnam Harmonization Action Plan

2005-2006 (V- HAP) was established to support the implementation The V-HAP contains a large number of activities to be implemented by arrangement of government agencies and donor Figure 3.1.1 below illustrates how ODA is distributed once the process of Paris Declaration is localized and implementation is outlined The right-hand column shows how aid effectiveness agenda is localized Mean while the ODA resources (middle column) support Vietnam’s development agenda, that is through a strategic framework administered by the PRGS/CPRGS through a short term plan of 5 year Socio Economic Development Plan which

complements the 10 year Socio Economic Development Plan (SEDP), illustrated in left hand column

Figure 3.1: Relationships between Vietnam Development & Aid Effectiveness Agenda

(Ministry of Planning and Investment & UNDP, 2005)

Figure 3.2: Improving Aid Effectiveness to Support Vietnam’s Development

(Ministry of Planning and Investment & UNDP,2005)

The 10 highlights of the current status of Aid effectiveness in Vietnam

includes [47] from adopting the HCS which the government recognizes the Paris High level forum as one of global leader The SEDP detail sectorial and provincial plans with consultation with donors The development of the ODA Strategic Framework has been done An ongoing process to strengthening the legal framework for public investment and ODA, including drafting the Procurement and Public Investment Decree and revising the Environment Law The Joint Government and donor for the Public expenditure Review was launched to create awareness, along with the launch of the Targeted budget Support Programs for Education for all as well as continuous promotion for increasing number of donors joining the poverty reduction support credit This common reporting system tool was successfully piloted The problem-solving efforts have been undertaken by the inter-Ministerial Taskforce which is handled by the PGAE

3.2 Lesson from Timor L’Este

Unlike Vietnam or Laos, Timor L’Este was not one of the original signatories of the Paris Declarations Therefore their agenda does not include any commitment to localization of the Declaration They also have a different environment and vulnerable political situation in comparison with other countries

A vulnerable country like Timor L’Este receives aid 3.6 billion US dollars of international assistance between 1999-2006 (Norad, 2007) where a majority of ODA are for emergency relief and long term state building efforts Included in this, half of the amount was made up from contributions from the UN missions and the other half was from 28 bilateral donors as well as multilateral donors

The major challenge in working in Timor L’Este is the availability of statistics Many development practitioners struggle to find indicators because of limited existence of important documentations Giving the circumstances of being a young an unstable political situation, it is difficult for Timor to get into coordination effort to make their abundance of aid received effective

The local aid environment is entirely dominated by development agencies particularly the massive UN mission based in Dili, the capital city There is limited economic activity within the country and aid dominates the economic growth

Timor is chosen as a lesson to be learnt for aid coordination because it has demonstrated good joint aid delivery within the development community

Financial assistance is not the only aspect of the ODA portfolio The international community has provided more than the real value These are combined packages of military and police force support, UN missions from transition mission

to current state building mission, and humanitarian technical assistance [68] COMPACT was the only mechanism to coordinate how a development community comes together and talk about the needs for the country and what donors can do to meet such requests The challenge was working with a transition government that could mean any decisions made in that day would later not have future values The COMPACT meeting consists of officers from government and development agencies and representative of civil society and head of local communities Although the outcomes of the meeting held were not effective, given that was the first coordination initiative

The unique development practices from Timor L’Este were the development community coordinates aid within themselves Because of the transition situation and that the country is still in a weak position to lead development agenda The donor community has approached aid coordination amongst themselves Within the

UN missions and UN agencies there are coordination within themselves, while other donors and the rest of the community try to come together and work on joint programs in order to share the limited available resources that the country has Following the post conflict reconstruction, many external partners particularly bilateral donors such as Japan, Norway, US, Australia and international banks (World Bank, ADB) have moved toward establishing a presence in the country and have geared toward long term day-to-day engagement Under the previous government leadership, external partners have supported the development in National Development Plan (NDP) Most of the development agencies are aligning their assistance with the NDP The World Bank’s Country Assistance Strategy (CAS) for FY06-FY08 includes a result framework to support NDP implementation and supports all development partners (Development Gateway, 2006) This became

an agreement obtained by both development partners and the Government of Timor

L’Este A join trust fund was created (Trust Fund for East Timor) in 1999 to support the reconstruction and development activities The World Bank has been playing the central role in supporting the government in capacity development, coordinating all partnerships within the country For Analytic and Sector Work in reconstructing Timor L’Este several major donors created Joint Assessment Mission (JAM) to identify the priorities for Macroeconomic development This is a great example of effective aid practice, namely having agencies join together with one objective and contribute each specialized resources into one program or project

Many development agencies understand that in order to achieve the Millennium Development Goals (MDGs), their development practices need change

to improve development practices and expedite the effort of MDGs UN agencies

‘programs have been jointly organized through channels of funding, with one objective Many of their specialized agencies do not have independent projects and have moved to new programs with join initiatives Even fund raising efforts have been jointly organized which is much different from UN agencies in Laos The UN Trust Fund for Human Security (UNTFHS) was a great example of joint effort in Timor, where UN agencies got together and have designed program and propose a one of financial support to the Japanese donor This task is managed and led by a unit called Poverty Reductions Unit, within UNDP This new proposed project also involves many agencies through combined resources to explore how human security could be addressed in Timor L’Este That includes senior management team representatives from: UNICEF, World Food Program, UNDP and UN Habitat The project will be involving several activities ranging from, micro-finance support by UNDP, WFP will support children and family for food security, while UNICEF overlooks at child health care and UN Habitat overlooks are providing homes for families who were internally displaced during the internal crises

Although Timor L’Este is a young country, many challenges lie ahead for its people The development community has set a great example in working together in one common agenda It realized that the local government needed to improve local capacity to manage aid Nonetheless, development agencies have been working together in joint programs and projects to ensure efficient output By doing so it

allows for development agencies to realize the current activities within the country and avoid project duplications They rely on working together in order to come up with non-existing recorded statistics This is the best development partnership displayed in which other countries could learn from From personal work experience in Laos, much of the development community duplicates one another’s projects simply because of poor communication and lack of awareness With lessons learnt from both countries Vietnam and Timor L’Este, Laos could look at their model or practices for better aid delivery This is relevant for both developing country governments and applies well to development agencies

3.3 Comparative Lessons

Vietnam has the advantage of having put its aid effectiveness portfolio together much faster than Laos Laos only started their agenda recently and finalized their work plans late in 2007 Much of the Lao agenda still needs to be improved because of local conditions While Vietnam has a relatively good balance

of competent people working on the agenda, Laos needs to improve the local capacity Funding for training such as English language training, report writing and basic specialized trainings in order to support the coordination effort from the central level are also needed That involves not just the local government’s ability to coordinate aid, but the development community’s willingness and commitment to support the agenda with the right capacity

The development community seems confused and rather weak in making good aid practice work The important aspect of Vietnam’s successful model is that the government has taken strong leadership within the development community The success factors also involve pushing the development community to cooperate with the government’s agenda Vietnam even has provincial plans beside sectoral plans and consulting with donors to align This is one of the components of aid delivery that still needs improvement from the local Lao government situation Although two provinces have been identified to monitor the projects, the capacity of provincial governments lags far behind and coordination is difficult to implement This is one of the reasons why aid coordination is still done entirely at the central level Thus, in Laos, capacity still needs to be significantly improved

Vietnam is one of the first countries to get a head start with the localization

of the Paris Declaration It became a model, particularly in South East Asia, for how development communities in the region could coordinate aid effectively Accordingly, Laos has recently attempted to localize their version of the Paris Declaration, and the development community there has drawn on the Vietnamese aid effectiveness agenda as a leading model Both countries are similar in terms of their systems but Laos needs to catch up on more details, especially decentralizing the coordination and monitoring down to provincial level

Timor L’Este has particular characteristics in its development efforts and draws much attention to the role of development practitioners The unique geographical location as well as its history has led to a situation where government capacity in severely limited Aid inflows are much higher in comparison to Laos and coordination is essential However, Timor L’Este has a weak state sector and,

as a result, has to bring civil society much more into its development agenda At present, Laos to be in a rather similar situation but shows few signs of involving civil society effectively

The Lao UN agencies have struggled to put joint programs together because they have their own mandates to operate aid Although they have been trying to move from independent programmes to working together amongst themselves, it has been really difficult for them to do so Within UN agencies, they find it much more difficult to coordinate aid and organize joint programmes, in comparison to

UN agencies in Timor L’Este Timor L’Este has not yet signed up for the Paris Declaration and therefore, the government is little concerned with localizing aid effectiveness However, the international is and development communities have realized the importance of coordination and they have taken the approach through the community themselves With or without the government, they have realized the instability of the political situation and the need to take actions for the people of Timor L’Este They have moved into joint programmes although their existence in Timor has only been recent, since independence in 1999

UN agencies in Laos often do not operate successful joint projects and there are concerns regarding power and the management system, because some UN