Monitoring development cooperation policy: the private financing channel

Report | 31-03-2016

Conclusions

We drew the following conclusions from our audit.

• The private sector creates practical opportunities but there is no systematic insight into the results – The use of private companies to implement development cooperation policy provides opportunities for sustainable development in developing countries. We found examples of this in Vietnam, where jobs have been created and local suppliers have benefited from economic growth. These positive examples, however, do not provide enough hard evidence of the private sector’s value for development cooperation as a whole. A systematic evaluation is needed of the results achieved and the lessons learned, supplemented with representative impact assessments. The availability of such evaluations, however, is limited.
• Fragmented disbursement of the budget, laborious implementation – The Netherlands Enterprise Agency (RVO) is an agency of the Ministry of Economic Affairs. As the largest administrator of the development budget for the private sector, it ran 14 programmes in 2014 and nearly as many in 2015. The programmes channel Dutch aid to 67 countries, including the 15 countries with which the Netherlands has a permanent development relationship. It disbursed about €7 million through private companies in Ghana, Ethiopia, Kenya and Nicaragua and just under €1 million in each of 36 other countries. RVO awarded funding to nearly 400 companies and organisations in 2014. Half of them were Dutch companies.
  The fragmentation makes programme implementation labour intensive (fewer than half of the many funding applications are honoured) and increases the management burden, as knowledge has to be kept up to date about many countries and industries. Implementation costs range from 5% to 30% depending on the scheme concerned. New programmes are constantly being set up, even before existing programmes have been completed and still require many years’ attention.
• Ambitions only partially achieved through private channel - The minister wants Dutch companies to play a bigger role in development cooperation. The figures in the open data provided by the Ministry for Foreign Trade and Development Cooperation show that the private sector is still a relatively small channel for the disbursement of ODA. It has grown from 4% in 2010 to 6% in 2014. It cannot be determined from these figures whether the minister is achieving her ambition of having the private sector play a more important role. The private sector channel is only a small part of the picture. Development assistance also finds its way to the private sector through other financing channels, for instance through public private partnerships and through contributions to multilateral organisations such as the World Bank.

Recommendations

We recommend that the Minister for Foreign Trade and Development Cooperation provide more insight into the results achieved from financing companies in developing countries. We would stress the importance of implementing in full the monitoring and evaluation protocols agreed in 2012. We would also stress the need for more focus and less complexity in the implementation of private sector programmes. We suggest that the minister consider concentrating development programmes on a limited number of countries and a limited number of themes. We also recommend that the minister seek instruments that increase the flexibility and tailoring of implementation. Longer use could then be made of instruments without having to constantly introduce new instruments with their own conditions and procedures.

Response of the Minister

The Minister for Foreign Trade and Development Cooperation responded to our recommendation to provide more and more up-to-date insight into the results. It agreed with her goal of increasing the focus on results. Policy is increasingly concentrating on the impacts that resources and funds have. The Court of Audit endorses this in its afterword. It notes, however, that spending cuts have increased the need for even more management focus in the years ahead.