Tuesday, September 13, 2011

Ghana’s efficient country system for aid management not complemented by donor conduct – Study

 By Emmanuel K. Dogbevi

A major new study on aid effectiveness to be published in the run-up to the High Level Forum on Aid Effectiveness (HLF-4) in Busan, South Korea has found that even theough Ghana has made significant progress in applying  Overseas Development Assistance (ODA) or international aid by using country systems, the unwillingness of donor countries to change their attitude is a drawback to achieving the objectives of the Paris Declaration (PD) and Accra Agenda for Action (AAA).

The study conducted by the European Network on Debt and Development (Eurodad), says ” While Ghana has made much progress in reforming country procurement systems, this progress does not seem to have been complemented by changes in donor conduct. Donors’ own reporting suggests that the extent to which they use country systems has not changed a great deal.”

The report to be published at the end of November 2011 focuses on six country case studies including Namibia, Uganda, Bangladesh, Bolivia, Nicaragua and Ghana.

The report titled, “How to spend it: smart procurement for more effective aid,” will be published to assess progress towards these aid effectiveness commitments. The report includes suggestions for a new and ambitious agreement in Busan and it constitutes one of the few civil society research reports ahead of the HLF4.

The report investigates how aid is actually spent, who the beneficiaries are and what the local economic impact is.

In its summary on Ghana,  titled: “For whose gain? Procurement, tied aid and the use of country systems in Ghana”,  the report argues that “the use of recipient country systems can increase the effectiveness of ODA by enhancing ownership and harmonization, reducing transaction costs and strengthening institutions.”

“Channelling ODA through country systems facilitates the alignment of aid allocation to national development plans. Using country systems is therefore a central pillar of the current aid effectiveness reform agenda as agreed on in international agreements, in particular the Paris Declaration and the Accra Agenda for Action,” it adds.

According to the report almost all of the donors interviewed for the study noted that in recent years progress has been made in improving Ghana’s public financial management and procurement systems.

“Past and ongoing reforms have enhanced donors’ confidence in the country systems, and scaled-up budget support has led to open dialogues between donors and Ghanaian authorities on the quality of the Public Financial Management (PFM) system, and how to improve it,” it says.

During interviews for the report most donors said they would channel more funds through the country system, in particular through the Multi-Donor Budgetary Support (MDBS) framework.

“However, the actual figures in the most recent official assessment, the 2008 Survey on Implementing the Paris Declaration (PD), give a different picture: the proportion of aid using country public financial management systems actually decreased to 57 per cent in 2007 from 62 per cent in 2005, contrary to the commitments made by donors,” the report says.

The report however, noted that the use of country procurement systems showed a slight increase, from 52% to 57%.

While it indicates that some donors, such as France and the Netherlands make full use of the country procurement system for all their ODA, it has been totally side-lined by others such as the USA and the African Development Bank (AfDB).

The report however says in a previous research on the use of country systems in Ghana carried out by Eurodad, it found that the US aid agencies are constrained by policies and regulations set at headquarter level. Moreover, the large number of vertical funds in Ghana, in particular in the health sector is also a contributing factor for the continued underuse of the country systems, despite an increase in their quality.

According to the report, some donors, mainly European Union (EU) Member States, explained that although they committed to using country systems as a first option, they use their own procurement procedures in cases where the procurement involves supplies or services which need to be procured internationally since they are not available on local markets.

Donor representatives also pointed to persistent structural or political constraints for using country systems. These are for example risk aversion by donor country parliaments which require that spending is visible and attributable, and well-documented and properly accounted for. Real or perceived fiduciary risks lead to the continued use of parallel implementation by donors. Some donors also continue to tie technical assistance and provide consultancies in kind rather than in cash, it said.

Citing a study by Osei Baffour titled “How tied aid affects the cost of aid-funded projects in Ghana“, in which he drew the conclusion that “there is significant mark-up on the prices of the tied funded inputs, and that the mark-up translates to a significant cost to Ghana,” the report said empirical research has shown that tied aid makes aid less efficient and less effective.

Since 2001, Ghana, the report noted  has undertaken a large number of reforms of its Public Finance Management (PFM) system in general, and the procurement systems in particular. Central is the Public Procurement Act, passed in 2003, which provides a comprehensive legal framework for public procurement. New institutions such as the Public Procurement Authority (PPA) and the Appeals and Complaints Panel have been set up to formalise and improve procurement processes, it says.

It also acknowledged that the development of software for procurement planning, a standard bid document and short –term training modules as well as the Public Procurement Model of Excellence (PPME) for assessment and monitoring have aided in enhancing the image of public procurement.

Several interviewees, the study said, explained that the PPME represents a significant step forward for monitoring the performance of public procurement entities and their compliance with the legal provisions.

The PPA and the Auditor General have indicated that the implementation of the Act has reduced leakages and led to more transparency in public spending. However, many government officials’ respondents bemoaned the delays associated with the implementation, it added.

The study therefore, recommends among others that all donors should deliver on their aid effectiveness commitments and use country procurement systems as the first option, while at the same time providing scaled-up support to strengthen local procurement capacities and improve accountability of the procurement process.

It suggests further that, where donors continue to procure themselves, they should end all practices of formal and de facto aid tying. They should also thoroughly assess their procurement practices and remove all barriers which hinder better access and participation of local economic actors, with the final aim of maximizing the share of contracts which are awarded to Ghanaian firms.

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