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Too much money is chasing too few really good development projects – Part 1: Funding periods and priorities

 I can already hear the howls of frustration from committed development workers at this title. And in some way, you’re right: it is sometimes terribly difficult to obtain enough funds for some important development cooperation projects. And other ideas go unfinanced merely for lack of funds.

But let’s face it: In many cases, decisions on financing projects are taken in an almost random way. One example is the project approval committee in one EU Delegation, where project budgets were raised – or lowered – by one million Euros depending on the mood of the deciding officer. Another is the intergovernmental negotiations between Germany and another country, in which far-reaching financing decisions were taken to fit the particular interests of one responsible officer. And it happens with almost all donor organisations. We are all human, and the subjective nature of such decisions can never be completely removed; however much more care should be attached to project financing decisions, in order to direct the available monies specifically to the most deserving needs.

The first thing that needs to be examined is how money is distributed. this applies, whether it is through the German Federal Ministry for Economic Cooperation and Development or an EU or UN office in a particular country, or other donors such as World Bank and ADB. Tthe financing organisations receive at the beginning of each budget period a specific pot of money to be programmed. And if they spend less than they receive, they risk seeing their budget cut in the following period. So the pressure to approve projects is understandable. And depending on the proposals in front of them, the projects may be better or less well thought out and researched. The move to approve programmes with individual project components is a worthwhile first step to reduce this pressure.

But in fact we should first examine what all that money is supposed to achieve.

And, in returning to the basics, we might find that far more can be achieved with considerably less if the incentives are set right and we have the strength to resist a few big repeat temptations:

  • status projects,
  • throwing money at a problem without fully understanding its root causes, and/or
  • maintaining inefficient or ineffective projects for lack of a better alternative.

It all comes down to what we want to achieve with development cooperation. This is a difficult topic and one I shall address in several of the upcoming blogs.

The first aim of development cooperation is certainly concrete improvements in the living conditions of the populations in the areas addressed by development cooperation. So the next blog will look at how to improve the quality of projects.

Another important benefit of development cooperation is the international cooperation to solve major problems facing the world (For example, a side benefit of Europe’s development cooperation with China is seen to be the possibility to support improved environmental conditions in that country.). Another blog will discuss the issues involved in such indirect benefits.

Yet another potential “benefit” of development cooperation can be an indirect contribution to various economic sectors in the donor countries (For example, US contributions of grain to WFP have also helped maintain grain prices in the US itself.). The fourth blog will deal with creating a natural support in the donor countries for successful and sustainable development cooperation.

In upcoming blogs I will take each of these aspects and discuss how improving the quality of the projects funded – even at the risk of reducing the volume of development cooperation – could help to better achieve the real aims. I will also address indirectly ways to improve the funding issue mentioned above.

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