The Obstacles to Foreign Aid Harmonization: Lessons from the Decentralization Sector in Indonesia

40 Pages Posted: 24 Feb 2012

See all articles by Matthew S. Winters

Matthew S. Winters

University of Illinois at Urbana-Champaign - Department of Political Science; Institute for Corruption Studies

Date Written: February 1, 2012

Abstract

Relying on a new institutional economics analysis of transaction costs, the 2005 Paris Declaration on Aid Effectiveness emphasizes donor harmonization as an intermediate objective for increasing the effectiveness of foreign assistance in bringing about development outcomes. Surveys on adherence to the Paris Declaration commitments so far suggest that foreign aid donors are lagging behind targets. This paper explores the political and bureaucratic obstacles faced by bilateral and multilateral aid organizations trying to harmonize aid at the country level. Looking at foreign support for the decentralization and local governance sector in Indonesia – where a “bold experiment” in harmonization failed to bring about improved donor coordination – I find evidence that the lack of harmonization can be linked to some of the characteristic pathologies of foreign aid: the dominance of the strategic interests of some donors and the structure of bureaucratic incentives within aid agencies. These traditional problems work through a pathway that is underexplored in the literature: by enabling a lack of coordination among agencies within the recipient government, donors create barriers to harmonization of their own programming. However, I conclude by noting that government coordination failure may not be as much of a problem as donors make it out to be. Decisions about governance and decentralization are necessarily contentious and political. In the case where donors succeed in bringing about government coordination in the interest of their own harmonization, they risk exercising harmful leverage that leads to premature resolution of domestic policy disputes, thereby undermining the Paris Declaration principle of country ownership.

Keywords: foreign aid, aid effectiveness, principal-agent relationships, bureaucratic politics, Indonesia, Paris Declaration

Suggested Citation

Winters, Matthew S., The Obstacles to Foreign Aid Harmonization: Lessons from the Decentralization Sector in Indonesia (February 1, 2012). Available at SSRN: https://ssrn.com/abstract=2009992 or http://dx.doi.org/10.2139/ssrn.2009992

Matthew S. Winters (Contact Author)

University of Illinois at Urbana-Champaign - Department of Political Science ( email )

702 S. Wright Street
Urbana, IL 61801
United States

HOME PAGE: http://https://sites.google.com/site/mswinters1/home

Institute for Corruption Studies

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