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Cash on Delivery is an approach to foreign aid that focuses on results, encourages innovation, and strengthens government accountability to citizens rather than donors. Under COD Aid, donors would pay for measurable and verifiable progress on specific outcomes, such as $100 dollars for every child above baseline expectations who completes primary school and takes a test. CGD is working with technical experts and potential donors and partner countries to design COD Aid pilots and research programs.
Cash on Delivery Aid is designed to overcome the problems of traditional aid, which often focuses more on disbursements and verifying expenditures than on results, undermines a government’s accountability to its citizens, and undervalues local experimentation and learning. COD Aid’s advantage is in linking payments directly to a single specific outcome, allowing the recipient to reach the outcome however it sees fit, and assuring that progress is transparent and visible to the recipient’s own citizens. These features rebalance accountability, reduce transaction costs, and encourage innovation.
COD Aid can be applied to any sector in which donors and recipients can agree upon measurable, verifiable outcomes and commit to making progress toward those shared goals. The approach is fully explained in Cash on Delivery: A New Approach to Foreign Aid (CGD, 2010). Listen to more about COD Aid in these Wonkcasts.
This is a joint post with Nancy Birdsall and Bill Savedoff.
During a panel discussion we hosted at the World Bank and IMF annual meetings in Istanbul last month on mutual accountability and outcomes in aid, Max Lawson from Oxfam, in referring to COD Aid, said that CGD appears to have more effective publicity strategies and reach than the European Commission. While we do have a (small but) stellar communications team, our ideas spread far primarily because other organizations are seriously engaged in exploring and debating new ideas like the ones we have proposed (otherwise our tiny team would be sleepless, to say the least!).
One case in point is the recent COD Aid briefing paper issued by the Catholic Agency for Overseas Development (CAFOD) – a large international development organization based in the UK which raises about 75% of its funds from individual supporters.
In this paper, part of the Innovations in Aid series, Jean-Michel Severino and Olivier Ray describe shifts in the objectives of overseas development assistance (ODA) over time and conclude that it is time to put the concept itself to bed—in favor of what they propose should be called “Global Policy Finance.”
A new report issued last week in Davos by former UN Secretary-General Kofi Annan on behalf of the Africa Progress Panel draws in part on CGD research to argue that Africa is both at risk from the global economic crisis and potentially an important part of the solution.
The report says that experiences of past financial crises suggest that aid to Africa may be cut. But it also sees a silver lining to the crisis: measures to help Africa—including trade and investment initiatives, as well as aid—should be an important part of a global stimulus package in response to the global financial crisis.
"Africa can be an important part in a global economic stimulus plan," said Annan, who chairs the Africa Progress Panel, which is composed of leaders from Africa and high-income countries. "The scope for investment in Africa is vast."
Documenting the economic growth and positive political trends of the last few years, the report states that "Africa's medium to long term prospects are better now than at any time since independence."
However, the report also cautions that "the global crisis could arrest and even reverse steady, and in some cases dramatic, gains that have been made over the last decade." Citing research by CGD research fellow David Roodman, the report warns that despite promises to the contrary, evidence from financial crises shows that rich countries have generally reduced the level of aid in the aftermath of a financial crisis.
The panel report says that "it is more important than ever that Africa's partners honor their commitments" in terms of aid. Alluding to a new aid delivery mechanism being proposed by CGD president Nancy Birdsall called Cash on Delivery Aid, the report suggests that "rich countries can also link aid to outcomes in order to reduce the burden on African governments and improve aid effectiveness."
The report also asserts that "a real partnership between Africa and her supporters is the only way for progress to be achieved." This requires that global governance reforms "include means by which Africans are represented in a legitimate and effective manner."
Annan launched the report at Davos at a session focusing on the State of Africa with leaders from across the continent. Speaking at the session, he said:
"Economic recovery in industrialized countries is needed for Africa—for trade, remittance flows, investment, and aid levels. However, Africa is also integral to immediate efforts to reboot global growth. World leaders must grasp the opportunity to support African development as a means of driving their own economic recovery."
Annan also had strong words about the situation in Zimbabwe, stating that the African Union "did not have the courage" to back the conclusions of its own election observers.
"The crisis in Zimbabwe is man-made, unnecessary, and only getting worse," he said. "The recent cholera outbreak that has taken thousands of innocent lives is only the latest sign of the collapse of a once-thriving nation. Responsibility for this calamity falls squarely on the shoulders of Zimbabwe’s leaders, who have shown great callousness toward their own people and nothing but contempt for the exercise of their political voice and freedoms. Zimbabwe’s neighbors, the African Union, and regional bodies such as the Southern African Development Community (SADC) need to act more purposefully to bring about political change and facilitate recovery and reconstruction."
CGD senior fellow Vijaya Ramachandran served as rapporteur for the 2008 report of the Africa Progress Panel and assisted with the Davos report. "It is extremely important for the urgent issues of infrastructure investment, aid effectiveness, trade, and agriculture to remain as priorities during these times of crisis," she said. "While we are preoccupied with corporate irresponsibility and financial bailouts in the rich world, we must not forget our commitment to economic development and political stability in Africa."
The report urges three steps to mitigate the worst effects of the crisis on Africa, and to enable the continent to become a driver of global economic recovery and stability:
Rich-country governments and institutions must lend strong support to address the problems of climate change by investing in adaptation and in the prevention of deforestation and by increasing funding for renewable energy in Africa.
Africa's own potential for a green revolution in food production must be realized. Technical and financial support is required as well as additional investments in rural infrastructure to ensure farmers’ access to inputs and market outlets.
There has been no progress on multilateral trade negotiations. While pressing for the impasse post-Doha to be broken, an early harvesting of gains in trade liberalization for Africa is needed.
In a recent blog post in the Guardian, Jonathan Glennie welcomes the new focus on results in foreign aid and has some good things to say about Cash on Delivery Aid (COD Aid) in particular. (We especially like this: “COD Aid demonstrates a post-ideological humility regarding how to achieve development.”)
In his article, but even more so in readers’ reactions below it, there are some questions about the possible effects of linking aid to results. We think that the commenters are right to raise these worries, because they are concerns that we share. But we believe that these concerns are relevant for other forms of results based aid, and to an even greater extent for conventional forms of aid, and that COD Aid would in fact go a long way towards allaying them.
Here are the main worries raised, with some reflections on whether and how they apply to COD Aid:
Interest in Cash on Delivery Aid has been so strong that we’ve printed a second edition of the book which can be purchased or downloaded online. Here is our new preface:
Since Cash on Delivery: A New Approach to Foreign Aid was published in March 2010, the ideas we proposed have been embraced by presidents and ministers, by heads of public and private institutions, and by researchers and practitioners. The Education Ministry in Malawi sent us a letter asking for help creating a COD Aid program there, the British government has publicly committed to financing pilot experiences, and articles and essays have addressed COD Aid in a range of publications including The Economist, The New York Times, and Public Choice. In the debates that ensued, we have learned even more about the Cash on Delivery Aid (COD Aid) approach and how significant a departure it could be from current aid practices.
One of the exciting things about the Cash on Delivery Initiative is that once people understand the concept, they frequently come up with all kinds of new ideas for applying it. This happened most recently at the CGD-hosted book launch for Cash on Delivery: A New Approach to Aid this week. Within the course of an hour, the conversation shifted from skeptical questions to prospective applications of COD Aid. While the book outlines a proposal for channeling aid to countries that accelerate their progress toward accomplishing the Millennium Development Goal of universal primary completion, people have asked about applying it to water, deforestation, malaria and to another Millennium Development Goal: reducing maternal mortality.