Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 4 - Evidence - June 21, 2006
OTTAWA, Wednesday, June 21, 2006
The Standing Senate Committee on Foreign Affairs met this day at 4:07 p.m. to examine the development and security challenges facing Africa; the response of the international community to enhance that continent's development and political stability; and Canadian foreign policy as it relates to Africa.
Senator Hugh Segal (Chairman) in the chair.
The Chairman: Honourable senators, we are fortunate today to have with us Ms. Danielle Goldfarb, a senior policy analyst with the C.D. Howe Institute.
I want to express thanks of the committee for your flexibility with respect to scheduling issues. It was not your fault or ours, but because of the cancellation of committees last week across the set, you were kind enough to adapt your schedule to accommodate us and we appreciate that.
Let me also say that I have an immense respect for the work of the C.D. Howe Institute. I am no longer in the think- tank business myself. When I was, we always looked to the C.D. Howe Institute for constructive and thoughtful work not only on economic issues.
I am particularly pleased that the C.D. Howe Institute has engaged as an organization on this particular instrument of foreign policy, CIDA, to express an analytical framework and frame of reference with respect to matters of efficiency and effectiveness.
I invite you to make opening comments, and I know honourable senators on all sides would like to put questions to you. We are aware of your time constraints.
Danielle Goldfarb, Senior Policy Analyst, C.D. Howe Institute: Thank you for the invitation to be here today. I am pleased to be present to discuss C.D. Howe Institute research on what CIDA can learn from the experience of several other bilateral aid agencies.
I will not go into the debate about aid effectiveness at length, but I do think it is useful as a starting point to briefly discuss the characteristics of aid that make it likely to be effective in reducing poverty. The focus of our research on aid policies and operations is on aid aimed at long-term development rather than aid aimed at short-term humanitarian purposes.
There is a lot of evidence, but I will try to summarize it briefly. The evidence suggests that there is no magic bullet that will address development or make aid effective in every country and every region. Success requires a focused strategy, country-specific approaches and an understanding in terms of research on what works in particular aid environments. Success also means openness to feedback and critique and re-evaluation, an understanding of the realities of corruption and poor governance in recipient countries, tempered expectations and the untying of aid to purchases from donor country suppliers.
Keeping these criteria for effective aid in mind, C.D. Howe Institute compared CIDA with its counterpart bilateral aid agencies. We focused on five aid agencies that are widely and consistently considered to have the best bilateral aid policies and operations: The United Kingdom, the Netherlands, Denmark, Norway and Sweden. The last three aid agencies have aid budgets similar to Canada's, so we thought they would be particularly important on which to draw conclusions to Canada. Rather than exhaustively studying each agency, we examined selected dimensions that relate to aid effectiveness.
I am not an expert on Africa. I would be happy to talk about what I know with regard to these aid agencies, but I may not be able to answer specific questions with respect to Africa.
Before questions, I want to highlight some of the characteristics of those agencies that we looked at that I think provide lessons for CIDA.
The balance of evidence suggests that the effectiveness of aid depends on a deep understanding of the conditions in recipient countries. We have seen a number of these leading aid agencies do is reduce their staff at headquarters and increase staff in recipient countries. By the way, we did not look at the United States, but this has been a feature of the U.S. aid program. Denmark and the United Kingdom have the most decentralized aid agencies, and they locate half of their staff at field offices abroad. This makes it easier for those agencies to assess local conditions, evaluate programs, to ensure the programs meet their objectives and also, very importantly, to coordinate with other donors.
Over 80 per cent of the CIDA staff is at headquarters. That is at odds with what the other leading aid agencies are doing. CIDA has 1,500 full-time employees. That number is far in excess of the other agencies that manage aid budgets of similar size. It is out of proportion when you look at the larger aid agencies. The ratio of staff to aid budget is much higher for CIDA.
The second thing we looked at relates to increased field presence and where the authority to make decisions lies. When you look at what could make a bilateral aid agency more effective than a multilateral agency, or why we should give aid bilaterally rather than multilaterally, one thing that comes to mind is the ability to be flexible and respond to local conditions. The leading agencies that have moved their staff to the field have also decentralized much of their decision-making authority from headquarters to the field. This allows them to respond to changing local conditions, provide oversight and also coordinate with other agencies.
In contrast, CIDA field staff has little authority to design, analyse or manage projects. Most of the project reports and most of the country framework documents that outline aid strategies are written at headquarters. Even without a large field presence, CIDA's administrative costs as a share of aid are the highest in the OECD. One would think if there is a large field presence perhaps high administrative costs would be understandable, but we have high administrative costs without a large field presence.
The third item we looked at is focus. Most donors concentrate aid in a few major recipient countries or regions. For example, we did not study Australia and New Zealand, but they concentrate on the Far East and Papua New Guinea while Japan concentrates on Asia. The Netherlands recently phased out aid to poorly governed and wealthier countries. Norway focuses its aid on only seven main countries and 18 minor countries. On a number of measures of concentration, CIDA is still the most geographically dispersed of the agencies, even taking into account that the agency will focus on involving 25 countries. Aid programs continue to be announced to countries that are not on the list of 25. Canada, as far as I am aware, has not announced it is cutting any countries off its list of 150 aid recipients. This is problematic because the dispersion spreads CIDA's managerial expertise thinly across many recipients. It means Canada is an insignificant donor. Even among Canada's top aid recipients, CIDA is a very small donor representing 3 per cent to 4 per cent of the total aid to each country. Therefore, if you are an insignificant donor in your top recipient countries, it minimizes the possibility that Canada's aid can improve policy advice and dialogue between donor and recipient. CIDA has a list of priority sectors that one analyst, Dennis Stairs, said we could read this list to include almost any development issue.
The fourth issue we looked at was tied aid. Numerous studies show that tied aid increases costs by estimates ranging from 15 per cent to 50 per cent of the aid. Most leading aid agencies have reduced their tied aid considerably, with the OECD average at less than 10 per cent and Norway and the United Kingdom and Sweden effectively at zero, at least as far as they reported tied aid to the OECD. There is an issue between what is reported and what actually happens in practice that we could talk about if you are interested. CIDA by comparison greatly lags international practice by tying close to one-half of its aid to purchases from Canadian suppliers. CIDA officers can still tie new aid programs, as long as they justify why they are doing so.
The last area I wanted to highlight is the importance of research. Research and openness to critique and feedback is critical to developing effective aid programs and adapting them over time as circumstances change.
The United Kingdom's aid agency has a well-established, highly respected and transparent research department, with most of their findings posted on the website. The agency draws regularly on a domestic stable of critics to provide feedback on its policies and programs and has a significant peer review research program. Some might say that the U.K. has an aid budget three times the size of Canada's, so why is this a relevant comparison? The agency actually devotes double the share of its budget to research over CIDA. Also, if you draw on external feedback and research, that is relatively inexpensive to do. The U.K. is better at doing it. Denmark, Sweden and the Netherlands also invest heavily in research and draw heavily on external resources for feedback and input. CIDA invests comparatively little in research and does not draw very effectively on external research, including from the International Development Research Centre. According to a few studies, CIDA does not welcome criticism, has a reputation for making sure its outputs remain proprietary, gives low priority to learning within the agency and tends not to encourage debate.
There was a bright sign about 18 months ago when CIDA actually launched a policy journal and published a first issue on the topic of corruption. I thought that was a good step because it is something not discussed often in aid circles or had not been until a couple of years ago. I just found out about a month or two ago that CIDA has cancelled its policy journal, after publishing only one issue in December 2004.
The country program frameworks that set out aid strategy and assess the conditions in the recipient country vary widely in analytical quality. They also often take many years to prepare as aid programs march ahead.
Critical to the success of aid agencies like the United Kingdom's is strong, consistent leadership. The U.K. was considered to be a relatively middle-of-the-pack aid agency before about 1997, when it was completely turned around to make it what is now considered one of the leading aid agencies. Ministers, members of Parliament, civil servants and media recently ranked the agency the best performing U.K. government department.
In 1997, when Tony Blair came to power, he appointed a relatively powerful minister to run the agency. She stayed there for about six years and she increased the focus of the agency and its presence in developing countries. She created an environment for discussion and debate, which makes it a much more attractive place for people to go and work, and to attract the top types of researchers and development policy types to the agency.
CIDA, by contrast, has a junior minister, and has much less credibility within government and internationally. As CIDA's current president noted in a report written before he became the agency president, ``Canada is seen to have lost its leadership role on development policies, both in absolute terms and in comparison with other countries.'' The agency has changed ministers about 12 times over the last 15 years. Obviously, that lack of consistency makes coordination and policy development difficult, both within Canada and with other countries.
To sum up on a positive note, I think that CIDA could improve its overall effectiveness by making changes similar to some of these leading agencies. The government needs to decide if it wants to invest in making CIDA a leading aid agency, in which case it will need to give the aid minister a higher profile and invest in research to improve aid quality. Another alternative would see CIDA harness existing research more effectively, including the use of expertise outside the agency — and possibly consider giving more aid through multilateral channels that have greater analytical capacity.
I think CIDA must become more open to debate and feedback. It should scale down the number of countries for which it develops programs; build on Canadian expertise that has already been developed; increase its field presence in the countries in which it has chosen to focus and learn much more about these countries; give the field staff more decision-making powers and more flexibility, obviously building in checks and balances; reduce its administrative costs; and fully untie aid from the requirement to purchase from Canadian suppliers, making untied aid the default option for new aid programming.
I think it is important to put aid policy in its much broader context. Global aid flows are small relative to global trade flows, investment flows, workers' remittances and private foundation funds. Policy improvements that Canada can make to encourage those flows can be potentially much more rewarding than aid. These can include things like trade policies, the treatment of charitable giving, immigration policies and guest worker programs. Even Canadian policies that are aimed at pre-empting corruption in developing countries can be important. That is just to put the aid discussion in a larger context.
As I say, it is not an exhaustive assessment. I understand that the committee will be going to some of these countries. I did not have the benefit of travelling to Scandinavia and elsewhere to study these agencies, so I look forward very much to your questions and I hope I will be able to answer them.
Senator Andreychuk: Ms. Goldfarb, you indicate that CIDA's administrative costs are high. Part of CIDA's defence is that parliamentarians and communities want the agency to be accountable and it has to perform many pre- assessments before it gives outs contracts. The people at CIDA tell us that before they can get to work they are doing their research on a consultation basis at the start per project.
Is this administrative cost, in your assessment, a result of too many accountability factors — too many reports to present to too many sources — or is it some other reason? Do you believe that CIDA is inward looking because it does not have a legislative framework from which to work?
Ms. Goldfarb: It is widely known that CIDA does have a lot of reporting requirements. It is very paper heavy relative to some of the other aid agencies. One aspect that could possibly account for CIDA's higher administrative costs, relative to some of the agencies I studied, is that it is a separate agency. Table 3 of my handout compares the administrative costs as a share of total aid budget. The table shows that Canada is doing better than in previous years. It was 10 per cent in 2003, and this number is for 2004, so that is positive improvement. The U.K. is high at 7 per cent. The thing that Canada and the U.K. have in common is they both have a separate aid agency. They do not have an agency that is combined under the foreign affairs ministry, which is different from Denmark, Sweden and, I believe, Norway. Most of those other organizations have folded their aid agencies into their foreign affairs, so they have lower administrative costs as a share of aid, as a result. We have to think about the model we have in Canada and what would be the best thing to have.
Another aspect that increases Canadian administrative costs is the cost of translation. In order to put anything up on the website, it has to be translated. I have not evaluated that claim; I do not know how much the cost of translation affects the administrative cost, but other agencies do not have to pay that cost.
In the study, we look at reasons why aid administrative costs are higher for Canada. Our findings show that the main reason is our geographically disbursed aid program that involves reporting requirements for many countries. One way to reduce our higher administrative costs is to have a focused aid program and as a result, have the aid more available for development purposes.
Senator Andreychuk, perhaps you could clarify your question on the legislative framework.
Senator Andreychuk: CIDA does not have a role of Parliament, and so the parliamentarians do not have a way of debating and dialoguing with CIDA and coming to some understanding of the direction in which it is going. CIDA's input must come through Question Period, calling a minister, et cetera. Some people argue that situation often puts parliamentarians, individually or in groups, in an adversarial position rather than on a more cooperative basis with CIDA.
Ms. Goldfarb: I have not studied the legislative framework in detail. What I do know is that the U.K. introduced such a framework, and it is credited with raising the profile of development policy and aid policy within the government. However, there were many other changes that the U.K. agency made as well, so I would not want to draw conclusions. There were many other factors at play which could have a role with respect to CIDA, but I would not want to speculate about how much of a role that is. If we are going to invest in aid and if we are going to have a bilateral aid agency, either we give the minister a higher profile and invest in that agency or we do not have a bilateral aid agency, so we have to make those kinds of decisions.
Senator Andreychuk: We have relied on and utilized the expertise of Canadians through the base of NGOs. There is a perception that CIDA has slowly withdrawn from the utilization of small NGOs that were doing interesting work, in preference to larger, more substantial NGOs that they deal with on an ongoing basis.
The complaint from the NGO community is twofold. One complaint is that we have lost the development education base that we used to have. We used to have DEVED all across Canada. We no longer have the ability to dialogue with Canadians and build awareness about the international fabric of development.
The other complaint is that NGOs feel that it is unfair to say that they increase the reporting, the administrative tasks and the risk, so that it is easier for an aid agency to move on to more reliable, professional-type NGOs rather than volunteer-based NGOs.
Did you study the NGO base as opposed to more well-known institutions for delivery of aid?
Ms. Goldfarb: I am sorry to say that we did not study that aspect. There is not a lot of literature on this aspect of aid, so it is a difficult question to answer. You raise a good point. We did not look at the question of dialogue among Canadians. We were more concerned about the question of aid effectiveness in the countries receiving the aid. I am sorry that I cannot answer your question.
Senator Merchant: Please clarify for me the difference between bilateral and multilateral. I know that ``bi'' is two and ``multi'' is many, but as it relates to aid, what does that mean?
We must decide as a government what we are trying to accomplish when we give aid dollars. Perhaps we want to have a presence in many countries rather than a few. Maybe this is something that we want to put our money into. I noticed you said that you did not try to compare Canada with the U.S., Australia or New Zealand, which are perhaps countries that have similar aid goals to Canada. I know that your study was concentrated on these countries, and I noticed that you said that things changed in the U.K. in 1997 when Prime Minister Tony Blair came into power. I am wondering if the political atmosphere in these countries is a different from Canada. I do not know if this has some relation to what is happening with our aid dollars.
Ms. Goldfarb: I suppose you are suggesting that maybe it would have been more relevant to compare Canada to countries that have similar political goals.
Senator Merchant: I am not sure if it is more relevant, but you would have had different results with these countries, perhaps.
Ms. Goldfarb: Fair enough. We chose not to study the United States simply because the aid program there is so much larger than Canada's aid program; also because it is such a fragmented system, where there are many different aid agencies; and because it is very driven by U.S. geopolitical interests. We felt that the U.S program was not very similar to our model and not very similar to the budget in Canada or to the structure of our agency. There are lessons to be drawn from the U.S. agency, but we did not think that it was very relevant to how the Canadian agency will spend its $3.6 billion.
Similarly, with Australia and New Zealand, we chose to focus on agencies that are considered to be effective in putting together aid policies and operations that are successful in reducing poverty. You are correct that they may have different goals and interests than Canada, and perhaps more support for aid goals, but the important thing is that if we are going to be concerned with aid effectiveness and reducing poverty, let us look at those agencies that are more effective at reducing poverty. Aid agencies in Australia and New Zealand are okay, but they are not considered to be leading aid agencies.
I appreciate your point that, yes, there are different political circumstances. Canadians have an interest in seeing poverty reduction in developing countries. We should be focusing on those agencies that are doing the work that is most effective in achieving those goals.
You were saying that maybe our political goals require us to have more of a presence in many countries. I am arguing that will affect the effectiveness of aid in achieving development goals. If we focus our aid on a smaller group of countries, have people on the ground who understand the realities of giving aid in difficult aid environments and who have a genuine policy dialogue with aid recipients, our chances of having a more effective aid program are greatly increased. Obviously, there are political goals of almost every country's aid program. If you spread your presence thin, administrative costs go up, policy dialogue with those countries goes down and agencies become irrelevant in those countries. Countries like India have simply chosen not to accept any aid from small countries; India only accepts aid from bigger agencies. It is not worth it to fill out all of the documents.
There is a trade-off involved. You may not have a diplomatic calling card in every country you visit, but your aid effectiveness will probably be higher.
On the question of bilateral versus multilateral, CIDA and the OECD have different definitions. CIDA is responsible for both multilateral and bilateral aid. Some of the multilateral aid is dealt with through the Department of Finance. About three quarters of CIDA's responsibility is bilateral and one quarter is multilateral.
Bilateral aid is aid that goes from country to country. That is the OECD definition of bilateral aid. The question that I pose with respect to that definition— and I raised it very briefly in my remarks — is what is the comparative advantage of a bilateral aid agency? Why are we giving aid through a bilateral aid agency rather than giving it through a multilateral aid agency and having one coordinated effort with very strong analytical and research capacity? Why do we have this bilateral aid agency?
You raised the issue of politics. There are different political reasons why Canada might want to have a bilateral aid agency and certain political goals that it wants to meet. If we are talking about aid effectiveness, I argue that a bilateral aid agency can potentially be more effective than a multilateral aid agency because it could be flexible and nimble on the ground to respond to changing local circumstances. Because so many of our resources are at head office in Ottawa, I would argue that we are not so flexible and nimble to respond on the ground. We need to invest in being more flexible and in delivering our aid in development areas where we have the ability to be flexible. We need to give authority to people in the field to make those kinds of changes. If we are not willing to do that, then we may want to consider giving more aid through the multilateral agencies. This is not to say that there are not problems associated with that. I am simply asking the question: What can a bilateral aid agency do better than a multilateral aid agency?
Senator Merchant: Aid comes from taxpayers' dollars. CIDA is not here to explain to us why they do things the way they do, but the generosity of Canadians, how much aid we give, is perhaps tempered by our mood. I do not know how governments decide where their dollars will go, but I think that governments respond to the political climate, as far as aid goes. I am not specifying political parties, but just the political climate of the time. Aid is taxpayers' dollars.
Ms. Goldfarb: I agree that politicians often give aid in response to the Canadian political climate, and my point is that giving aid widely on political grounds could negatively affect aid effectiveness.
Senator Corbin: What methodology approach did you take to this study and what were your principal sources. Did you have any recipient country feedback as to the quality and type of aid?
Ms. Goldfarb: Thank you for your question. The C.D. Howe Institute is a small institute, so I did not have many resources to draw upon in conducting this study. However, in terms of the methodology and approach, we selected agencies based on their ranking that came from a U.S. think-tank, the Centre for Global Development and from a study from Robert Greenhill. These studies assessed the most widely respected aid agencies and determined which agencies are considered to have high-quality aid. They looked at aid volume and the degree to which that aid was tied, and various other things that would make aid less effective.
The Chairman: I want to be clear. That was a study done by Robert Greenhill before he became the president of CIDA?
Ms. Goldfarb: That is correct. Thank you for the clarification. We also thought that it was important to look at aid agencies, which had aid budgets similar in size to CIDA's aid budget, because we thought that was most relevant. We looked at leading aid agencies and those that were close in size to CIDA.
In terms of our sources, we did a lot of interviews with CIDA and also with some of the officials at these other agencies. We also relied on many of their online documents and independent evaluations, whatever we could find that was available.
You raise a good point about recipient country feedback. We were not doing a micro-level assessment; we were doing a kind of survey, and that is a limitation of this type of study. If we were doing a more thorough study and if we had access to evaluation from recipient countries, that would be very helpful. Unfortunately, we did not have access to that kind of information. That is beyond the scope of this particular study. However, the study is just a beginning. It is not an exhaustive study; it just raises certain issues that relate to the balance of evidence that we found in the aid effectiveness literature. We reviewed the aid effectiveness literature with regard to what kinds of things work and what kinds of things do not work.
I do not know if that is a sufficient answer.
Senator Corbin: It provides me with some information.
You looked at the spread of Canadian aid as a disadvantage in terms of its ultimate usefulness.
Ms. Goldfarb: Yes.
Senator Corbin: I suppose you look at aid in terms of pure aid, nothing else, but surely, this is a government-directed program. I wonder if you looked at the advantages of aid in terms of political bilateral advantages, other than aid qua aid.
Aid serves not only to relieve people of their misfortunes and to provide opportunities for development; it also provides the donor nation with other specific advantages, political, diplomatic and what have you.
Ms. Goldfarb: We have a small section in the paper where we talk about political, commercial, and other consideration.
We are primarily concerned with the question of aid effectiveness in reducing poverty, so that was what our study focused on. In terms of political advantages, however, I would say that some of the findings about focus would apply. We found that aid is insufficiently focused and that we represent only 3 per cent or 4 per cent of total aid in almost all of our top recipient countries.
I think it would be a major disadvantage for political considerations as well. In many of these recipient countries, there are 40 aid donor agencies, and it is impossible to have a policy dialogue and discussion with all of them. In Haiti, for example, Canada represents about 10 per cent of donor aid, which is the largest share that we represent in any of our recipient countries. Ten per cent is not 50 per cent but we actually have a dialogue with Haiti because there is a stake in the recipient country's eyes for some discussion. Focus matters not only for aid effectiveness; I am not sure which political considerations you are considering in particular, but having a dialogue is much easier if you are a significant donor in that country.
Senator Corbin: Aid facilitates dialogue, too.
Ms. Goldfarb: Yes; if you have an aid program that is related to governance, you can engage in those issues and talk about issues that Canada thinks are important for encouraging development in that country, and perhaps for larger Canadian political goals. However, I am not an expert on political ramifications.
Senator Corbin: This paper is a useful instrument for this committee and it will lead us on to examination of the issues in greater depth.
The Chairman: Ms. Goldfarb, you looked at aid agencies like CIDA that are part of larger departments. You made it clear that there may be some efficiencies that are achieved by those other aid agencies because they are part of larger departments as opposed to having a completely and totally separate governance cost, as CIDA does by virtue of how it has been established.
Are you comfortable that in assessing the cost structure of those other aid agencies, we have not missed accrued governance costs that do not show up in the aid agency? Are these costs borne by the corporate head office of that particular foreign ministry?
Ms. Goldfarb: Yes, that is a problem. The OECD says that their numbers are comparable across countries. However, CIDA has criticized that sometimes, creative accounting is applied to the numbers. Some agencies consider certain administrative items to be aid, and some agencies consider certain overhead costs to be associated with the foreign affairs department and not with aid. It is difficult to compare these numbers.
That said, even if one compares the U.K., which is its own agency, our administrative costs as a share of aid are higher. That is all I am saying. However, it is not a perfect comparison; that is a valid point.
The Chairman: Are you suggesting there may be some nuances that shave the numbers a bit, but you are comfortable with the core relative standing of the numbers?
Ms. Goldfarb: Yes.
Senator Downe: This is a very interesting and timely report published in April of this year. Have you sent a copy to CIDA asking for a response?
Ms. Goldfarb: Yes, that is actually part of the C.D. Howe Institute peer review process. After reviewing the study thoroughly within our institute, we send a copy to the policy-makers responsible for the particular policy we are addressing. In doing so, we ask for their feedback.
I had many conversations with CIDA staff over the course of writing this report. Many of them saw a copy of this report, and I have had some email discussion with Mr. Greenhill about this report and possible areas where there may be some change. We definitely encourage that kind of ongoing dialogue and get feedback from them to make sure we are not misstating or are factually incorrect.
CIDA reviewed an earlier draft of this report. I would not want to hold the CIDA president responsible for every word because they reviewed a earlier draft.
Senator Downe: I look forward to us receiving a copy of CIDA's response. That would be helpful for the committee.
Ms. Goldfarb: I will have to inquire about that.
The Chairman: Ms. Goldfarb, we could make that request ourselves, which we will be glad to do. CIDA will deal with that as they deem appropriate.
Ms. Goldfarb: I was going to say that some of their responses were conveyed orally, but I am sure there is something on paper as well.
The Chairman: Inviting them to respond would be helpful to us in our deliberations in the coming report.
Senator Downe: Have you already written to them requesting a response?
Ms. Goldfarb: Yes.
Senator Downe: We will get a copy from CIDA.
Where is Canada in the list of six countries that you picked? I am interested in the total amount of aid the other countries gave in dollars. I do not see that information in your report.
Ms. Goldfarb: The list of the five-comparator countries is not in this brief but it is in the actual report, in Table 1, if anyone has a copy of that report. Canada ranks sixth out of the list that we compared it to; but if you look at the OECD countries, it is fourteenth in the list of OECD countries. Canada is ranked as an aid share of gross national income, which is the way it is normally compared. You will see that Canada is nowhere near the others. That, of course, changes. It depends if you use the un-weighted average or the weighted average, which takes into account the size of the aid budget; but either way you slice it, Canada does not compare favourably to the leading aid agencies. I would argue, though, that we should be placing less of an emphasis on the volume of aid and more of an emphasis on the effectiveness of that aid.
Senator Downe: I am interested in Table 4 in your report. The table, on page 18 concerns tied aid practices and the bottom refers to ``partially untied aid.'' Could you explain what that means?
Ms. Goldfarb: Senator, I do not know the answer to that question. I do know that tied aid numbers are very complicated. I have had numerous discussions with CIDA officials and I still do not have a complete understanding of the process. The tied aid numbers do not include things like technical cooperation or the recent Canada Corps program that sends Canadians to work on governance projects in developing countries. Such projects are considered 100 per cent tied, and are not included in our tied aid calculations.
Partially untied aid is a category that the OECD uses, but it is not in CIDA documents. I am sorry to say that I have had some trouble myself getting a clear understanding of exactly what the policies are with respect to tied aid.
Senator Downe: Is it possible it could mean that Canada is transparent and open about their tied aid and other countries might be fudging the numbers?
Ms. Goldfarb: If you include partially untied aid, these other countries have slightly higher shares of tied aid. The last three countries — Norway, Sweden and the U.K. — which are effectively at zero, would be slightly higher. This information is readily available from the OECD, but you do raise a very good point, which is what is reported to the OECD. My understanding is that the U.K. even though it reports itself at zero tied aid, many contracts still go to British people.
Senator Downe: Funny how that works.
Ms. Goldfarb: There is a discrepancy. It is hard to tell because this is what is reported to the OECD.
I did a survey of the upcoming CIDA programs on the MERX electronic tendering and almost all of the programs are limited to Canadians. Not all CIDA opportunities are displayed on MERX, but even if other countries are reporting numbers that do not tell the whole story, there is not much justification in terms of the effectiveness of the aid in reducing poverty. Tied aid increases costs, it is more expensive and it is not very effective.
Senator Downe: I do not disagree with the principle; I question the numbers. I am not questioning the report, but I am questioning the countries involved. As you indicated in the U.K., it is passing strange that the contracts issued almost all go to U.K. companies.
I like the part of the report that recommends more CIDA officials in the field and for those officials to have more authority. I think that is very helpful. However, I am concerned about the focused aid, as you refer in the report to more effective aid, and to have more say in a limited number of countries.
There are a host of people in the world who are living under terrible administrations and corrupt governments through no fault of their own. If the Canadian government can assist those people without assisting their government, that should also be the objective of our aid policy. However, according to the criteria in your report, it would not be considered effective because we are not a top donor and do not have tremendous influence as a result.
Ms. Goldfarb: That goes back to the question of focus. What can one reasonably achieve with an aid program that has a budget of $3.6 billion? Obviously, there are many people in the world that could benefit from Canadian assistance. I am arguing that we could do a better job of helping some of them if we focus our attention. There are ways to get around dealing with governments by providing aid through other channels. We should definitely examine those ways, but we must be realistic that in those countries where we have problems with corruption and poor governance, if we decide to give aid through other channels, there are problems associated with that because aid is actually fungible. If Canada funds health care and education in a particular country, the government can simply say it does not have to provide health care and education. There are problems associated with aid in those kinds of difficult environments. It does not mean we should not do it, but as we are selecting priorities, we have to choose the right ones.
Senator De Bané: Chairman, as you know, this document from the C.D. Howe Institute Commentary: How Canada Can Improve Its Development Aid: Lessons from Other Aid Agencies is a companion to a lengthier study completed by Mr. Richards. As it is a companion to the other report, which goes more into good governance, I wonder if you might like to invite Mr. Richard to speak at our committee.
Ms. Goldfarb, I was very stimulated by your report. What comes across loud and clear in your document appears on page 1 where you state,
CIDA invests comparatively little in research, particularly of strategic or long-term value. The agency tends not to encourage debate or draw effectively on external feedback, particularly of strategic or long-term value.
Further on in your report, you inform us that other national and multilateral agencies have already invested over $800 billion in development aid to Africa, and that in all likelihood, in view of what Prime Minister Harper has stated will occur by 2010, the CIDA budget will be around $5 billion. You indicate that using comparative data mainly supplied by OECD — which we are a member of ourselves so we cannot dispute the numbers — the conclusion indicates that we are not very effective. We do not even deliver on our publicly stated priorities.
With respect to good governance, 22 countries place more importance on that aspect than Canada does. Your conclusion is very potent. In one word you state that CIDA could be much more effective in meeting its development goals.
As many of my colleagues have said, you have given us a lot of food for thought. The members of the committee are very much troubled by the poverty of that continent. Soon, not only in absolute numbers but also in percentages, over 50 per cent of the people on that continent will be under the poverty line.
From what I understand, there are three players that should be doing their part in aid: The African countries themselves, the international community, and finally Canada.
It is obvious that by producing that report, you have studied this matter along with all the people who have worked and given you feedback before publishing your companion commentary. What are two or three main recommendations you would like to suggest to us? We have been studying and reflecting on Africa for the last year. What is your own perception on the issue?
Ms. Goldfarb: I imagine you know much more about Africa than I do.
Senator De Bané: I have learned a lot from your document.
Ms. Goldfarb: Thank you. John Richards' study is also very interesting, and it delves into the questions at more depth. It is a much lengthier discussion of aid effectiveness literature, and it particularly discusses education, health and governance as areas where he believes Canada could potentially make a difference. I think he would make a great guest here for the committee.
In terms of two or three recommendations I would offer, what I think is most important particularly to the committee's work on Africa, is the idea that many countries in Africa are considered difficult aid environments. The balance of evidence indicates that you really need to have a deep understanding of the particular circumstances of a country as well as what is going on in terms of governance, corruption and other kinds of issues that happen in those countries. I would say the most important thing would be to have a presence in those countries.
Canada has chosen 25 countries on which to focus. One country of focus is Cambodia. At the time of my research, there was no CIDA officer present in Cambodia, and CIDA had a very small program in Cambodia. The selection of Cambodia without a CIDA presence there did not make sense to me.
Senator De Bané: As you know, Ms. Goldfarb, the other CIDA argument is that giving a real team of people and analysts a voice in the decision-making process would increase their administrative costs and would endanger their strict administrative roles; you know all the bureaucratic issues. I understand their point as they say they can manage more effectively by concentrating everything in Ottawa and having junior staffers in the field. If you have senior people there, of course you have a larger team and administrative costs will expand. I am sure you have thought of all those counter arguments.
Ms. Goldfarb: That is why I would say you need to have a more focused approach. You cannot have an enlarged field presence and expect administrative costs to go down unless you have a focused approach, and I would suggest those two strategies would have to go hand in hand. Many of these other agencies have managed to do it; the U.K. has 50 per cent of its staff in the field and has lower administrative costs as a share of its budget than Canada.
Senator De Bané: You say that international organizations like the World Bank have more research capabilities than CIDA, and I am sure CIDA people would reply that they examine the research of those large international institutions.
Ms. Goldfarb: I am sure there are many people at CIDA who read those reports. That is certainly the case. I cite a number of studies that look at debate and intellectual inquiry within CIDA and conclude that it is just not viewed as an environment open to such inquiry. Hopefully, that is changing, but in the recent past, it has not been viewed as an environment that has been particularly open to external researchers within Canada who are doing research on development issues. I have seen a glimmer of hope that there is an attempt to change that environment. Historically, it has not been the case that CIDA makes its outputs transparent to external researchers. It is very difficult to get many documents
Senator Di Nino: Before I address my question, I should tell you, Mr. Chairman that Mr. Ted Menzies, the Parliamentary Secretary to the Minister of International Cooperation, has asked me to keep him informed as to the proceedings of this study. I thought it would be a very good idea if we could send Mr. Menzies a full copy of Ms. Goldfarb's presentation as well as minutes of this meeting. It may be a useful bit of information for him. It is quite extensive, and it deals particularly clearly with CIDA. I think it would be useful for him to know this is happening. He may get it anyway, but let us ensure that he does.
Ms. Goldfarb, you put a great deal of emphasis on research. Am I to gather that you believe that CIDA is sometimes making decisions when it is not particularly well informed?
Ms. Goldfarb: I would not want to draw a blanket conclusion without having studied every CIDA program. I do not want to make a general statement when I do not have the support to say that I have reviewed every CIDA program and CIDA did not rely on research here or there. However, the agency overall does not invest a lot of resources in research, and the majority of its research is temporary, project-specific research that no longer applies to the next project. About 85 per cent of its research is of that nature, and very little is strategic research. There has not historically been a large research capacity in CIDA. That has changed in recent years when there has actually been an increase in policy staff, and I would not want to speculate on exactly how much of that research is translating into aid programs and aid effectiveness.
The Chairman: Ms. Goldfarb, may I ask you to specify how many of the 1,500 people would be involved in research?
Ms. Goldfarb: I actually do not know how many people are in the policy branch. Perhaps somebody here could get that answer, as I was unable to get the answer to that question. The branches that make many of the decisions in CIDA are in the geographic programming, which is the bilateral aid division. That is where the decisions are made in CIDA, and that is different from the policy area. It is hard to know how much of the policy research feeds into the actual decision-making.
Senator Di Nino: The other useful and constructive criticism that you have directed is that CIDA aid is likely too dispersed, it is not focused enough. In your study, were you able to discern whether the comparator countries have a more focused or a regional type of focus, and is that why they are more effective or more efficient?
Ms. Goldfarb: Figure 1, on page 9 in this handout is actually a little dated, but the 2003 bar graph shows the two different metrics of aid concentration. The left-hand, darker bar indicates the share of aid that goes to the top 25 recipients, and the right-hand bar is a more complicated aid concentration index that is explained in the study. You can see that, on both measures, Canada is a more diversified or less concentrated than the comparators we looked at and, with respect to the OECD, it is comparable on one measure and more diversified on the other measure. There have been attempts by CIDA to concentrate more on the 25 core countries, with two thirds of the aid going to the 25 core countries by 2010. I would argue that we are already pretty close to that if you look at the actual numbers, so that is not a major change from the previous state of affairs. In my view, CIDA aid is much more concentrated than the other leading agencies.
The Chairman: Did you mean to say ``much more concentrated'' or ``much less concentrated?''
Ms. Goldfarb: Sorry, CIDA is much less concentrated, yes.
That still stands today, even with the announced policy changes, given that our new policy is to put two thirds of aid to these 25 countries and the rest to a number of other countries. I have not seen any announcements saying we are cutting off aid from any other countries. I would say we are still among the most diversified countries.
Senator Di Nino: In your report, you did not put much emphasis on economic development or private sector development. I do not know whether you looked at those two types of development, but we have had testimony that suggests that a cooperative effort with the private sector, particularly if one is there for a longer term, can lead to some very positive results. Can you comment on that area of development?
Ms. Goldfarb: My not commenting on private sector development or economic development was not a statement about its usefulness or ineffectiveness one way or another. We did not get into the question of which types of development issues CIDA should focus on. I do not have too much to say about that, although I do agree with you that there are many positive aspects with respect to development. I am glad that others who have come to the committee have spoken about that issue.
The Chairman: I would like to clarify that the major investment made most recently with respect to Afghanistan is not yet part of these numbers.
Ms. Goldfarb: Afghanistan is not part of the 25 focus countries. Apparently this other third of aid is supposed to be devoted to these other countries not on the list of 25.
Senator Stollery: I just made a note of your question. I heard General Hillier this morning talking about Afghanistan. I do not want to get it wrong, but we are putting a large sum of money into Afghanistan. As you know, the committee is seized with the study of Africa, but it is hard to ignore Afghanistan and CIDA because more and more money is going into Afghanistan.
Afghanistan is not one of the 25 countries; is that the idea? Where does it fit in all of this aid?
Ms. Goldfarb: Afghanistan is the top Canadian aid recipient, but this is probably a good question: if it is not on the list of 25, why is it getting the most aid money?
The reality is that in 2002, CIDA said it would focus on nine countries; all its new aid spending would go to countries on this list of nine countries that I indicated in my report. Then Iraq and Afghanistan became the recipients of new aid spending, so obviously, political priorities have taken over the CIDA goals set for development policy. When you read the international policy statement and the subsequent documents, which indicate they will focus on 25 countries, it may be a little inconsistent. The focus on Afghanistan and so on may be taking people away from the development-determined priorities that CIDA has made.
You raise a bigger issue, which is a significant challenge for CIDA and the Canadian government going forward. There are two issues: One is the question of having military and development people in the same country and how to deal with the different priorities. How does that affect your development priorities, as well as your defence or military priorities? There is also the question of humanitarian aid versus development aid. Humanitarian aid is aimed at short- term development purposes. Development aid is supposed to be aimed a long-term development purposes and sustainable long-term development. There have been a significant number of natural disasters lately that have meant significant increases in humanitarian aid. We may also be seeing — and I have not studied this at length — a shifting toward calling things humanitarian aid because two thirds of our development aid has to go to these 25 countries, but humanitarian aid may not fall under the same category. That is something else that is a challenge for development aid.
Senator Stollery: I heard the testimony this morning at the defence committee. I do not intend to get into the Afghanistan issue except that it seems that we make our largest contribution in Afghanistan, but I am told that it is so dangerous that aid workers cannot safely operate in the country. You have to ask, if that is the case, is this really aid money? There seems to be a messy crossover.
Table 3 illustrates that a low proportion of administrative people are in the field. I think Senator De Bané touched on this subject. The implications of that seems to me to be fairly great. You have not been to Africa; you work from research, but there is nothing like a field trip to get you into the scene, as they say. That seems to be a problem with CIDA, according to these numbers.
Ms. Goldfarb: Yes.
Senator Stollery: CIDA want to stay in Ottawa.
Ms. Goldfarb: I guess so. It is major deficiency. As I mentioned earlier, the United States has been decentralizing authority for many years, allowing decisions to be made in the field. That is something we can perhaps learn from our southern neighbours though they might not be a model for Canadian development in all respects.
I do not know if the committee is aware that there is another study, which is a little old now, from 1999, by Carol Lancaster, which reviews several other countries' aid policies specifically with respect to Africa. Her primary concern with respect to aid effectiveness in Africa was the lack of capacity of aid agencies on the ground. She studies a series of other aid agencies. She does not just look at the leading ones, as we did, but also at the French, Japanese, Italian and other aid agencies that have been unsuccessful, and what has made them so. Her main conclusion is that the lack of capacity of aid agencies on the ground has really made the difference in making their aid ineffective. This is one other piece of evidence that suggests that this is an area in which CIDA can improve.
Senator Stollery: If this committee were to look at other countries' aid policies and visit a number of countries and observe their success or lack of it, would you like to give us the benefit of your wisdom? I will suggest Denmark, Norway, Sweden, the U.K. and the Netherlands. If you had to pick three of those, which would you pick?
Ms. Goldfarb: I would probably pick the U.K., even though it has an aid budget that is three times Canada's size, simply because it had the most dramatic turnaround and is viewed as a leading aid country. Of course, Canada has historic ties to it as well. It would be either the U.K. or Denmark with respect to the question of field presence in particular, and how that has worked for them, because those are the two agencies that have half of their staff in the field.
I do not want to hazard a guess about the other ones. I am sure you could learn things from any of them, but I would say probably the U.K. would be what I would put on top.
Senator Stollery: You could try the other two or three. For the benefit of your research, where would you go?
Ms. Goldfarb: If I was picking the U.K. as my first choice, I would probably want to pick Denmark or Norway as a second, because it would be important to view an aid agency that has a similar-sized budget to CIDA. Therefore, that is what I would say in terms of the second and third choices.
There are lessons from all of them. I think we have pared down the list to a select group. If you are in the Scandinavian countries, perhaps you can go to all of them.
Senator Corbin: I have one simple question. In the conclusion of your paper, on page 22, you say:
Recent federal government initiatives, such as the decision to focus on fewer countries selected according to meaningful criteria, are steps in the right direction, but are only a start.
Could you explain what is meant by ``meaningful criteria''?
Ms. Goldfarb: I was referring to the criteria that CIDA has said it uses in selecting its aid recipients.
Senator Corbin: Okay.
Ms. Goldfarb: I can read them to you.
Senator Corbin: Are they inclusive? Could they be expanded, ameliorated?
Ms. Goldfarb: Here it is, on the bottom of page 10.
Ottawa selected the 25 focus countries based on three criteria: their level of poverty, their ability to use aid effectively, and the presence of sufficient Canadian presence to add value.
I think that they are meaningful criteria, but there are obvious trade-offs that lead to some curious choices. For example, Ukraine does not meet the poverty criterion. However, it is chosen for political reasons, as well as the fact that there has been some Canadian work in the Ukraine.
I think what is important is that there are some criteria that have something to do with aid effectiveness and poverty level, and Canadian strengths. In terms of intention, that is a good step. Historically, Canada has not been so selective in terms of who it allocates aid to. We have simply given aid widely. Even when there were budget cuts in the 1990s, we cut every aid program by the same amount and we did not make any of those difficult choices.
This is a step forward. I am still not sure of some of the countries on the list, but I think it is meaningful to start with a discussion about the criteria we will use and at least move those discussions forward. As I say, it is only a first step because I do not think we have actually gone to a system that is that much more concentrated than where we were before. It is only a start.
Senator Corbin: I notice that you also published a paper in 2001, entitled Who Gets CIDA Grants? Recipient Corruption and the Effectiveness of Development Aid. Is that paper dated, or is it still valuable today as reading material?
Ms. Goldfarb: It depends how much reading time you have.
Senator Corbin: I have lots of it, two months coming up.
Ms. Goldfarb: In that paper, my research suggested that CIDA was insufficiently attentive to the problem of corruption and governance in its recipient countries, and that it was giving a lot of its aid to corrupt countries. Yet, if you read its country reports, the word ``corruption'' was never mentioned. I have not gone through all its reports to know if that is still the case today, but certainly the issues of corruption and governance are much more recognized in the World Bank literature and in CIDA's policy journal. As I said, its only issue was on the question of corruption and they brought in someone from the World Bank to write a part of that report.
I would say there has been some progress. I still think there is not sufficient attention paid to the issue, but I have not done a thorough study of it today. I would say there has been a bit of progress with respect to acknowledging that this is an issue; and that we are going to give aid in these countries, we have to be realistic about the circumstances in which we are doing it because that is the only way we will be able to do it effectively.
The Chairman: On behalf of the committee, let me express our thanks to you, Ms. Goldfarb, for your frankness and clarity this afternoon, and for the excellent work you and the institute have done on this issue over the years.
I am certain that the transcript of your testimony will somehow make its way to CIDA and that may engender more information from CIDA, which is always good news — however surprising — and be helpful to us in our deliberations. We appreciate that very much.
I should also say, honourable senators, that this is the last scheduled session for this Senate committee, with the Senate perhaps rising in the next few days. Your steering committee, however, will continue to work diligently on your behalf with respect to both the draft report as it emerges over time and our activities as they may develop relative to the fall.
[Translation]
I would like to extend our deepest thanks to Senator De Bané, who prepared a relatively detailed comment on the draft report on Africa already in our hands. He has distributed his comment on my encouragement. This allows us to reflect as committee members on the content of the final report that we will prepare this fall and that will represent the huge work done by the committee members, including former chairman Senator Stollery, and Senator Corbin.
[English]
Your committee will keep working in that respect. We will keep you fully informed and we are very much open to thoughts, ideas and suggestions about how we proceed in the fall. We will be making our own recommendations to the committee for consideration at our next meeting.
Thank you very much.
The committee adjourned.