Localising Aid: Sustaining change in the public, private, and civil society sectors

This report examines the proposition that by localising their aid—by which we mean transferring it to national rather than international entities—external donors can play a part in strengthening three sectors of society: the public sector (state), the private sector, and civil society.

• A previous paper (Glennie et al, 2012) set out the framework for our research, and a forthcoming series of shorter papers will discuss what our research findings may mean for donors facing complex constraints.

This paper sets out our research findings and conclusions based on extensive literature analysis supported by three country studies: Guatemala, Liberia, and Uganda. A core element of the Paris Declaration on Aid Effectiveness, and subsequent fora, is that donors should progressively increase their use of host country systems. ODI's "Localising aid" work evolves this approach in four key ways.

• First, we defined a new category of aid delivery: "Localised aid" is aid money that is transferred directly to, or through, national entities. This concept is very much in the same spirit as the "using country systems" popularised by the Paris Agenda, but has a number of advantages, including being easier to define and count.
• Second, we set the scope of our research to cover three pillars, the three main sectors of society: state, private, and civil society. This scope is in line with the spirit of Busan, which sought to expand the vision of development practitioners beyond strengthening the state to include a concern for the private and civil society sectors as well.
• Third, acknowledging that the Paris agenda has been criticised for focusing on stable, low-income countries, we analysed three categories of country to determine the relevance of localising aid: stable low-income, middle-income, and fragile states.
• Finally, we decided to focus on system-strengthening and sustainability rather than other possible development objectives, namely improving short-term results and reducing costs. We end with suggestions for how donors can strengthen the market for public goods and services and promote a stronger local private sector. These include making strengthening the capacity of the local private sector an explicit objective in foreign assistance, including in contracts; taking a whole-of-market approach to facilitating the development of the local private sector; taking a new approach to managing economic rents and anti-corruption; and taking better measurement of the impact of aid on the local private sector (Excerpts from Executive Summary, pp. 9-10).