Skip to main content
SpringerLink
Log in

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

  • Published:
Studies in Comparative International Development Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. I acknowledge the large critical literature that problematizes the ideas that the development industry either truly seeks or is equipped to bring about poverty alleviation and economic growth (e.g., Bauer 1972; Ferguson 1994; Escobar 1995; Scott 1998; Easterly 2006). In contrast to some of this literature, I take at face value the claim that most actors in the development industry care about improving the economic welfare of people in developing countries (most easily conceived of as household income). My goal is to identify pathologies within the development world that prevent the realization of the intermediate goal of aid harmonization. At the end of the article, however, I return to the antecedent question of whether or not a failure to harmonize is as bad as the discourse on aid effectiveness alleges. I point out that some policy disputes need to be settled through political contestation and argue that donors can undermine country ownership by using their resources to catalyze premature resolutions of disputes.

  2. For more general introductions to the literature on transaction costs, see Williamson 1981; Moe 1984; and Milgrom and Roberts 1990.

  3. Other authors have identified how partisan politics in donor countries affect overall levels of aid giving (e.g., Therien and Noel 2000; Fleck and Kilby 2006; Lancaster 2007; Tingley 2010). As of yet, however, no one has studied the impact of partisan politics on the distribution of project types or donor agency behavior in aid-receiving countries.

  4. For related examinations of the pathologies that affect bureaucracies in the aid industry, see Barnett et al. 1999; Easterly 2002; and Woods 2006.

  5. The research draws on primary and secondary sources and over 30 interviews with development partners, government officials, academics, and civil society leaders conducted in Jakarta and Yogyakarta in March and April 2010.

  6. There exists a fair amount of skepticism about the democratizing intent of those supporting decentralization in the late 1990s. Decentralization to the districts—rather than to the provinces—was a “divide and rule” strategy meant to short-circuit separatist sentiment at the provincial level (Fitriani et al. 2005; Firman 2009).

  7. Throughout this paper, I use the term “districts” to refer to both kabupaten (regencies) and kota (cities); other sources reserve the term “district” for kabupaten only.

  8. An earlier ADB case study of the DSF experience had been significantly more upbeat: “Trading on its adaptability, energetic approach, and willingness to plan for and embrace reform, the DSF … has started to operate in the ways that may deliver tangible benefits. The DSF was envisaged as a bold experiment in donor harmonization and alignment approaches, and so it has turned out to be” (ADB 2006).

  9. This is not to say that all elements of the government were happy with the creation of the BRR—the Ministry of Public Works distinctly was not.

  10. As of this writing, both Australia and Canada have made financial contributions.

  11. In an ideal world, government policy would be determined by an elected representative body (i.e., the Indonesian parliament), but in reality, policy results from an interplay among decisions taken by the institutions that make the laws and those that implement them (Sutton 1999).

  12. The way in which the development industry discursively transforms political issues into seemingly technical ones has been the subject of significant critical work on development (e.g., Ferguson 1994; Mosse 2005).

  13. It is worth noting, as Eyben (2007) does, that less aid-dependent countries like China and India are not interested in door harmonization and, in fact, prefer to be able to use different development partners for different, country-determined ends.

References

  • Acharya A, de Lima ATF, Moore M. Proliferation and fragmentation: transactions costs and the value of aid. J Dev Stud. 2006;42(1):1–21.

    Article  Google Scholar 

  • ADB [Asian Development Bank]. 2008. Partnering & Harmonization: Review of ADB Harmonization Strategies and Activities in Selected Programming Operations. February.

  • ADB. 2006. Aid Effectiveness Case Study: Decentralization Support Facility—Indonesia. August.

  • Alesina A, Dollar D. Who gives foreign aid to whom and why? J Econ Growth. 2000;5(1):33–63.

    Article  Google Scholar 

  • Alm J, Indrawati SM. Decentralization and local government borrowing in Indonesia. In: Alm J, Martinez-Vazquez J, Indrawati SM, editors. Reforming intergovernmental fiscal relations and the rebuilding of Indonesia: The ‘Big Bang’ program and its economic consequences. Northampton: Edward Elgar; 2004. p. 234–58.

    Google Scholar 

  • Balogun P. Evaluating progress towards harmonisation. London: U.K. Department for International Development Working Paper 15; 2005.

    Google Scholar 

  • Barnett, Michael N. and Martha Finnemore. 1999. “The Politics, Power and Pathologies of International Organizations,” International Organization 53.4 (Autumn): 699–732.

  • Bauer PT. Dissent on development. London: Weidenfeld and Nicolson; 1972.

    Google Scholar 

  • Beynon, Jonathan and Andra Dusu. 2010. Budget Support and MDG Performance. Brussels: European Commission, Directorate-General for Development and Relations with African, Caribbean and Pacific States.

  • Bigsten A. Donor coordination and the uses of aid. Department of Economics: Göteborg University; 2006.

    Google Scholar 

  • Brewer, Stephanie, Vanessa Cuerel Burbano, Weiyuan Cui, Caitlyn Fennessy, Samanthé Eulette, Christian Gillitzer, Jenny Lah, Sarah Samis, Cara J. Winters and Christina Wright. 2008/09. “Accountability, Ownership, and Development Policy: Analyzing the Impact of Civil Society Engagement on Aid Effectiveness,” Woodrow Wilson School, Princeton University.

  • Buiter WH. ‘Country ownership’: a term whose time has gone. Dev Pract. 2007;17(4–5):647–52.

    Article  Google Scholar 

  • Chowdhury, Anis and Iman Segema. 2005. “How Significant and Effective Has Foreign Aid to Indonesia Been?” Center for International Economic Studies Discussion Paper No. 0505, University of Adelaide, May.

  • de Mesquita BB, Smith A. A Political Economy of Aid. Int Organ. 2009;63:309–40.

    Article  Google Scholar 

  • de Renzio P, Booth D, Rogerson A, Curran Z. Incentives for Harmonisation and Alignment in Aid Agencies. London: Overseas Development Institute Working Paper 248; 2005.

    Google Scholar 

  • DFID [Department for International Development, United Kingdom]. 2007. Evaluation of DFID Country Programmes—Country Study: Indonesia. Evaluation Report EV680, September.

  • Dijkstra G. The new aid paradigm—a case of policy incoherence. Rotterdamn: Erasmus University; 2010.

    Google Scholar 

  • Easterly W. The cartel of good intentions: the problem of bureaucracy in foreign aid. J Pol Reform. 2002;5(4):223–50.

    Article  Google Scholar 

  • Easterly W. The white man’s burden: Why the west’s efforts to aid the rest have done so much ill and so little good. New York: Penguin Press; 2006.

    Google Scholar 

  • Edi, Jepri and Ayu Setianingtias. 2007. “Donor Proliferation and Donor Coordination in Indonesia: The Case of Governance Reform,” Centre for the Future State, Institute of Development Studies, University of Sussex, September.

  • Escobar A. Encountering development: The making and unmaking of the third world. Princeton: Princeton University Press; 1995.

    Google Scholar 

  • Eyben R. Harmonisation: How is the orchestra conducted? Dev Pract. 2007;17(4–5):640–6.

    Article  Google Scholar 

  • Faust J, Messner D. Organizational challenges for an effective aid architecture: Traditional deficits, the Paris agenda and beyond. Bonn: German Development Institute Discussion Paper 20/2007; 2007.

    Google Scholar 

  • Ferguson J. The anti-politics machine: Development, depoliticization and bureaucratic power in lesotho. Minneapolis: University of Minnesota Press; 1994.

    Google Scholar 

  • Ferrazzi, Gabriele. 2007. “Exploring Reform Options in Functional Assigment,” draft report prepared for the Decentralization Support Facility and GTZ, Jakarta, December.

  • Firman, Tommy. 2009. “Decentralization Reform and Local-Government Proliferation in Indonesia: Towards a Fragmentation of Regional Development,” Review of Urban & Regional Development Studies 21.2/3 (July/November): 143–57.

  • Fitriani F, Hofman B, Kaiser K. Unity in diversity? The creation of new local governments in decentralising Indonesia. Bull Indones Econ Stud. 2005;41(1):57–79.

    Article  Google Scholar 

  • Fleck RK, Kilby C. How do political changes influence us bilateral aid allocations? Evidence from panel data. Rev Dev Econ. 2006;10(2):210–23.

    Article  Google Scholar 

  • Government of Indonesia. 2009. Jakarta Commitment: Aid for Development Effectiveness—Indonesia’s Road Map to 2014. January.

  • GTZ [Gesellschaft für Technische Zusammenarbeit]. 2006. Support for Decentralization Measures, Indonesia: Final Evaluation 2006. Brief Report. 18 December.

  • Hofman B, Kaiser K. The making of the ‘Big Bang’ and Its aftermath: A political economy perspective. In: Alm J, Martinez-Vazquez J, Indrawati SM, editors. Reforming intergovernmental fiscal relations and the rebuilding of Indonesia: The ‘Big Bang’ program and its economic consequences. Northampton: Edward Elgar; 2004. p. 15–46.

    Google Scholar 

  • Hyden G. After the Paris declaration: Taking on the issue of power. Dev Pol Rev. 2008;26(3):259–74.

    Article  Google Scholar 

  • Killick T, Gunatilaka R, Marr A. Aid and the political economy of policy change. New York: Routledge; 1998.

    Google Scholar 

  • King DY. Political reforms, decentralization and democratic consolidation in Indonesia. In: Alm J, Martinez-Vazquez J, Indrawati SM, editors. Reforming intergovernmental fiscal relations and the rebuilding of Indonesia: The ‘Big Bang’ program and its economic consequences. Northampton: Edward Elgar; 2004. p. 47–64.

    Google Scholar 

  • Knack S, Rahman A. Donor fragmentation and bureaucratic quality in aid recipients. J Dev Econ. 2007;83(1):176–97.

    Article  Google Scholar 

  • Lancaster C. Foreign aid: Diplomacy, development, domestic politics. Chicago: University of Chicago Press; 2007.

    Google Scholar 

  • Lewis BD. Tax and charge creation by regional governments under fiscal decentralisation: estimates and explanations. Bull Indones Econ Stud. 2003;39(2):177–92.

    Article  Google Scholar 

  • Milgrom P, Roberts J. Bargaining costs, influence costs, and the organization of economic activity. In: Alt JE, Shepsle KA, editors. Perspectives on positive political economy. Cambridge: Cambridge University Press; 1990. p. 57–89.

    Chapter  Google Scholar 

  • Moe, Terry M. 1984. “The New Economics of Organization,” American Journal of Political Science 28.4 (November): 739–77.

    Google Scholar 

  • Morgenthau HJ. A political theory of foreign aid. Am Polit Sci Rev. 1962;56(2):301–9.

    Article  Google Scholar 

  • Mosley P, Harrigan J, Toye J. Aid and power: The world bank and policy-based lending, vol. 1. London: Routledge; 1991.

    Google Scholar 

  • Mosse D. Cultivating development: An ethography of aid policy and practice. New York: Pluto Press; 2005.

    Google Scholar 

  • Murphy C. The United Nations development programme: A better way? New York: Cambridge University Press; 2006.

    Book  Google Scholar 

  • Murray WE, Overton JD. Neoliberalism is dead, long live neoliberalism? Neostructuralism and the international aid regime of the 2000s. Prog Dev Stud. 2011;11(4):307–19.

    Article  Google Scholar 

  • OECD. 2011. Aid effectiveness 2005–10: Progress in implementing the Paris declaration. Paris: OECD.

  • OECD. 2008. 2008 survey on monitoring the Paris declaration—making aid more effective by 2010. Paris: OECD.

  • OECD. 2003. Harmonising donor practices for effective aid delivery. Paris: OECD.

    Book  Google Scholar 

  • Podger, Owen. 2001. “Regions Know What to Do to Develop Themselves,” Jakarta Post 30 March 2001.

  • Pollard, Amy. 2009. Power in Doubt: Aid, Effectiveness and Harmonization Amongst Donors in Indonesia. Unpublished Ph.D. Dissertation, Department of Social Anthropology, University of Cambridge.

  • Rasyid MR. The policy of decentralization in Indonesia. In: Alm J, Martinez-Vazquez J, Indrawati SM, editors. Reforming intergovernmental fiscal relations and the rebuilding of Indonesia: The ‘Big Bang’ program and its economic consequences. Northampton: Edward Elgar; 2004. p. 65–74.

    Google Scholar 

  • Rogerson A. Aid harmonisation and alignment: bridging the gaps between reality and the Paris reform agenda. Dev Pol Rev. 2005;23(5):531–52.

    Article  Google Scholar 

  • Rohdewohld, Rainer. 2006. “Managing Decentralization: Interministerial Bodies, Policy Coordination, and the Role of Development Aid Agencies,” The Governance Brief [Asian Development Bank] 15.

  • Ross DJ. Aid co-ordination. Publ Admin Dev. 1990;10:331–42.

    Article  Google Scholar 

  • Schraeder PJ, Hook SW, Taylor B. Clarifying the Foreign aid puzzle: a comparison of American, Japanese, French and Swedish aid flows. World Polit. 1998;50(2):294–323.

    Article  Google Scholar 

  • Scott JC. Seeing like a State: How certain schemes to improve the human condition have failed. New Haven: Yale University Press; 1998.

    Google Scholar 

  • Silver C. Do the donors have it right? Decentralization and changing local governance in Indonesia. Ann Reg Sci. 2003;37:421–34.

    Article  Google Scholar 

  • Simandjuntak M. Indonesian decentralization: Opportunities appear but risks abound. In: Alm J, Martinez-Vazquez J, Indrawati SM, editors. Reforming intergovernmental fiscal relations and the rebuilding of Indonesia: The ‘Big Bang’ program and its economic consequences. Northampton: Edward Elgar; 2004. p. 261–71.

    Google Scholar 

  • Smith, Benjamin. 2008. “The Origins of Regional Autonomy in Indonesia: Experts and the Marketing of Political Interests,” Journal of East Asian Studies 8.2.

  • Smoke P. “The rules of the intergovernmental game in East Asia: Decentralization frameworks and processes”, East Asia decentralizes: Making local government work. Washington, D.C.: The World Bank; 2005.

    Google Scholar 

  • Smoke PJ, Bastin J. Decentralizing Regional Infrastructure Planning and Finance in Indonesia: Progress to Date and a Strategy for the Future. Cambridge: Harvard Institute for International Development Discussion Paper No. 469; 1993.

    Google Scholar 

  • Smoke PJ, Lewis BD. Fiscal decentralization in Indonesia: A new approach to an old idea. World Dev. 1996;24(8):1281–99.

    Article  Google Scholar 

  • Sutton R. The policy process: An overview. London: Overseas Development Institute Working Paper 118; 1999.

    Google Scholar 

  • Suwandi M. The Indonesian experience with the implementation of regional autonomy. In: Alm J, Martinez-Vazquez J, Indrawati SM, editors. Reforming intergovernmental fiscal relations and the rebuilding of Indonesia: The ‘Big Bang’ program and its economic consequences. Northampton: Edward Elgar; 2004. p. 272–88.

    Google Scholar 

  • Therien J-P, Noel A. Political parties and foreign aid. Am Polit Sci Rev. 2000;94(1):151–62.

    Article  Google Scholar 

  • Tingley D. Donors and domestic politics: political influences on foreign aid effort. Q Rev Econ Finance. 2010;50:40–9.

    Article  Google Scholar 

  • Turner M, Podger O, Sumardjono M, Tirthayasa WK. Decentralisation in Indonesia: Redesigning the State. Canberra: Asia Pacific Press/Asian Development Bank; 2003.

    Google Scholar 

  • USAID [United States Agency for International Development]. 2009a. “Decentralization 2009: Stock Taking on Indonesia’s Recent Decentralization Reforms,” report prepared by USAID Democratic Reform Support Program with support from Donor Working Group on Decentralization, Jakarta, July.

  • USAID. 2009b. “Democratic Decentralization Strategic Assessment: Indonesia,” final report prepared by ARD, Inc., Burlington, VT, February.

  • USAID. 2006. “Decentralization 2006: Stock Taking on Indonesia’s Recent Decentralization Reforms—Summary of Findings,” report prepared by USAID Democratic Reform Support Program for the Donor Working Group on Decentralization, Jakarta, August.

  • Williamson OE. The economics of organization: the transaction cost approach. Am J Sociol. 1981;87(3):548–77.

    Article  Google Scholar 

  • Williamson T, Dom C. Sector budget support in practice. London: Overseas Development Institute; 2010.

    Google Scholar 

  • Woods N. The Globalizers: The IMF, the World Bank and their borrowers. Ithaca: Cornell University Press; 2006.

    Google Scholar 

  • Zimmerman, Libseth. 2011. “Everyone Has Heard of Paris—Translating the Aid Harmonization Paradigm to Local Contexts in Post-Conflict Guatemala,” paper presented at the 6th European Consortium for Political Research Conference, Reykjavik, August.

Download references

Acknowledgments

This paper is based, in part, on a June 2010 case study prepared for the U.S. Agency for International Development (USAID) under a task order implemented by Management Systems International (MSI). For comments on that project, the author thanks Ed Connerley, David Deziel, Scott Guggenheim, Kai Kaiser, Paul Smoke, Bill Wallace, members of the Informal Development Partners Working Group on Local Governance and Decentralization, participants in a donor/civil society workshop held in Jakarta and seminar attendees at the University of Illinois. Thanks to Sarah Green for comments on a previous version of the manuscript and to Rebecca Weitz-Shapiro for useful feedback and discussion.

Author information

Authors and Affiliations

  1. Department of Political Science, University of Illinois at Urbana-Champaign, Urbana, IL, USA

    Matthew S. Winters

Authors
  1. Matthew S. Winters
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Matthew S. Winters.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Winters, M.S. The Obstacles to Foreign Aid Harmonization: Lessons from Decentralization Support in Indonesia. St Comp Int Dev 47, 316–341 (2012). https://doi.org/10.1007/s12116-012-9114-7

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12116-012-9114-7

Keywords

Search

Navigation