Hope for the best Plan for the worst? INGOs an the uncertainty of overseas development assistance

Austerity measures implemented across the OECD have led to substantial cuts to overseas aid and development budgets. In this post, Dr David Lansley discusses the opportunity this presents for international NGOs (INGOs) to rethink how they do development, by providing evidence of what works, contributing to national policies, and seeking innovative ways of combining public and private sector investment.


If international development NGOs (INGOs) needed a motto that reflects the current political, economic and financial landscape it would surely be ‘hope for the best, plan for the worst’. Heightened instability in numerous developing countries coupled with economic uncertainty in significant parts of the developed world means that the financial position of INGOs is particularly fraught. The parlous budgetary position of many developed countries is well known. Many OECD countries are still running substantial budget deficits five years after the global financial crisis, and Treasurers in many countries have repeatedly called for austerity. This is not a good environment for government official development assistance (ODA).

It is surprising, then, how well ODA has held up. ODA from OECD Development Assistance Committee countries rose by 6.1 per cent in real terms in 2013 to its highest level ever. But continued real growth in ODA or even maintenance of current levels in real terms cannot be assumed (just look at Australia). Large and growing private capital inflows to developing countries, China’s active role in providing foreign aid, and the rise of significant new players in global development such as the Gates Foundation all make it easier for governments in developed countries to wind back their official assistance. Looking further out, the lack of an adequate global response to climate change thus far means that existing ODA risks being increasingly channelled into emergency relief as the frequency of adverse weather events increases.

Reduced or redirected ODA directly affects the funding available for INGO’s long term development work. Less funding means fewer programs and increases the risk of contracting ‘reduced relevance syndrome’. To reduce this risk, INGOs need to actively demonstrate both their own value and the value of aid. More than ever, this requires strong evidence.

The case for at least maintaining current and future ODA commitments has typically emphasised the success of past investments and the need to replicate them. INGOs have justified their role in this process in terms of their lengthy experience in the field and the cost effectiveness of their interventions. But in the future, this may not be enough. It is becoming increasingly apparent that equitable, pro-growth government policies in developing countries, while not sufficient on their own, are an essential element of achieving sustained economic development. INGOs need to show not only that they can deliver effective programs, but that they can also contribute to the development of more effective national policies.

The good news is that they can, by using their strengths more strategically. Contact with communities over many years or even decades, extensive knowledge of local contexts, and considerable experience in program monitoring and evaluation make INGOs particularly well positioned to provide direct evidence of what is working, what isn’t, and what could work better. Traditionally, this experience and knowledge has been used to seek more funding to scale up the more successful interventions. Yet in most cases INGOs will never be able to scale up programs sufficiently to make a sustained nation wide difference. Nearly always some combination of public and private sector investment will be needed to achieve the necessary scale.

The current uncertainty of ODA flows should be a trigger for INGOs to rethink their approach to development. Increasingly they need to see their role not as rolling out successful programs on a large scale, but as providing the evidence needed for effective government action. Often this would involve taking the evidence from successful programs to national governments so they – alone or in partnership with the private sector – could replicate the programs more widely. It could also involve helping fill the many information gaps facing policy makers by providing relevant field data on, for example, the scale of particular problems in specific locations, or the effectiveness of existing government policies on the ground. More adventurous INGOs might even explore innovative types of financing that could assist in the scaling up of successful programs.

The challenging current – and likely even more challenging future – environment has important implications for INGOs. More of the same is becoming less of an option. INGOs need to think more about influencing national policies and less about rolling out and scaling up programs. No country has ever permanently moved out of poverty because of the work of INGOs. But countries have moved out of poverty assisted by pro-growth policies, and improving their effectiveness and equity opens up major new opportunities for NGOs working in the development field.

Dr David Lansley works in the policy and research area of The Fred Hollows Foundation, but the opinions expressed here are his own.

Posted by John van Kooy