New Review of Post-Crisis Multi-Donor Trust Funds

Some highly positive effects, - other results are mixed

The Review shows that the MDTFs have been important instruments for donor coordination around some selected objectives, especially to strengthen core state functions in a difficult phase, but also for funding small and medium size projects for reconstruction. They have attracted finance from donors that otherwise would not have contributed. They reduce the risk for donors and facilitate negotiations with recipient governments. They combine funding with strengthening public finance management, and they have often created useful fora for dialogue between donors and governments which in some cases have included non-government actors and civil society.

But efficiency and results vary considerably. Many funds, such as the Southern Sudan MDTF, took inordinate long time before money was released and projects were implemented. In other cases there was a more successful start-up, as in the post-Tsunami fund for Indonesia and in Afghanistan (AIAF/ARTF). In Sri Lanka there was political opposition (despite approval by the government and LTTE) and the Supreme Court dismissed its organisational set-up. In some countries the government felt marginalised from the fund, in other countries they dominated totally. Participation and contributions from donors have also been uneven. In some cases the World Bank and the UN have cooperated smoothly, while in other cases they have competed strongly in order to administer these funds. In some cases legal issues have caused long delays and frustration.

Strong recommendations on clear objectives

The Report provides some clear recommendations: The most important is that donors, in consultation with recipient governments, must be clear about the main purpose of new multi-donor funds, whether it will focus on state-building of core state functions; whether it will fund investments for reconstruction in a medium term perspective; whether it will fund a number of small and medium size projects in order to stimulate broad participation and engagement; and how it will balance demands to promote peacebuilding and reconciliation between previous opposing forces. A number of issues on how to organise the fund and manage expectations will emerge from this initial clarification.

In most cases, only a minor part of total funding for reconstruction is channelled through an MDTF, but the fund may function as the main forum between donors, government and other actors for dialogue on priorities and good practices for reconstruction. It is important to take this into account when designing the MDTF governance structures.

Recommendations for the World Bank and the UN

It is imperative that the administrator of an MDTF whether that be the World Bank or the UN (or others) must have a solid staff present in-country with sufficient experience and authority to adapt the application of rules and regulations to the special conditions in war- and crisis-affected countries. The higher risks must be accepted, while applying adequate and sufficient controls and good management of available funds. The World Bank in particular need to strengthen its staff and administrative practices to work effectively in these countries and circumstances, and they have to improve on its legal and other routines in order to cooperate efficiently with UN agencies and non-governmental organisations.

Cooperation between the World Bank and the UN system has to improve, because both (all) agencies have a role to play also in the early reconstruction phase. The Report and the final Hague conference on the report strongly recommend that the World Bank and the UN system reach a global agreement in line with the recently negotiated agreement regarding the Sudan MDTFs. In future cases it may be most practical to establish two parallel funds (as in Iraq) or one fund with two or more "windows". The UN agencies seem more efficient for funding rapid projects, based on their greater flexibility and mandate which covers humanitarian, security, peacebuilding as well as development. The World Bank has nevertheless proven a capability to support basic economic functions and public financial management of budgets also in newly (re)established governments, which are crucial functions from the start. Which agency which is more suitable and capable of managing an MDTF will therefore depend on the context.

Recommendations for donor governments, for host governments and for NGOs

Donor countries are also responsible for making MDTFs effective instruments in difficult situations. The Report warns against the tendency among donors to "hand over" all risk taking and risk management to the MDTF administrator. Donors should also accept higher management costs for MDTFs in fragile and popst-crisis states as compared with normal conditions, and should nor earmark their contributions for specific purposes. Bilateral donors should assume greater responsibility for political analysis and assessments that the multilaterals may not undertake, in particular to improve conflict sensitivity. Donor countries must also take responsibility and interfere in MDTF governance whenever the administrator fail to perform, as in the recent case of Southern Sudan.

For non-government organisations and civil society the MDTFs may also represent a useful mechanism for coordination and prioritisation of international and national efforts. Civil society is an important voice for parts of the population, and may constitute an important supplement to and control of central government. These organisations must, however, take responsibility for promoting a balanced and broad reconstruction. National authorities should contribute to broad participation and understanding for peacebuilding and reconstruction, they should accept the participation on non-government actors in reconstruction, and should build capacity for management and national contributions as soon as possible.

Read

* The full report
* Chapter 1 (Executive Summary)
* Country Study Annexes
* MDTFSummary of the Hague_Conference_(Co-chair Statement)

The full report and the Country cases annex can also be ordered from Norad's publication database:

* Order Review of Post-Crisis Multi-Donor Trust Funds : Final Report
* Order Review of Post-Crisis Multi-Donor Trust Funds : Country Study Annexes