Dialogue in Pursuit of Development - Are you looking for one of ...

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for short-term commitment of resources for the pilot, but it will still be
impossible to assess the financial sustainability of a long-term engagement.
When ‘hooked’ on an unsustainable programme, most donors prefer to stay
on for too long, thereby allowing the recipient government to use its
domestic resources elsewhere (Catterson and Lindahl, 1999).
Another case where the recipient has the advantage of better insights is
usually when two donors are competing for the same project. If the host of
the project is a sector ministry or agency, its negotiators may use the competitive
situation to increase the size of the project, or even try to duplicate
it in order not to lose one of the donors. Lack of transparency in combination
with inter-departmental rivalries has often led to projects which are
bigger and more expensive than necessary.
A more serious inequity in the relationship is caused by the recipient’s
lack of knowledge regarding whether and how much the donor is prepared
to invest in a project. Sometimes recipients are not even informed of the
actual expenditure once the project is being implemented. Some donors
make available equipment and personnel from their own countries without
informing the recipient about their costs. Such practices make it impossible
to evaluate cost effectiveness, and the end result is often that projects use
too many and too advanced foreign inputs, leading to a lack of financial
sustainability. The same effect may be drawn from uncertainty regarding the
total commitment of a donor to a recipient country. If one does not know
where the budget limit lies, there is no disincentive to accepting even projects
of questionable usefulness. And when the recipient does not know how
long a donor will continue to fund a project, this is often a disincentive to
providing counterpart financing, since such moves could encourage the donor
to phase out faster.
It is possible to fit these uncertainties into a game theory, taking into
account what the two sides want to gain and how probable it is that they
will achieve it. The upshot of such analysis is that uncertainty always increases
transaction costs for the operation as a whole, and in some cases it
may even bring distortions in project or programme design that are big
enough to turn them into ‘white elephants’. From the point of view of the
dialogue, the recipient’s lack of knowledge of how much the donor will
commit and how long he will stay is one of the most important factors
behind the inequality of the whole aid relationship.
Different levels and channels of communication
A free exchange of views on development problems can be conducted
through a variety of means, of varying degrees of formality. In his evaluation
of Swedish programme aid, Howard White (1999) identifies several dimensions
of donor influence on a recipient government, separating direct
influence from indirect via other agencies, and formal channels from semi-