Policy Paper

by David Carment - CDFAI Fellow and
Yiagadeesen Samy - Carleton University  
August, 2014  

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Table of Contents

• Executive Summary
• Introduction
• Fragile States, the MDGs and Aid Effectiveness
• The New Deal
• Lessons from Afghanistan
• Conclusion
• Appendix A: The Top 20 Fragile States: 1980 vs. 2012 
• Appendix B: List of Acronyms
• References
• About the Authors
• Canadian Defence & Foreign Affairs Institute 
• Endnotes

Executive Summary 

Negotiations continue to determine what the post-2015 development agenda will look like. This gives Canada, along with other donors, the opportunity to reassert their long-term commitments to fragile and conflict-affected states (FCAS) while engaging effectively in new ways. Reforms to the structural drivers of conflict and fragility must be incorporated and monitored in the post-2015 environment in order to ensure the success of fragile states.  This policy brief reviews how donor countries tackle the idea of aid effectiveness in fragile states, including endorsing the New Deal of Engagement in fragile states. We examine the case of Afghanistan to demonstrate the challenges that Canada and other donors face when engaging fragile states.  Finally, we discuss the policy implications of our analysis. 

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Introduction

Negotiations to determine what will replace the Millennium Development Goals (MDGs) after their expiry date in 2015 is an opportunity for Canada and other donor countries to reassert their long-term commitment to, and engage more effectively with, fragile and conflict-affected states (FCAS).  This policy brief argues that the post-2015 framework will need to recognize many of the structural drivers of instability and conflict that have prevented progress in fragile states.

In order to properly diagnose these drivers we must continuously monitor and assess early warning tools at the strategic and operational level that are deployed by donor countries such as Canada.    Although there have been a number of crucial investments in the development and strengthening of monitoring tools and capacity building, gaps and unmet challenges persist within the donor community. A systematic effort is required to understand why some countries are able to transition out of the conflict-fragility trap and build resilience, while others remain unstable or mired in conflict.

This challenge demonstrates the need to build more effective linkages between analysis, monitoring and warning, while supporting donor decision-making.  Early warning tools should complement self-assessments conducted by aid recipients as part of the New Deal for Engagement in fragile states.  Agreeing on a set of indicators to measure fragility as part of the post-2015 development framework – something which the original MDGs did not do – is paramount in order to recognize the specific challenges faced by fragile states.

In the following sections we review how the issue of aid effectiveness in fragile states has been dealt with by donors, including the endorsement of the New Deal for Engagement in fragile states.  We then consider Afghanistan as an example of the challenges that Canada and other donors face when engaging fragile states.  We conclude by briefly discussing the policy implications of our analysis.

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Fragile States, the MDGs and Aid Effectiveness

The Millennium Development Goals (MDGs) have made global development and poverty reduction a priority. This led to an increase in aid spending and drew attention to the quality and effectiveness of aid. Several conversations were had on effectiveness in Rome (2003), Paris (2005), Accra (2008) and Busan (2013), but the Paris Declaration on Aid Effectiveness was particularly important as it culminated in the endorsement of the Paris Declaration of Aid Effectiveness (PDAE), which introduced the principles of ownership, alignment, harmonization, managing for results and mutual accountability. 

Fragile states require different approaches from those of better performing countries, because of this the OECD adopted the fragile states principles (FSPs) in 2007 to complement the commitments made in the PDAE.  These principles recommend that actors involved in development cooperation do the following: take context as the starting point; do no harm; focus on state-building as the central objective; prioritise prevention; recognize the links between political, security and development objectives; promote non-discrimination as a basis for inclusive and stable societies; align with local priorities in different ways in different contexts; agree on practical coordination mechanisms between international actors; act fast…but stay engaged long enough to give success a chance; and avoid pockets of exclusion (OECD 2007).

However, the MDGs, along with attempts to make aid work better in fragile and developing nations have been largely ineffective.1 Despite increased amounts of official development assistance (ODA) to fragile states they are rapidly falling further behind other developed countries in meeting the MDGs.2 In fact, some fragile states will not meet any of the MDGs making them stuck in a fragility trap. Using the International Futures forecasting system, Cilliers and Sisk (2013), we can predict that 10 African countries will remain trapped beyond 2050, and another 12 may exit fragility by 2030 or earlier.  This means that donors will need to stay engaged over a long period of time in order to see results.  Indeed, several FCAS are among the most aid-dependent countries in the world, with aid constituting up to 55% of their national income (OECD 2014).     

We know from our own work on fragile states that several countries listed as fragile in 1980 remain so today. Appendix A shows the top 20 fragile states in 1980 and 2012, based on the Country Indicators for Foreign Policy (CIFP) fragility index.  Half of the countries that were in the top 20 in 1980 were still there in 2012. Many of these currently fragile countries are also focus countries for Canada’s Department of Foreign Affairs, Trade and Development (DFATD).  In fact, Canadian aid allocated to fragile states has increased significantly since 9/11, with Afghanistan, Ethiopia and Haiti among the largest recipients in recent years.  It remains to be seen what the impact of shifting the focus of development dollars towards countries Canada has an economic interest in will have on the list of priority countries, but we would argue that it will negatively impact the attention devoted to fragile states where we have fewer economic interests. 

Fragile states are highly aid dependent as they cannot effectively mobilize domestic resources and cannot rely on other sources of financing such as remittances and foreign direct investment (OECD 2014).  Ignoring fragile states is costly both to the state and their citizens, as well as to the international community on the whole (Chauvet et al. 2007).  This problem will only increase as larger proportions of the world’s poor will inhabit fragile states in the future (Kharas and Rogerson, 2012) and will make the World Banks goal of ending extreme poverty (decreasing the percentage of people living on less than $1.25/day to 3% by 2030) increasingly difficult to achieve.

This is particularly important for Canada, which, along with several other donor countries, allocates a significant proportion of its aid budget to FCAS. Based on the list of countries considered fragile by the International Network on Conflict and Fragility, a subsidiary body of the Development Assistance Committee of the OECD (OECD/DAC), we estimate that Canadian aid to fragile states increased from 18.2% in 2001 to 38.4% in 2010 (Carment and Samy, 2013).  Globally, in 2011, 38% of total ODA, or US$53.4B, went to fragile states (OECD 2014). This indicates that Canada has been keeping up with the increase in aid flows to FCAS overall.  The OECD (2014) notes that after reaching a peak in 2005, aid to fragile states has been erratic and on a downward trend.  Latest data from the OECD/DAC (April 2014) shows that net ODA increased by 6.1% in 2013 and reached an all-time high of US$138.4B, following two years of declining aid volumes.  However, aid to the neediest sub-Saharan African countries, many of which are fragile, continue to fall.

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The New Deal

On November 30^th 2011, at the 4^th High Level Forum on Aid Effectiveness held in Busan, South Korea, members of the International Dialogue on Peacebuilding and Statebuilding, endorsed a New Deal for Engagement in Fragile States. The New Deal, based on the work done at the 2002 Monterrey Consensus, 3 the 2005 PDAE, and the 2007 FSP, established five Peacebuilding and Statebuilding Goals (PSGs) deemed necessary for transitioning from fragility to resilience: legitimate politics, security, justice, economic foundations, revenues and services. It also allowed fragile states to assess their own fragility and negotiate development compacts with donors. These discussions, for the first time, brought the G7+ group of FCAS to the table along with donors, including Canada, and international organizations. The leadership these countries demonstrated brought much needed attention to the unique challenges they faced. 

Seven self-nominated pilot-countries (Afghanistan, Central African Republic, Democratic Republic of the Congo, Liberia, Sierra Leone, South Sudan and Timor-Leste) are currently being monitored to see whether this country-led and country-owned framework will yield better results in the hopes that the results will feed into the post-2015 MDG framework4.  As part of this examination a fragility spectrum was proposed as a qualitative tool for internal benchmarking that would allow fragile states to conduct a self-assessment of their fragility situation, determine where they are relative to the five PSGs, and provide relevant indicators to track progress.  In the assessment of their country’s fragility, national participants rate their country based on various stages of fragility (Crisis, Rebuild and Reform, Transition, Transformation, and Resilience) across the five PSGs.  As of today, fragility assessments have been conducted in five pilot countries - the Democratic Republic of the Congo, Liberia, Sierra Leone, South Sudan and Timor-Leste - but it is too early to determine what the impact will be on the PSGs.

It is interesting to note that the first three PSGs – legitimate politics (fostering inclusive political settlements and conflict resolution), security (establishing and strengthening people’s security) and justice (addressing injustices and increasing people’s access to justice) are very different from what the MDGs were trying to address.  Lack of progress on meeting the MDGs in fragile states is partly because of the failure of the MDGs to address explicitly peacebuilding and statebuilding.  One can thus think of the PSGs as prerequisites for MDG attainment and as a more appropriate framework for tracking progress in fragile states.

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Lessons from Afghanistan

When the Bush Administration invaded Afghanistan their initial strategy was to oust the Taliban from power and destroy al-Qaida. They were, at first, contemptuous of nation building and wary of mission creep, but as Washington chose to work with allies and organizations that wanted more than just a targeted military strategy the mission found itself at odds between its strategy and goals (Carment 2011). Allies focused on moving Afghanistan away from its failed state status led to a counterinsurgency mission with a parallel nation-building and reconstruction strategy. Unfortunately, neither of these efforts were entirely successful and operated largely independent of one another.  As a result Afghanistan has now received US$51.4B in net development assistance from 2002 to 2012 (World Development Indicators database, World Bank) and still remains one of the most fragile countries in the world (see Appendix A). 

On the surface, Afghanistan is a portrait of moderate success, and according to the MDG Monitor, Afghanistan is on track to meet five of its MDGs. However, numerous challenges remain including a sprawling informal economy, an agricultural sector dominated by drug production, and a porous border hosting the country’s most dangerous actors.5  Afghanistan’s infrastructure is unable to support increased agriculture, hydroelectricity and mining.  Improvements have been seen in democratic capacity, for example 13 years ago there was no national government or democracy and now Afghanistan has held a series of elections, adopted a constitution, elected a President and a Parliament, have increased access to education to more children and girls than ever before and increased access to health care for the total population.  

It is important to remember that these growth areas start from a baseline of near zero. In essence, Afghanistan appears to be a state emerging out of fragility, but our research shows that states like Afghanistan exhibit what Andrews et al. (2012) define as “isomorphic mimicry” in order to generate  and sustain donor support.  Currently broad structural impediments to progress remain, including a National Assembly that is deeply divided and organized along ethnic lines. The political system is more akin to coalition blocs than representative politics.  For example, parties in support of President Hamid Karzai were largely ethnically Pashtun while the opposition was led by ethnic minorities.  This led to a great deal of suspicion and mistrust between parties and representatives and continues to hamper effective governance.

Afghanistan is currently dependent on development assistance to survive. Between 2002-2012 net development assistance as a percentage of GNI averaged more than 40%, and an even greater percentage of central government expenditure (World Development Indicators database, World Bank).6 This type of aid dependency is the result of ineffective revenue generation from the central government coupled with deep seated patron-client politics.  Tax collection has received the most support for revenue mobilization over the last few years, but revenue as a percentage of GDP is very low in Afghanistan (OECD 2014).  If tax collection improves, and the mining sector is developed, a financing gap will still persist for many years.  Additionally, donor funds redistributed by the central government to Kabul’s regional client base are allocated to build political capital, which, rather than furthering representative democracy and good governance, has resulted in a centralized government largely answerable to its own ethnic clan-base with only a limited responsibility to minority groups.  Lacking an accountable civil administration at the district level, aid funding is often exhausted on largely inefficient distributive networks intended to maintain political stability and not economic growth.

The central government encourages local ministers to “buy” political support from local elites by financing their efforts on local projects, recruiting youth, and making payoffs to auxiliary police in order to maintain some semblance of local stability. Government inefficiency is further compounded by the vast network of corrupt payoff structures dampening economic development. For example, not all of the development assistance spent in Afghanistan actually goes towards development projects, instead a good portion has been historically allocated to coordinating “technical assistance” a euphemism in many instances for paying bribes to advisers. 54%-72% of the country remains outside the central governments ethnic base and are characterized by a permanent Taliban presence and even deeper ethnic dives. In many cases the Taliban is the “de facto” governing power in many towns and villages in the south.7

As one of DFATD’s countries of focus, and one of the largest recipients of Canadian aid in the last decade, Canada has consistently reaffirmed its commitment to bring peace, and economic prosperity to the entire country through several UN Security Council resolutions. After Canada petitioned for a NATO takeover of the International Security Assistance Force (ISAF) in 2003, it sent troops to secure parts of Kabul in a stabilization role.  Canadian Forces also provided security to the perimeter of the site for the Constitutional Loya Jirga meetings, as part of the Bonn Agreement.  Consistent with its emphasis on democracy promotion, Canada helped institute a national voter registry and supported Afghanistan's Independent Election Commission. 

Notwithstanding the significance of democracy promotion, the question remains whether regular and genuine elections are an effective conflict resolution policy in states without a monopoly on the use of force, or in countries where state institutions are weak. Indeed, despite elections relatively free of violence in May 2014, the country is far from being stable.  As foreign troops withdraw, there is a high likelihood of escalating insurgent attacks and a continued rise in violence.

Source: Constructed using data from CIFP.
Figure 1: Afghanistan, Fragility and ALC, 2000-2012

On its own, Afghanistan cannot cover the immense costs of simultaneously maintaining its security while trying to grow its economy.  Although fragility improved in the early 2000s, it has deteriorated since because of fluctuations in authority and legitimacy structures (see Figure 1 above) and despite improvements in capacity in the last few years8. Extensive work remains to be done on strengthening the rule of law and shoring up the state’s political legitimacy.  The Taliban are simply biding their time but its leaders may also be willing to talk after their repeated tests of National Army strength now under way through 2014-2015 are completed. In reality the authority of the government outside of Kabul is severely weakened not because its army is weak but because its legitimacy is scattered and undermined by bad governance.

Afghanistan will remain fragile, in part, because of the lack of emphasis among donors on structural issues and problems. Currently, most donor activity focuses on human development and humanitarian assistance including earthquake relief, opening schools and rebuilding communities, rather than longer-term structural problems such as improving domestic resource mobilization in order to reduce aid dependency.  We can see in Figure 2 below, that security and crime, the environment and governance are areas that have deteriorated in the last few years.

Conclusion

There is no shortage of proposals and goals for the post-2015 development agenda.  The North-South Institute’s (NSI’s) Post-2015 Tracking Tool, available through NSI’s Canadian International Development Platform (CIDP) is a very helpful resource to track the goals, targets and indicators that are being proposed to replace the MDGs.9  In particular, it classifies proposals across various themes, but it is important to note that “peace and security”, a key issue for fragile states, isn’t as prominent as other themes including the environment, health, education, employment and inclusive growth or governance (see also Higgins et al. 2014).  Going forward, given the persistence of fragility over time, it is essential to maintain the momentum for effective assistance and a long-term commitment towards fragile states.

The so-called “New Deal” for International Engagement in fragile states is intended to be an innovative model of partnership between fragile and conflict-affected countries and their development partners from the DAC at the OECD.  While many have applauded its emphasis on country leadership, rather than the dictates of the donor community, another interpretation is that it represents a desperate attempt by donors, as well as new geo-strategic realities.

Indeed, there appears to be few policy options left for engaging the most troubled countries of the world.  The conventional principles and guidelines regarding aid effectiveness in fragile states have simply not worked; neither have more tailored-approaches such as the FSPs.  The emergence of powerful and wealthy new donors like China, India and Brazil that operate outside DAC structures means that recipient countries now have more room to negotiate deals best suited to their interests.  One must wonder whether handing over some of the responsibility to the leaders of failed and fragile states is the right option.  There are a few countries such as Sierra Leone and Liberia where economic and political gains have been achieved in the last few years.  But there are others, including Afghanistan, which are lacking in authority, legitimacy and capacity; in such cases, it remains to be seen whether the New Deal will work as planned or whether it will be yet another policy disappointment.

For countries that are mired at the bottom of the fragility spectrum, such as Afghanistan, it will be important to implement an independent evidenced-based capability to monitor progress overtime and ensure a positive outcome. This would complement the New Deal’s principles of country ownership and leadership rather than undermining it.  After all, many of the countries that have signed up for the New Deal are caught in a fragility trap and show little indication of lifting themselves out of their political, economic and social malaise.  While some of these countries are the most aid dependent in the world, others have, until recently, suffered from international neglect or were under-resourced given their size and importance (for example Sudan and the DRC).  The New Deal’s rhetoric notwithstanding, donors and recipients are still uncertain on how to tie economic success to effective political development.  For example, Africa, home to many of the world’s most fragile states, may well be ‘booming” – six African countries were among the ten fastest growing economies in the world over the 2001-2010 period – but unless those economic gains lead to positive political change their futures may hold deeper corruption, cronyism and increasing inequality.

The most dangerous cases of fragility combine weak economic capacity, low political legitimacy and poor authority. Essentially they lack effective leadership. Leaders of fragile states must ensure they have institutions to provide adequate services to their populations.  They must also find ways to properly channel ethnic, social and ideological competition that would otherwise erode the effectiveness of weak institutions even more. Finally, leaders must find a way to overcome the challenges that, otherwise, would overwhelm a vulnerable state’s capability to function, including the cumulative effects of poverty, over-population, environmental degradation, rural flight and rapid urbanization. This is a very big agenda for countries now expected to carry the burden of effective economic and political management.

From a DFATD perspective, particular attention must be paid to strategic dilemmas in terms of weighting, prioritizing and sequencing aid instruments at various junctures in the state building process. The degree to which specific initiatives may contribute to economic development but undermine political change needs to be considered. Of particular relevance are the implicit trade-offs between short-term economic growth and longer-term institutional development.  It is folly to assume that Canada can only engage those countries where only our direct economic interests are at stake as the long term stability of trading regions, such as sub-Saharan Africa, are only as strong as their weakest links. The failure to fix failed and fragile states today has implications for global economic prosperity.  Once they enter large scale violence as is now the case in the Central African Republic, South Sudan and Mali, the costs of prevention rise exponentially. It is better to act to forestall such violence than pursue costly military operations down the road.

At its core, effective state building involves the fundamental transformation of a broad spectrum of state-society relationships. That is something the donor community has historically shown to be utterly incapable of fixing and that DFATD has no appetite for. Far too often, DFATD relies on qualitative experts who tend to focus on the same cases repeatedly in the absence of any theoretical or methodological rigor or worse they wait for other donors to pick up the ball, throwing in its token contribution only after all options are exhausted.  This will not do for a country that prides itself on cost effective, rational and focused efforts, at least in rhetoric. Canada’s leaders need to know how it is that some countries that were once considered fragile have successfully recovered and become resilient, functional and effective while others have been less successful and remain fragile for long periods of time.10   

Finally, it is not obvious that the newly-created DFATD will ensure greater coherence across diplomacy, commerce and development, and enable Canada to engage the world (including fragile countries) more effectively.  What matters ultimately is the need for our development and broader foreign policy objectives to be clearly articulated, followed by a political will to ensure that these objectives are translated into concrete policy actions.

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 Appendix A: The Top 20 Fragile States: 1980 vs. 2012 

The Top 20 Fragile States: 1980 vs. 2012

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Appendix B: List of Acronyms 

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References

Andrews, Matt., Pritchett, Lant and Michael Woolcock (2012).  “Escaping Capability Traps Through Problem-Driven Iterative Adaptation (PDIA).”  Center for Global Development Working Paper 299, June.

Carment, David and Yiagadeesen Samy (2013).  “Canada’s Fragile States Policy: What Have We Accomplished and Where Do We Go from Here?”  Unpublished manuscript.

Carment, David., Prest, Stewart and Yiagadeesen Samy (2009).  Security, Development and the Fragile State: Bridging the Gap Between Theory and Policy.  Routledge.

Carement, David (2011).  Afghanistan and the Regional Blindspot.  Embassy Magazine, January 26.

Chauvet, Lisa., Collier, Paul and Anke Hoeffler (2007).  “The Cost of Failing States and the Limits to Sovereignty,” UNU-WIDER Research Paper No. 2007/30, May.

Cilliers, Jakkie and Timothy D. Sisk (2013).  Prospects for Africa’s 26 Fragile Countries.  African Futures Paper (www.issafrica.org), October.

G7+ (2013).  Note on the g7+ Fragility Spectrum Launched in Kinshasa, Democratic Republic of Congo (Preliminary Release).  Available at: http://www.g7plus.org/news-feed/2013/11/29/fragility-spectrum-note-launched (Accessed on May 8th, 2014).

Higgins, Kate., Bond, Rebekka and Shannon Kindornay (2014).  “Measuring Progress Post-2015: An Assessment of Proposals.” North-South Institute Research Report (February).

Kharas, Homi and Andrew Rogerson (2012).  Horizon 2025: Creative Destruction in the Aid Industry.  Overseas Development Institute, July.

OECD (2007).  Principles for Good International Engagement in Fragile States and Situations.

OECD (2011).  International Engagement in Fragile States: Can’t We Do Better?

OECD (2014). Fragile States 2014: Domestic Resource Mobilization in Fragile States.

World Bank (2013).  Annual Report 2013:  End Extreme Poverty.  Promote Shared Prosperity.  Washington DC.

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About the Authors

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Canadian Defence & Foreign Affairs Institute

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Endnotes

[1] In a monitoring survey of the FSPs conducted in 2011 in 13 countries, donors were either partly off-track or off-track in eight of the ten principles (OECD 2011).
[2] Part of the problem is that a lot of this aid remains concentrated towards the so-called aid darlings such as Afghanistan, the Democratic Republic of Congo, Ethiopia and Iraq.
[3] The Monterrey Consensus is the result of the 2002 United Nations International Conference on Financing for Development which was held in Monterrey, Mexico. It considered several areas of financing for development, including mobilizing domestic and international resources for development, the role of trade for development, debt relief and policy coherence.
[4] At the time of writing, the deteriorating situations in two of the pilot countries - Central African Republic and South Sudan - do not bode well for the future.
[5] See Afghanistan Country Indicators for Foreign Policy Fragile States Country Report No. 20 (2009) at http://www4.carleton.ca/cifp/app/serve.php/1246.pdf.
[6] Average of 121.4% from 2006 to 2012.
[7] Ibid 4.
[8] In both Figures 1 and 2, a higher number means that the situation is getting worse. For CIFP’s full methodology, please go to www.carleton.ca/cifp or see Carment et al. (2009).
[9] See http://cidpnsi.ca/blog/portfolio/tracking-post-2015/
[10] This is the foucs of our SSHRCC funded research on transitioning fragile states. For preliminary results see: http://www4.carleton.ca/cifp/app/serve.php/1407.pdf   and http://www4.carleton.ca/cifp/app/serve.php/1444.pdf.

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