Evaluating Effectiveness of Aid for Trade

The Aid for Trade (AfT) initiative, launched during the Sixth Ministerial Conference of the World Trade Organization (WTO) held in Hong Kong in December 2005, came on the heels of several unsuccessful trade-related technical assistance programmes ostensibly designed to integrate developing countries, in particular least-developed countries (LDCs), into the global trading system. However, in the six years since its implementation, the initiative has become contentious because of veritable North-South divisions on the issue. The WTO and the Organization for Economic Cooperation and Development (OECD) are responsible for the evaluation of the AfT initiative at the global level, but these Geneva- and Paris-centred processes have been criticized from several quarters and calls have been made to conduct independent evaluation of the AfT initiative at the national level, on the ground.

In this context, South Asia Watch on Trade, Economics and Environment (SAWTEE) and International Centre for Trade and Sustainable Development (ICTSD), in 2011, developed a methodological framework for conducting independent evaluation of the effectiveness of aid for trade (see Adhikari, Ratnakar, 2011, AMethodological Framework for Conducting Independent Evaluation of the Effectiveness of Aid for Trade, ICTSD Programme on Competitiveness and Sustainable Development, Issue Paper No. 18, International Centre for Trade and Sustainable Development, Geneva, Switzerland). It describes nine aspects to measure the effectiveness of AfT: i) AfT funds trajectory, ii) ownership, iii) alignment, iv) coordination among donors, v) South-South cooperation, vi) partner country limitations in absorptive capacities, vii) coherence with environmental sustainability, viii) impact at the macro level, and ix) impact at the micro level (AfT case study). It also details the elements, indicators and possible sources of information for each aspect.

Based on the methodological framework, studies were conducted in six countries to evaluate the effectiveness of AfT. The countries were: Cambodia and Nepal in Asia, Malawi and Mauritius in Africa, and Jamaica and Peru in the Americas. SAWTEE conducted the Nepal study (see Adhikari, Ratnakar, Paras Kharel, and Chandan Sapkota, 2011, Evaluating Aid for Trade on the Ground: Lessons from Nepal, Aid for Trade Series, Issue Paper No. 23, International Centre for Trade and Sustainable Development, Geneva, Switzerland). The study finds that AfT in Nepal has only been partially effective. The potential effectiveness of AfT in Nepal is hampered by various factors, internal and external. Internal factors include low absorptive capacity; limited progress in making AfT programmes and projects financially and institutionally sustainable; and the need for more ownership by government agencies and the private sector. External factors include lack of coordination among donors, bureaucratic hurdles on the part of donors, rampant use of parallel programme implementation units bypassing the recipient government mechanism, slow progress in the use of country systems, and the broadness of definition of AfT. The study provides concrete recommendations for making AfT programmes and projects in Nepal more effective in achieving their trade and development goals.