NEWS ANALYSIS: Denmark Shines with Financial Aid Policy

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By Richard Johnson

A new report pours lavish praise on Denmark's "robust foundations and political backing for fighting global poverty" but draws attention to the fact that the new strategy for development cooperation – describing aid policy also as 'realpolitik' -- was adopted by only a small parliamentary majority in 2010.

Denmark's official development assistance (ODA) stands at USD 2.87 billion, or 0.90 percent of its gross national product. One of the five most generous donors as a percentage of its total economy,
Denmark has surpassed the UN aid target of 0.7 percent of GNI (Gross National Income) every year since 1978. It is also a leader in its approach to development -- working with fragile states, delivering effective humanitarian and development aid, and focusing on gender equity and climate change, says the report.

The report is the Peer Review of Denmark undertaken by fellow members of the Development Assistance Committee (DAC) of the 30-nation Organisation for Economic Cooperation and Development (OECD). It took place on March 30, 2011. It was written by the OECD secretariat and peer reviewed by DAC members Luxembourg and New Zealand.

In the new strategy, linkages between development, security and foreign policy goals are more explicit. This marks a departure from more altruistic motivations for giving aid: Freedom from Poverty notes that "development policy is also realpolitik".

This focus on Danish interests also reflects greater public pressure to justify why Denmark gives aid. Denmark’s continued commitment to the MDGs and poverty reduction is critical to ensure that short-term foreign and security policy pressures, when they emerge, do not put at risk the overall long-term interest in effective development, explains the review.

"Danish development cooperation enjoys continued popular support and understanding in parliament, civil society and among opinion leaders," the review says. "The Minister for Development Cooperation and Danida informed civil society actors, and the parliamentary committees involved in development cooperation keep the debate about development in the public domain, thus maintaining critical support for and awareness of the issue," the Review adds.

This public debate, the review argues, undoubtedly contributes to the continued political commitment to exceed the UN target of providing 0.7 percent of gross national income as official development assistance as well as to achieving the Millennium Development Goals (MDG), implementing cutting-edge policies and taking up international leadership on global issues such as climate change, and gender equality and women’s empowerment.

"Nevertheless, while there is a shared consensus politically that Denmark should punch above its weight in international development, the new strategy for Danish development cooperation -- Freedom from Poverty: Freedom to Change -- was adopted by only a small parliamentary majority in 2010," the review points out.

"A contributing factor may have been the divergent views between political parties on the government's decision to freeze official aid at 2010 nominal levels between 2011 and 2013, announced shortly before parliament met to approve the strategy," argues the DAC review.

Denmark considers that its comparative advantage in development cooperation stems from both the way its own society is organised and its specific experience in various sectors. Freedom from Poverty embeds core values such as freedom, democracy, human rights and gender equality in Denmark’s strategic priorities.

"These values are key drivers of Danish development assistance, which also emphasises zero tolerance of corruption, a focus on results, and an agenda to influence its partners, Denmark should be pragmatic in pursuing its objectives in partner countries, and should continue to respect local needs," says the review.

It points out that Denmark's focus on defining risk jointly with international partners, and the priority it intends to give to risk management at the Fourth High Level Meeting on Aid Effectiveness in Busan in 2011 are both commendable. The new concept of risk being developed by the ministry should also help it to be realistic about how it intervenes in different country contexts. It will also need to build capacity of staff to manage risks accordingly.

The 2007 peer review found that criteria for selecting partner countries favoured stable and well-performing states, making Denmark appear risk averse. Denmark has now established new criteria for selecting partner countries.

While recognising that partner selection is ultimately a political decision, selection criteria look at partner countries’ development needs, Danish national interests, and whether Denmark can make a difference and achieve results. These new, more flexible, criteria pave the way for Denmark’s active engagement in fragile states.

"Denmark's contribution to global development -- its efficient and effective partnerships – is a good example to other donors," says DAC Chair Brian Atwood. "Its efforts to encourage a strong civil society movement in developing countries ensure that the poor will have a voice."

The 2011 peer review notes that, acting on the recommendations of the review in 2007, Denmark has made good progress in almost all areas.

Unlike some countries, Demark is not cutting its aid over the coming years but has instead announced a freeze at the present level for three years. It also plans further reductions in Foreign Ministry staff. The review suggests that more coordination between development staff in headquarters and embassies would ensure that these efficiency measures do not interfere with Denmark's very effective aid delivery.

"In line with good development practice, Denmark is paring down the number of countries and multilateral organisations it supports and its aid is transparent and predictable," says the review. "It is also taking more 'risks' -- working with fragile states on governance concerns, expanding its focus on employment, gender equality, democracy and environment. The review recommends advance planning as Denmark withdraws aid from some countries and better training for staff going into high-risk areas."

In order to encourage continued public support for development, the peer review recommends that Denmark provides evidence that it is improving the lives of people in poor countries. These 'good news' stories would be useful for development staff as they communicate to the public through the media.

"Denmark should also seize the opportunity of its 2012 EU presidency to ensure that EU policies are supportive of aspirations of developing countries, better equipping both to deal with global challenges," advises the review.

The Danida Board and the Council for International Development, both created by Denmark’s 1971 Act on International Development Cooperation (amended in 2002), are mandated to provide independent advice to the Minister for Development Cooperation on development issues.

However, while the board is fulfilling its mandate to provide advice and recommendations to the minister on Danida's strategies, policies and programmes, the council is not playing its role as a sounding board on development issues more generally, the review says, adding: "There is scope for the minister to reinvigorate the role of the council, which could play a more active role in public debates about development."

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