# **1. Introduction**

Fragile and conflict-affected states (FCS)<sup>2</sup> face daunting challenges for development. The international community has been increasing its focus on FCS and has provided them with significant amounts of aid. Recently, FCS are receiving 30 percent of total Official Development Assistance (ODA)<sup>3</sup> . However, the increasing attention and resources have not yet translated into significantly improved development results. One and a half billion people live in FCS and they remain the group furthest away from achieving the Millennium Development Goals (MDGs)<sup>4</sup> . The contrast between the increasing focus/aid and development results leads to a critical question: Is aid effective enough to address the development challenges in FCS?

The importance of aid effectiveness in FCS is emphasized in ̳A New Deal for engagement in fragile states‘, endorsed by more than 40 partner countries and development partners since it was officially introduced at the 4<sup>th</sup> High Level Forum (HLF-4) on Aid Effectiveness in Busan, Korea in November 2011. While the relationship between aid and development is not straightforward, the improvement of aid effectiveness – defined as the management and delivery of aid – is rationally linked to improved development results<sup>5</sup> .

Identifying key aid effectiveness challenges is the critical first step for both FCS (recipients of aid) and development partners (providers of aid). This is the first of two main purposes of this paper. The second is an attempt to identify good performance examples in this area, as learning from each other‘s experiences is an important and practical step to improve aid effectiveness.

In order to serve for these purposes, this paper relies on quantitative results generated through the Survey on Monitoring the Paris Declaration (the PD survey) given the survey‘s three key advantages. First, it has comprehensive country coverage with 78 countries participating in the latest survey round in 2011. Second, as it was conducted three times – in 2006, 2008 and 2011 – it allows us to conduct some degree of time series analysis over the past half-decade. Third, it has a comprehensive coverage of aid effectiveness issues, consisting of 15 indicators (including subindicators). Among the 15 indicators, this paper selects 10 which directly relate to the delivery and management of aid. However, as the indicators have different definitions and methodology, they cannot be directly compared to each other. Therefore, this paper translates indicator values into standardized scores so that indicators can be more easily compared.

As both recipients of aid (FCS) and providers of aid (development partners) are mutually accountable for aid effectiveness, analyses are conducted by focusing on both sides of the equation. First, performance in 2010 is compared across partner countries and indicators, which enables us to

> 2 This paper uses the World Bank classification of FCS in FY2012.

> 3 <u>A New Deal for engagement in fragile states</u>

> 4 <u>World Development Report 2011: Conflict, Security and Development (World Bank)</u>

> 5 <u>The World Bank defines aid effectiveness as</u> ― a cross-cutting mandate for partner countries, donors, and other aid providers- including the Bank; embodying a reform agenda to better deliver and manage aid‖

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