Title: Distortions of the Penalty and Reward System in the Aid Contract: A Case Study of Uganda
Abstract: By not penalising poor performance even rewarding Uganda with new projects, development partners play ineffective principal roles vis-?-vis the recipient government. This is linked to the home government structured incentives that bilateral agencies face. The recipient government (as an agent) seems not to face an incentive environment structured by the terms of the contract, but rather one that encourages opportunistic behaviours. By exaggerating the Ugandan 'success story', development partners claim credit for the purported results, secure more funding and come under more pressure to disburse with less oversight. The level of PEPFAR funding in Uganda is widely considered a reward for the HIV/AIDS work done previously for which success is claimed. Development partners can observe poor performance of the Government, for instance through Joint Review Missions [as there is a considerable level of transparency in the Sector Wide Approach (SWAp) / General Budget Support systems], but they fail to hold the Government to account for it. For example, there are various instances of poor performance or shirking on the agreed aid contract, such as: - Persistently low indicators for Reproductive Health and maternal health; - Undertakings not being achieved / being vaguely formulated; - Failure of the control mechanisms of the SWAp (e.g. Sector Working Group and monitoring and evaluation working group); - Decreased levels of transparency and failure to produce specific documents that would increase levels of transparency. Failure to penalise takes place in the context of verifiability problems as independent assessments of performance is deficient. Commitment to monitoring and evaluation by both parties is also low. Hence, if performance is inadequately measured and poor performance is not punished. Government perception is that aid will continue to flow, thus providing incentives to under perform. Development partners tended to justify their continued disbursements of aid flows by presenting a number of difficulties in relation to alternative options. For instance, they mentioned that there is a 'tricky' balance in judging when corruption and governance problems exceed 'acceptable' levels. Building capacity and improving existing systems are argued to be long term processes. When it is time to take action is not clear cut.
Publication Year: 2007
Publication Date: 2007-02-15
Language: en
Type: article
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Cited By Count: 1
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