The new “Department of Foreign Affairs Trade and Development” is an opportunity to elevate the profile of international development in Canadian foreign policy

Published: April 3, 2013

In its recent budget the Government of Canada announced the “amalgamation” of the Canadian International Development Agency into the Department of Foreign Affairs and International Trade. Much of the discussion surrounding this move has been entirely insular and backward looking. This merger offers a unique opportunity to think bigger on development.

First let’s shed some light on the channels of aid delivery. While big bilateral donors provide the bulk of foreign aid, they are hardly ever the only channel even within their own countries. French aid for instance is delivered through 6 different ministries and departments, Spanish aid through 7, German aid (until recently) 7, and in the most extreme example of fragmentation US aid is delivered through 15 different departments and agencies. Even the Swedish development cooperation agency, SIDA, located within the ministry of foreign affairs and often held up as a model bilateral donor, provides only about half of Sweden’s total aid.

So at the outset there is a clear case for reform within donor countries and this has been happening. The most recent example is Germany which in 2011 undertook major reforms that restructured and consolidated 3 large aid and technical cooperation agencies into 1 ministry, to both drive efficiencies but also increase the profile of international development.

In Canada, CIDA was never alone. DFAIT, Defense, Finance, IDRC and RCMP are all important channels of Canadian aid. Back in 2000 over 75 percent of Canada’s aid was delivered through CIDA. By 2011 CIDA’s share declined to around 63 percent.

It is very hard to glean anything solely from whether a bilateral aid agency is independent or part of a wider ministry. However, that several bilateral donors have been simplifying complex aid bureaucracies is not only important from the perspective of administrative efficiency but also from the perspective of reducing the burden on partner countries.

An interesting case study for Canada could be Denmark. In the 1990s Denmark undertook a major administrative reorganisation where DANIDA (the Danish aid agency) went from being an independent unit to being part of a single-string service in the Ministry of Foreign Affairs. What happened to the volume of Danish aid? According to the latest figures Danish aid expressed as a share of gross national income (GNI), exceeded the global 0.7 percent of GNI target. In 2011 Denmark gave 0.85% of GNI in aid, while Canada gave only 0.32%. Clearly the folding of DANIDA into the Foreign Ministry did not lead to reneging on aid commitments. What about the quality of Danish aid? According to the latest data from the Quality of Official Development Assistance report, on both “fostering institutions” in aid receiving countries, and “reducing the burden” on its recipients, Denmark fares better than Canada. In fact folding DANIDA into the foreign affairs ministry had the effect of raising the profile of development assistance in Danish foreign policy.

Are aid agencies located within foreign affairs ministries more cost effective? The average administrative cost of providing aid as a share of bilateral assistance is around 6.5%. At 7.6% Canada places above average. The costs of more generous donors including Norway, Sweden, Netherlands, Switzerland and Denmark, where aid is located within the ministries of foreign affairs is similar or even higher than Canada. While the cost of UK, US, German and French aid is far lower. Clearly there is a case for making aid at least more efficient by rationalizing big aid bureaucracies, regardless of whether independent or located within foreign affairs.

Is there a case for closer alignment between foreign aid and commercial interests? One may ask what commercial ends has aid ever served? Consider the following. While Haiti and Afghanistan are the largest Canadian aid recipients today, historically the bulk of Canadian as well as global aid has gone to countries like India, China, Indonesia, Vietnam and Bangladesh. Aid has played a critical role in the “emergence” of emerging economies, as it has the potential to do in Africa and Asia today.

Back in the 1960s and 70s aid played a huge role in countries like Thailand, Malaysia, Singapore and South Korea. Strikingly, South Korea in 1961 was as aid reliant as a share of national income as Benin, Nicaragua, Madagascar and Senegal are today! Yet today Korea is one of our most important trading partners and a major aid donor in its own right. There is no real reason why commercial and long-term development interest should be at loggerheads.

The amalgamation of CIDA into DFATD has the potential to bring a longer term perspective into foreign policy thinking. But amalgamation should not become an excuse for policy paralysis or indifference.

It is now even more important to have a clear international policy statement that helps calibrate short term (diplomatic strategy) and long term (development outcomes) priorities which some perceive as contradictory. This is also an opportune moment to reemphasize Canada’s commitment to aid effectiveness, transparency and accountability. Ultimately, if we want it to, this reorganization presents a unique opportunity to elevate the profile of development in Canadian foreign policy.

Aniket Bhushan, The North-South Institute