CHAPTER IV - Key Factors Affecting Co-financing Opportunities

Introduction

 From field visits and questionnaires to country offices, the evaluators have been able to discern a range of factors that work for and against co-financing arrangements. These factors fall within five broad categories: the country's political and economic situation and government attitudes, the donor-community circumstances and preferences (particularly in-country), the nature of the programme seeking financing, the special characteristics of the several co-financing modalities and, most important, UNDP's role and image. At the end of this discussion, the evaluators attempt to analyse the comparative importance of these factors.

Some have expressed the opinion that such an analysis is not important since all that is needed is to motivate the resident representatives and their staffs with incentives and directives to get on with the task of resource mobilization. The evaluators suggest that, while this may be useful, the situation among the countries is complex and requires varied strategies and expectations. They recognize also that the regions are in different stages of awareness and initiative relative to the need for non-core resource mobilization and co-financing arrangements. Over the coming decade, the picture may change significantly.

Political and Economic Conditions and Government Attitudes

From a global view across a number of countries with and without significant co-financing, the evaluators find that there is a spectrum of country situations that favour or discourage co-financing.

At one end of the spectrum are those countries that are emerging from long periods of civil war, socio-economic, and governance crises. With less extreme circumstances but still experiencing politically and economically disruptive conditions are those countries that are undergoing major reforms such as changes in political structures, economic stabilization and structural adjustment programmes, and shifts to market economies and democratic systems. Middle-income countries with financial resources and a pool of underused national expertise are among the largest participants in co-financing arrangements with UNDP. A number of countries in the LAC region as well as other regions fall under this first grouping, resulting in a massive increase in co-financing. The transformations taking place in these countries have opened up opportunities for UNDP. In these situations of political and economic crisis and weak institutions, the environment is ripe for co-financing in one form or another until such time as the situation stabilizes and governments become capable of fully managing their own development resources without an intermediary.

At the other end of the spectrum are those countries where reform and change are minimal and the political and economic situation remains comparatively stable. Some of the countries in this latter category for various reasons have strong views about managing their own resources and are not likely to use their budgets to finance UNDP's services for programme implementation. Some of the poorest countries in this group do not have domestic resources that would enable them to allocate funds to UNDP; the major part of their development budgets is provided by external assistance. Also, recipient governments prefer to deal with bilateral donors individually rather than through multilateral channels. Some oppose the use of IFI loans for technical cooperation. In these circumstances, dramatic increases in co-financing are not evident or likely in the near future.

In the middle of the spectrum lie numerous gradations of countries with varying mind sets and reform circumstances. A number of other factors-for and against co-financing-are evident in these countries. They include the country's historic relationships and continuing conditions of dependency and the dominance, in some instances, of a primary donor. In other situations, particularly those countries in the middle-income category, governments have substantial funds of their own raised from local revenues. Depending on the availability of local expertise or other sources of contract services, they may or may not wish to rely on a multilateral agency such as UNDP.

Factors in a country's administrative culture are also important in favouring or discouraging the use of co-financing. Rigid bureaucratic systems or fears of corruption that impede or divert the use of resources-domestic and external-encourage the use of mechanisms such as cost-sharing and trust funds to bypass these conditions. Yet other bureaucracies prefer to retain control and the benefits that flow from control. Similarly, as noted above, a government's capacities-technical, managerial-may prevent its own effective and efficient use of resources even in situations of relative political and economic stability. The expertise that co-financing can bring is invaluable. Finally, the presence or absence of a national consensus on national development goals and the main impediments to growth can affect the opportunities for joint endeavours.

Donor Circumstances and Preferences

From conversations with many donor representatives in-country, the evaluators have identified a number of factors that influence the donors in their willingness to become involved in co-financing arrangements. The most significant from the donors' perspective are country situations emerging from domestic crises where there is a consensus on the immediate tasks for political and economic recovery. In these situations, the urgency for rapid responses combined with large volumes of external assistance from many sources demand effective coordination and special funding channels. Other factors include:

  • the acceptability of a country's political and economic policies to the donors (where negative, this may leave UNDP as the only international development agency continuing in the country);

  • the importance to a donor of a local presence and programme identity;
  • the country's development status: low income or middle income (note the recent phase-out of bilateral assistance to Botswana given its move to middle-income status or the absence of bilateral donors in many South American and Arab countries);
  • donor home-office policies that favour or discourage funding through multilateral channels (a frequently heard comment: "we are already contributing to UNDP's core fund" or "UNDP has a proliferation of funds that need to be consolidated");
  • the degree of trust the donor has in the recipient Government's administration of its funds (UNDP's national execution policy, while recognized as a desirable objective, makes some donors anxious about committing their funds where government administration is weak);
  • the nature of the programmes to be supported and the urgency of the conditions such as moving from relief to rehabilitation to development; and
  • for some bilateral donors, the lack of local representation with the capacity to manage development assistance.

For the IFIs, it is primarily a matter of their interest in having UNDP assist with the movement of loan projects that have been held up owing to the recipient Governments' inability to formulate and implement them and their wish to bypass cumbersome procedures. Also, UNDP's experience in managing technical cooperation for capacity-building can attract IFI interest.

The regions present different pictures of donor interests and activity. In South America there are few bilateral donors but substantial involvement of IFIs. In the poorer countries in Africa, Asia, and Central America, there are often numerous bilateral donors who, except for those with little or no local staff, prefer to manage their own programmes and preserve their identification with the programmes they are funding. They are prepared to join in some form of co-financing where a particularly urgent and relatively short-term requirement is confronting the country.

Finally, the donor's view of UNDP's capacity to manage resources (including prompt accounting for fiscal and substantive activity) and pro-vide leadership in the development community is often decisive as to whether donors turn to UNDP for co-financing arrangements (a point to be discussed below).

Programme Areas and Opportunities for Co-financing

In principle, no area of development should be inappropriate for co-financing arrangements and a review of a list of UNDP co-financed projects would confirm that the arena for co-financing is quite large. However, from field trips and other reports, the evaluators have found that five dimensions of development programming stand out as favouring co-financing arrangements.

Politically Sensitive Situations

First, politically sensitive situations frequently call for an international organization that blends the features of neutrality among contending parties, openness, flexibility, acceptance in coordination roles and competence in managerial leadership on the ground. Countries that are emerging from periods of civil conflict with the resulting devastating effects on viable governance and human well-being are particularly welcoming to UNDP's leadership in coordination and co-financing roles. Similarly, countries that are involved in fundamental change from military and autocratic dictatorships, including command economies, to democratic systems and market-oriented economies, and government restructuring and reform are open to UNDP's ability to facilitate donor support. It is during the delicate period of transition that this opportunity is most evident. UNDP's exceptional work in Mozambique in mobilizing and managing donor resources for the national elections and for de-mining and demobilization operations is a notable example of this role. Other examples that relate to facilitating rebuilding government and providing technical services while governments get their houses in order are well known in the LAC region, e.g., in El Salvador and Panama. UNDP's Programme of Assistance to the Palestinian People (PAPP) is another case in point (see box).

Case Study: Programme of Assistance to the Palestinian People

UNDP's Programme of Assistance to the Palestinian people (PAPP) epitomizes UNDP's distinct comparative advantage and roles in development. Owing to its neutrality and local presence, UNDP has played an important role for donors willing to support the Palestinians living in Gaza and the West Bank. PAPP has built up the logistical and technical base necessary to formulate and implement programmes rapidly and thus offers donors a transparent, reliable and expedient mechanism for providing assistance.

From its beginning in 1980, PAPP has expanded considerably with programme delivery reaching $11 million in 1993, $22 million in 1994 and an expected $35 million in 1995. While UNDP's contributions over the years amount to some $40 million, donor co-financing now dwarfs UNDP's own financial stake which in 1995 totalled $.5 million out of the Special Programme Resources reserved for the Palestinian programme. With a contribution of $54.5 million for 1994/1995, Japan is by far the largest contributor to PAPP; other DAC donors include Canada, Italy, the Netherlands, Norway, the United Kingdom, and the United States. Donor-specific trust funds are the dominant co-financing modality. The current Programme comprises infrastructure, training and institution-building initiatives, the major projects being housing construction for the Palestinian police force ($9.4 million), start-up support for the Palestinian central administration ($6.8 million), employment improvement for the Gaza Strip ($4.7 million), and reshaping of the the Gaza Strip ($4.7 million).

The UNDP office in Jerusalem and Gaza with a staff of 100 combines programming, administration, and technical expertise, mainly Palestinians. In addition to regular programming capacities, PAPP is set up to do its own procurement following international standard procedures and to support the many infrastructure initiatives technically through a special engineering unit. As far as project implementation is concerned, PAPP thus functions like a "mini-OPS". Being virtually independent from New York in both implementation and programming decisions, PAPP is , in many ways, a model of decentralized administration characterized by high flexibility and minimum bureaucracy. The Programme manages to be largely self-financed with an administrative budget for 1995 of $2.2 million or roughly 6 per cent of the total delivery of $35 million for this year. The donors' willingness to channel funds through PAPP is motivated, to a significant degree, by the Programme's proven local implementation capacity, flexibility, and low operating cost.

With its many positive traits, some see this Programme as the "way of the future" for UNDP's operations. Yet there are already signs that, in the coming years, the implementation function will diminish rather than grow. As a result of the political changes, donors are now considering undertaking their own programmes and no longer going though UNDP. PAPP anticipates increasing difficulties in attracting donor financing unless UNDP is able to support new programming initiatives with its own core resources. On the other hand, there are programme-related comparative advantages that PAPP is likely to maintain and build on; most important, its neutral role in programming in sensitive areas of policy and governance and in supporting aid coordination is likely to be sustained. Finally, the Programme offers unique opportunities for donors to support the peace process through sub-regional cooperation involving Israel, Jordan, and the Palestinians.

 

Experience with co-financing arrangements in these types of situations brings out an important condition that is key in mobilizing co-financed programmes. That key is consensus-building. In crisis situations of great urgency and importance to future national stability, the coming together of the donor community with government on the critical task at hand and the essentiality of a well- coordinated approach demand that UNDP provide the mechanism. In these situations, UNDP is often asked and pressed by the donor community to fill this leadership role. In more normal, stable settings, consensus-building and the promotion of close collaboration are more difficult.

Co-financing with external resources is feasible if the donors' and UNDP's priorities converge. By the same token, priorities of governments and UNDP also need to converge to provide a common ground that will enable UNDP to enter into an agreement with the Governments on a particular programme. If the policy priorities and objectives of either the Governments or donors have nothing in common with those of UNDP, no co-financing arrangements should be attempted; otherwise these would imply that UNDP is forgoing its own policy objectives only for the sake of generating funds, in the form of fees, to underwrite its expenditures. The accompanying diagram illustrates the points of convergence essential for entering into appropriate co-financing arrangements.

 

DONOR AND GOVERNMENT POLICY CONVERGENCE ON DEVELOPMENT PRIORITIES: THE IMPORTANCE OF CONSENSUS-BUILDING

Long-term Opportunities

Second, while many of these transition situations are, hopefully, temporary, there are long-term opportunities related to aspects of governance that are attractive to co-financing. One area is the extension of UNDP's role in aid coordination to capacity-building for the management of development. In countries where there are large cooperation programmes from many donors and where the Government's development budget is largely externally financed, aid coordination-a recognized UNDP role-and the management of development should be viewed as an integrated responsibility for guiding the use of development resources, domestic and external. This area of capacity-building requires leadership of a carefully orchestrated collaboration of governments and donors-a role which bilateral and multilateral donors are less prone to fill.

An important dimension of governance, which also lends itself to co-financing, is capacity-building at the local government and community levels; the formation or strengthening of provincial and district governments is a growing area of development activity as central governments reform their structures. UNDP leadership in this work is desirable and important in facilitating other donor assistance in local areas.

Transition Opportunities

Third and not well appreciated are opportunities to carry forward the transition from relief to rehabilitation operations. UNDP's role in this area is unclear, reflecting relationships within the UN system and the responsibilities of other agencies. While there may be merit in not having UNDP responsible for relief operations in their initial periods, it is important that UNDP play a role from the outset in the move from relief to rehabilitation (including disaster prevention) and, eventually, restored development. It appears from visits to Ethiopia and Mozambique that this work is carried out under the UNDP umbrella but not formally recognized by UNDP headquarters, according to staff reports. Yet the donor community welcomes opportunities to participate in well-coordinated and co-financed activities in this area.

Non-IPF Funds for Technical Cooperation Opportunities

Fourth, co-financing through government cost-sharing has been useful where governments seek assistance from an international technical agency for which IPF funds are no longer available. The collaboration of UNDP and ICAO in civil aviation development stands out in several countries as a successful relationship. In Botswana, this relationship has been supported by the Government since the 1970s and now represents the major source of non-core funding and fees for the country office. It illustrates the value of joining the skills of a technical agency with UNDP's country presence and rapport with government. While it is accepted in UNDP, but not by all, that civil aviation projects fall outside of SHD policy objectives, they are often justified as providing a means of generating income to enable UNDP country offices to maintain field staffs and thus work on primary development objectives. The extent to which this type of situation prevails in UNDP country programmes has not been determined; it is an issue requiring the clarification of UNDP policy among the SHD purists and operational pragmatists.

Traditional Sector Programming

Fifth, as one moves towards the more traditional economic and social sectors of development programmes, the opportunities for co-financing are less clear-cut. The themes of SHD and poverty alleviation are common to most donors and international organizations, presenting considerable competition. Moreover, the donor community and government departments, we have observed, tend to prefer to pursue their interests independently and preserve their identification with project activities rather than submerge them in UNDP cost-sharing. Trust funds and parallel financing modalities are somewhat more responsive to these interests.

Some of UNDP's work in the field in co-financing arrangements, however, has effectively dealt with this problem. It is a matter of defining a niche in the SHD and poverty-alleviation agenda. One dimension is the identification of cross-cutting issues that call for multi-governmental, multi-donor participation if they are to be addressed effectively. HIV/AIDS programming is one such area; the preservation of the environment is another, particularly in the complex activity of biodiversity programmes. Within the traditional sectors, it is a matter of identifying critical bottlenecks to programme performance largely in the area of capa-city-building where well-coordinated technical services joining local and international expertise are critical. This work may not result in a massive flow of non-core funds as has been experienced in LAC, yet it can be vital to effective development.

The Co-financing Modalities Themselves

The fourth category of factors affecting the opportunities for co-financing is the co-financing modalities themselves. They have been defined in the introduction and in annex I; here the pros and cons relative to each modality are enumerated.

Cost-sharing

In the fifth programming cycle, this modality has been the largest funding category for co-financing arrangements. The pros and cons apply to both government and IFI cost-sharing since the resources flow through government whether from its own budgets or from IFIs.

The pros include:

  • Cost-sharing has enabled governments to implement important social and economic programmes, funded from government budgets, which, for various reasons, they have been unable to carry out efficiently and effectively while they put their houses in order;
  • Cost-sharing generates substantial resources for UNDP to use in maintaining its country offices in countries where IPFs are too small to support a continuing presence;
  • By taking on implementation tasks, UNDP has been able to provide some capacity-building assistance and open the door for it to become engaged in more upstream issues and policy dialogues; and
  • Cost-sharing is attractive to UNDP because it can integrate the funds into its projects with IPF resources and control their use.

The cons include:

  • Cost-sharing risks involving UNDP in projects in which it has no substantive contribution and in which it otherwise would not have been engaged;
  • Cost-sharing can serve to finance ordinary government functions and create durable dependencies and a double-track civil service, which are not compatible with promoting good governance and capacity-building;
  • Cost-sharing can reorient country office staffing to handle administrative (procurement and accounting) tasks that undercut capacities for engaging in substantive programming and policy dialogues;
  • Cost-sharing can be less attractive to donors who would like to have greater public identification with projects that include their funds, more say in its implementation, and fuller accounting of funds and results to justify their participation; and
  • Cost-sharing does not mobilize additional re-sources when financed by governments from their own budgets.

These risks of cost-sharing with government funds have been well recorded in country reports. Country offices have demonstrated their awareness of the pitfalls of government cost-sharing and reports from the field visits suggest they have been avoided and the dangers kept under control. The abuses that may have occurred in the past can be avoided today by prudent programme design and management at the country level.

The SHD Test: In weighing the pros and cons of cost-sharing arrangements using the Government's own funds, the key tests should be whether a project addresses sustainable human development interests, is of limited duration, and leads to the creation of government or private capacities for sustaining the project's benefits. Part of this test should include the determination that government or private organizations are not capable of carrying out the implementation tasks or are not available to do so. While there will likely be many opportunities over the long run for UNDP participation in cost-sharing projects, UNDP will need to be concerned about becoming a permanent agent of government rather than a partner in a mature form of development-oriented cooperation. It should work to ensure that governments have their own institutional and human-resource development capacities-public and private-characteristic of those countries that have achieved a full development status.

Trust Funds and Funds Administered by UNDP This category of co-financing arrangements is a complex mixture of activities serving many varied purposes. Of the 95 trust funds and funds administered by UNDP:

  • 7 are administered funds in trust for central programme interests associated with Capital Development, Natural Resource Exploration, Sudano-Sahelian activities, the Volunteers Programme, Science and Technology for Devel-opment, the Energy Account, and the Development Fund for Women.
  • 41 are country specific, covering a wide variety of activities with some of the most important in the areas of national elections and post-civil war restoration;
  • 15 serve regional interests, including project development facilities, awareness promotion, multi-country cooperation on common development problems, and technical cooperation among developing countries (TCDC);
  • 29 are special-topic oriented, reflecting a donor's specific interest or a UNDP requirement for programme support.

While all of these trust and administered funds provided budget resources of $345.3 million in 1994-the highest to date-$300.4 million are from voluntary contributions and the balance from cost-sharing and sub-trust fund contributions. Environmental programmes account for about half and administered funds a fifth with the remaining third for the numerous country, regional and special task activities. It is likely that there are other small trust funds set up in the field that are not listed in headquarters reports. No attempt has been made to evaluate these funds at the headquarters level.

Do these UNDP-administered funds and trust funds constitute a form of co-financing from the country programme perspective? Certainly, these resources, as they flow to country programmes, are part of their non-core budgets. Moreover, the individual trust funds that are country specific and involve country office management are a useful form of co-financing arrangement. However, to date they are a small portion of total co-financing.

The pros are as follows:

  • The local trust funds are attractive to donors because they preserve donor identity and can be focused on specific development issues;
  • Trust funds are administered by UNDP, which receives a fee without requiring a UNDP contribution to the fund although the IPF may be used in parallel arrangements; and
  • Regional trust funds are also attractive to donors interested in promoting a particular development initiative.

The cons are:

  • Trust funds may tend to operate indepen-dently of government management-a donor preference at times-and thus not serve to strengthen government involvement. For national-election types of activity this may be desirable in preserving neutrality;
  • Trust funds are not integrated into UNDP project budgets, unlike cost-sharing, and thus add complexity to the management task and lessen UNDP control;
  • As some donors complain, the trust fund arrangement adds to a proliferation of accounts for UNDP to administer and involves seeking special additional contributions from the donors;
  • Trust funds raise the question of donor responsibility for performance and possible cost overruns; and
  • Many trust funds are headquarters-managed with little consultation and involvement of be-neficiary countries and country offices, which consequently do not have a sense of ownership of the particular programme activities.

The special UNDP-agency administered trust funds with non-core funding can provide a useful resource for country programmes with the co-financing pre-packaged. However, the transaction costs related to the procedures for obtaining these funds have been found to inhibit their use.

Parallel Financing

As noted, there are few statistics collected on the extent to which parallel financing serves as a form of co-financing. Although it is listed in UNDP guidance as a co-financing modality, the definition is imprecise and misleading. It has no status in the LAC programmes and is not reported officially by other country offices in other regions. This lack of interest is understandable as neither the Government's nor donor's resources are administered by UNDP or flow through UNDP accounts. No fee is collected so there is no means of covering any administrative costs. In that sense, parallel financing may be considered of little value by those who are primarily concerned with obtaining funds for UNDP's own programmes and, through it, with helping to finance country office and headquarters operations from overhead or other fees.

On the other hand, there can be no doubt that parallel financing can make a major contribution to joint programme objectives, magnifying the impact of limited IPF and donor resources applied separately. This is particularly the case when parallel financing is associated with the programme approach-an essential tool for co-financing arrangements. UNDP country offices can have, and have had (as in Mozambique) a major role in coordinating donor programmes and encouraging complementary programme management. In many instances, parallel financing by third-party donors is often the result of the catalytic role or multiplier effect of UNDP actions-a multiplier effect reflected also in substantial counterpart financing as well as in follow-up and investment. While triggered by UNDP projects or preparatory assistance, they may not appear in any UNDP programme budget. Also, parallel financing should be particularly attractive in countries where UNDP has substantial IPF funding.

Given this potential for parallel financing, it is important to establish clear criteria to differentiate between projects that are only complementary or coincidentally related activities and those that are actually parallel financing and can be recorded as UNDP accomplishments.

Management Support Services

Management support services and agreements, while not a form of co-financing, are an additional means of resource mobilization for countries. They provide donors with a means of implementing their major projects which contain large sums for the procurement of equipment and services. Some donors with little or no programme management capacity in the field find this mechanism particularly useful. For the fifth programming cycle, MSAs total $640 million and are active in 45 countries, with indications of increases in 1996 over the 1995 level. The World Bank and the Japanese Government have been the main users of these services.

In the LAC region, MSAs are being implemented in 13 countries. In two countries that were visited-Argentina and Peru-MSAs are used primarily for major equipment purchases and subcontracts. They do not appear to show a promise of growth. In Central America, MSAs are used mostly by the Japanese commodity assistance wherever JICA is not physically present. New MSA agreements with the Italian Government are in process in Ethiopia for a $20 million rural development programme and in Mozambique for $7 million for assistance to local development. The situation with MSAs requires more study than time allowed, owing to the repeated concerns about the MSA's cumbersome procedures and administration that is far removed from the country.

Role and Performance of UNDP

UNDP's role and performance in a country's development programme is, of course, central among the many factors influencing the opportunities for co-financing with governments and donors. The UNDP staff, donor representatives, and government officials with whom the evaluators met accented a number of positive and less positive features about UNDP's performance that influence their decisions about co-financing.

Certainly, UNDP's willingness to stay in-country despite the circumstances that cause other donors to leave has been cited by government officials as an example of a credible, trustworthy agency. However, this feature is tempered in some situations where radical changes of government occur, with the new Government's questioning UNDP's close associations with prior regimes. Also, this unique situation in a country can rapidly fade when major donors return with large assistance programmes and assert their roles in policy and programming with the Government. Other factors that have been cited relate to evidence of:

  • UNDP's knowledge of the country;
  • its ability to establish a partnership relationship with government as distinct from an aid donor relationship;
  • its assurances of trust related to integrity, transparency and neutrality;
  • its ability to disburse its own IPF funds and those of others;
  • the ability of UNDP staff to handle large-scale project implementation locally with efficient procurement practices and funds accounting;
  • the ability of staff to move beyond project administration into broader, more strategic approaches in development programming, which is essential in applying the programme approach; and
  • its access to multiple specialized agencies and, more generally, the worldwide development technology.

However, of the factors cited, the importance of the leadership qualities of the resident representative/coordinator stands out as decisive. The comments of one donor in a developing country setting make this point well and reflect a common view:

"The donor representative expressed concern that the sustainability and the visibility of UNDP at the country level depended very much on the individual Resident Co-ordinator. While UNDP had emerged to be a valued partner at this point, donors generally could not fully commit themselves, having misgivings whether the next Resident Co-ordinator would be able to sustain the momentum of their predecessor and actually take the organization a step further; or would the reverse be true?" (From a country visit report.)

We have observed the factor of the resident representative/coordinator's role in both its positive and negative manifestations in several countries.

As is true for most service organizations, UNDP's image among its clients is critical. Ineffective leadership, weak professional and management skills, unresponsiveness to the interests of others (e.g., the pursuit of pet ideas over what others prefer), slow fiscal and substantive reporting, cumbersome and inflexible procedures and delays in approvals or simply an unknown entity have all been cited as undermining UNDP's generally positive image. The reverse has also been reported and has placed UNDP in high standing by the donor community and governments in some countries.

UNDP's ability to provide leadership in upstream policy and programming activities is also critical for attracting co-financing in the long run. It is the expectation within UNDP that its work in the implementation of technical services for co-financing arrangements will open the door to more involvement in policy advocacy and programme development. Certainly, UNDP's positive performance in implementation is a necessary factor in attracting co-financing, but it is not sufficient, as has been pointed out in various reports.

Finally, the management environment within UNDP's bureaux is an important factor in ensuring the pursuit of well-structured strategies for co-financing that back up and support the work of the country offices.

 

Weighing the relative importance of influential factors

The analysis presented in this chapter sets out a number of conditions and factors that favour or discourage co-financing arrangements with UNDP. The question remains as to their relative importance in any particular situation and generally. From the evaluators' country visits and reviews of the data, we conclude that two factors stand out as particularly important.

First, countries that are experiencing traumatic change in their political, economic and social circumstances and that are emerging from crises of varying degrees of severity are particularly open to donor and government cooperation (including substantial IFI funding) on relatively short-to medium-term initiatives to support transitions to better circumstances. In these situations, some initial willingness to take on urgent implementation tasks may provide an entrée for more substantive work.

Second, these situations need to be accompanied by a highly motivated and entrepreneurial resident representative and country office faced, in some countries, with the threat of extinction on the one hand and/or the challenge of helping a government and country cope with the turmoil of change on the other. The rapid creation of a staff capacity to manage the implementation tasks of complex and sensitive programmes is essential for facilitating co-financing arrangements in these situations. Systematic, thoughtful, and constructive leadership from regional bureau management is important in providing supportive oversight of the initiatives of resident representatives and their country office staff. In the LAC region, these circumstances occurred concurrently, reinforcing each other in facilitating co-financing arrangements with UNDP (see box on Bolivia for one example). The other factors stemmed largely from these conditions, i.e., government support for UNDP which remained active when other donors withdrew; the desire of IFIs for improved loan performance and the need for borrowers to contain the penalty or holding fees charged for non-performing IFI loans; the relatively high absorptive capacity of the countries for increased resource flows; and the availability of substantial government financial resources. However, there is one other factor that is important and distinctive in the LAC region. This relates to the cultural affinity of those working in governments, UNDP, and the IFIs that is enabled by the Latin American culture. There is a high degree of interchange among leading officials and personalities that encourages understandings and confidence.

The concurrence of these dominant factors relative to co-financing resulted in the extraordinarily massive generation of co-financing for UNDP. It would seem unlikely that this high level of non-core resource flows will continue as the LAC countries stabilize and take over greater responsibility for the implementation of their development programmes-certainly an aim of UNDP's mission. This suggests that the continuation of co-financing will call for an evolution in UNDP's role.

These factors are also evident in other countries outside the LAC region, e.g., Mozambique. Each country presents a complex blend of favourable and unfavourable factors that would have to be analysed separately. Without expecting the massive accomplishment of the LAC region, other regions should be able to show a gradual but modest increment in co-financing arrangements. This leads to the question of how one judges accomplishments in co-financing.

 

Determining accomplishments in co-financing

Given the drive to mobilize additional non-core funding and the pressures on country offices, what are the measures of accomplishment? In recent UNDP communications, these measures have been related to achieving specific targets framed, for example, as five times larger than the IPF or as a 25 per cent increase in non-core funding within a specified period. However, without guidance on co-financing that is balanced with an understanding of each country situation, donor preferences, and the possible pace of change, such measures can be counterproductive, weakening the delicate relationships of UNDP with governments and the donor community. Because of the high preference that co-financed funds flow through UNDP's accounts, they also underrate the significance and considerable potential of co-financing modalities such as parallel financing in some countries.

Achievements in co-financing should be associated with substantive accomplishments in building country consensus on the essential development issues, mobilizing co-financing resources to address these issues, and developing host-country capacities to carry forward this work.

 

A Message on Co-financing Operations

UNDP Country Office in Bolivia (excerpts from UNDP/Bolivia presentation in Harare)

Core Messages

  • Mobilize resources for the country, not just for UNDP;
  • Government is normally the prime ally in resource mobilization;
  • Government needs to understand why UNDP is interested in mobilizing resources;
  • UNDP advantages must be clear to the Government;
  • If first experiences are successful, replications are likely to be automatic;
  • Aggressive sales techniques are counterproductive;
  • Resident representative and deputy resident representative leadership is irreplaceable.

Other messages

  • Resource mobilization needs different approaches in different countries and different situations.
  • UNDP's comparative advantages differ according to the type of resource mobilization. Choice of co-financing modality depends on the type of operation and role envisaged for UNDP;
  • Formal resource mobilization strategies are useful but not a prerequisite for resource mobilization.
  • It needs an empirical approach. Be pragmatic and pursue different opportunities;
  • Never claim ownership of non-core resources;
  • Overheads should never become an obstacle;
  • Audits required by donors are always possible at the local level under national execution;
  • The programme approach is a great tool for resource mobilization.

Some reasons why cost-sharing project negotiations were not finalized

  • Initial ambiguity: not all parties were fully aware of the negotiations and their implications. UNDP added value was not sufficiently clear or emphasized;
  • Formulation time was prolonged beyond expectations;
  • Donors were intuitively suspicious about UNDP's being too eager. Also, some bilateral donors in the country do not allow co-financing with UNDP as a policy. Only exceptional need for visits to donor headquarters;
  • UN agency collaboration in mobilizing resources jointly with UNDP was directed towards obtaining their own trust funds;
  • Previous experience of government institutions with UNDP administrative efficiency was not fully satisfactory;
  • Political changes occurred during the formulation or negotiation process.

What should be known

  • Know what donors want, fear, and hope for a country (both at their central policy and local representatives levels); know what the Government wants from each donor;
  • Detailed insights into donors' approval, management and accountability procedures and their restrictions, limitations, and opportunities are necessary for successful negotiations;
  • Similarly, detailed insights about different points of view within the Government are necessary.

Final note

  • Each county office should establish an internal culture of staff empowerment and a culture of reaching out;
  • Resource mobilization is a long-term and time-consuming process. In addition to patience, it needs personal commitment, extra time and, often, seed money. It does not come free.