‘‘‘‘The Use and UsefulnessThe Use and UsefulnessThe Use and UsefulnessThe Use and Usefulness of Conditionality of Conditionality of Conditionality of Conditionality’ ’ ’ ’ –––– A special focus on the Least Developed Countries

(1)

Final Master Thesis Final Master Thesis Final Master Thesis Final Master Thesis

‘‘‘‘The Use and Usefulness

The Use and Usefulness

The Use and Usefulness of Conditionality

The Use and Usefulness

of Conditionality

of Conditionality’ ’ ’ ’ ––––

A special focus on the Least Developed Countries

I.M. NUIJTEN I.M. NUIJTEN I.M. NUIJTEN I.M. NUIJTEN s1418424 s1418424s1418424 s1418424 Rijksuniversiteit Groningen Rijksuniversiteit Groningen Rijksuniversiteit Groningen Rijksuniversiteit Groningen

Department of International Economics & Business Department of International Economics & Business Department of International Economics & Business Department of International Economics & Business

Landleven 5 Landleven 5Landleven 5 Landleven 5 9747 AD Groningen 9747 AD Groningen 9747 AD Groningen 9747 AD Groningen The Ne The Ne The Ne

The Netherlandstherlandstherlandstherlands Tel: (031) 50 Tel: (031) 50 Tel: (031) 50 Tel: (031) 50----3633733363373336337333633733 Fax: (031) 50 Fax: (031) 50 Fax: (031) 50 Fax: (031) 50----3633720363372036337203633720 e ee

e----mail: i.m.nuijten@student.rug.nlmail: i.m.nuijten@student.rug.nlmail: i.m.nuijten@student.rug.nlmail: i.m.nuijten@student.rug.nl 1

1 1

1stststst Supervisor: Dr. E.H. van Leeuwen Supervisor: Dr. E.H. van Leeuwen Supervisor: Dr. E.H. van Leeuwen Supervisor: Dr. E.H. van Leeuwen 2

2 2

(2)

Abstract

(3)

List of Abbreviations

CAS Country Assistance Strategy CC Control of Corruption

CPIA Country Policy and Institutional Assessment DTIS Diagnostic Trade Integration Study

E.E.C. European Economic Community (Europese Economische Gemeenschap) GE Government Effectiveness

IBRD International Bank for Reconstruction and Development IDA International Development Association

IF Integrated Framework for Trade-Related Technical Assistance IFI International Financial Institution

IF-LDC An LDC that has the IF approval status, i.e. ‘Has Started the DTIS Process’ and/or ‘DTIS and National Workshop Completed’ and in 2007 ‘TR approved’ and/or ‘DTIS completed’

IGGI Intergovernmental Group concerning Indonesia (Intergourvernementele Groep inzake Indonesië)

IMF International Monetary Fund ITC International Trade Centre LDC Least Developed Country MDG Millennium Development Goals

Non-IF LDC An LDC that has the IF status: ‘New Request’, ‘Technical Review Under Consideration’ or has no status and in 2007 ‘TR under way’

ODA Official Development Aid

OED Operations Evaluation Department

OECD Organization for Economic Cooperation and Development (OESO - Organisatie voor Economische Samenwerking en Ontwikkeling)

PCN Project Concept Note

PRSP Poverty Reduction Strategy Process PS Political Stability

RL Rule of Law

RQ Regulatory Quality

UN United Nations

UNCTAD United Nations Conference on Trade and Development UNDP United Nation Development Program

UR Uruguay Round

VA Voice and Accountability

WB World Bank

(4)

The international community acknowledged the existence of a particularly alarming group of developing countries, in 1971. UNCTAD (United Nations Conference on Trade and Development) was a main contributor to the identification of the group of these Least Developed Countries (LDCs) and became a focal point within the UN system for tackling LDC-related economic development issues.1 The LDCs are the least developed among the developing countries and are characterized by intense poverty of their people as well as by the weakness of their economic, institutional and human resources. LDCs are countries which exhibit the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world. A country is classified as a Least Developed Country if it meets three criteria based on:

• low-income (three-year average GNI per capita of less than US $750, which must exceed $900 to leave the list)

• human resource weakness (based on indicators of nutrition, health, education and adult literacy) and

• economic vulnerability (based on instability of agricultural production, instability of exports of goods and services, economic importance of non-traditional activities, merchandise export concentration, and handicap of economic smallness, and the percentage of population displaced by natural disasters)2

At the time this research started, 50 countries3 were identified by the UN as "Least Developed Countries". These countries barely have the means to develop their domestic economies and to ensure an adequate standard of living for their populations. See appendix 2 for a list of these countries. Their economies are extremely vulnerable to external shocks or natural disasters. Therefore, it was realized that this group of countries thus constitutes the weakest part of the international community and that special and specific attention is needed4.

To facilitate the LDCs in their development process, there are several foreign aid programs available. However, while some aid is disbursed without conditions, such as in the case of emergency aid, there are also types of aid to which specific conditions are set. Now, in the case of LDCs, which are characterized by low income, human resource weakness and economic vulnerability, how can they meet certain conditions in order to receive this aid? Why do these requirements exist in the first place and is it fair to apply conditions to receive aid to these type of countries?

The goal of this thesis is to research the justification for using selectivity criteria for choosing countries that will receive aid and to find out if these are consistently applied to development programs for Least Developed Countries. The term Conditionality is used in this respect. Conditionality is a concept in international development and describes the use of conditions attached to a loan, debt

1

Source: http://www.unctad.org/Templates/Page.asp?intItemID=3358&lang=1

2_{http://www.un.org/special-rep/ohrlls/ldc/ldc%20criteria.htm}

3

In December 2007, Cape Verde graduated, thus currently there are 49 LDCs

4

(7)

relief, bilateral aid or membership of international organizations, typically by the international financial institutions, regional organizations or donor countries. In order to meet the goal of this thesis, two research questions are used:

1. Why are selectivity criteria used?

2. Are selectivity criteria used in a consistent way?

These two research questions are answered in two parts. The first part deals with the question why Conditionality seems to be used. First, the development of the concept of Conditionality in Dutch development aid is elaborated on and will show why and how is it applied. Then, the development and the appliance of the concept is shown in the light of the International Financial Institutions, the IMF and the World Bank. After that, empirical evidence in literature is discussed. Thus, different angles are shown to answer why the concept is used.

The second part deals with the question whether Conditionality can be consistently applied to Least Developed Countries by looking at the Integrated Framework for Trade Related Technical Assistance (IF). This development program is set up especially for the LDCs and uses Conditionality. It is explained how the concept is used and which factors are important in the selection process. This is done by making use of the World Governance Indicators (WGIs) created by Kaufman, Kraay, et al. (1996-2008).

(8)

PART I

PART I: WHY CONDITIONALITY IS USED

: WHY CONDITIONALITY IS USED

In this part, the use of the concept of Conditionality is explained by explaining the development of a country’s efforts in assisting other countries in their development. The country chosen is the Netherlands. When looking at the development of Dutch development aid, it moves from countries that were selected for development aid taking into account economic interest, towards increased concerns about the development of poor countries and increased optimism about its ability to increase welfare in these countries. After having selected up to 100 countries for development aid, more focus was put on the goals that had to be achieved through development aid and selection criteria were put into place with a more eminent role than before. Conditionality was used as it was believed that it would lead to a better achievement of the goals of the development plan, thus making aid more effective, which is similar to the reason why it is used in the Integrated Framework (IF).

1.1

1.1 From a national point of view:

From a national point of view: Dutch development aid

From a national point of view:

Dutch development aid

Until 1945 basically no development aid was issued by the Netherlands. After World War II, the country started recovering and to grow economically. It started to spend money on the

development of developing countries for the very first time as the country saw various advantages in doing so. Round about the 1950s people became more concerned about the development of poor countries and in 1965 a minister was put in charge of all development aid affairs for the first time. In the next years, the distribution of wealth and effectiveness of development assistance increasingly

became of importance. Selection criteria were designed and a larger focus on the results of development aid had been visible.

In a radio interview J.A. Nekkers, writer of the book ‘De geschiedenis van vijftig jaar

Nederlandse ontwikkelingssamenwerking 1949-1999’, said he believed that, considering 50 years of development aid, the paradigm of strong optimism about the ability to develop the low developed countries, was at its end. He claimed that support for development aid was not growing and believed that in the next decade there would be a stronger focus on the effectiveness of aid. So there would be a more business-like focus, and less focus on morality.5 And indeed, from around the year 2000 the focus on effective results in development aid increasingly was more outspoken.

1.1.1 1.1.11.1.1

1.1.1 After WorAfter World War IIAfter WorAfter World War IIld War II ld War II

In 1947 the UN introduced the idea to create a worldwide money collection, by collecting all worker’s salaries of one day. This idea was rejected by the Dutch government as the country was still

5

source: http://geschiedenis.vpro.nl/ ‘Nederlandse ontwikkelingshulp in de jaren 40 en 50’ , referring to the Bronnenuitgave

(9)

recovering from the war. It is not until the second half of the fifties that people become more conscious about development.

In the light of the Marshall Plan, the U.S. moved towards the U.N. as it was questioned by de-colonized countries why only a part of the world would benefit from the Marshall Plan. At the end of 1948 president Harry S. Truman was re-elected and in the beginning of 1949, point 4 of his

inauguration speech was of importance to development aid and also to the Netherlands. He revealed his ‘bold new Program’. Point 4 declared the support of V.S. to the developing countries in terms of capital investments and technical assistance . The U.N. mainly adopted this approach, the rest was to be executed by the Americans themselves. The program consisted of two separate aspects:

1. Technical assistance:

a. the sending of international groups of experts to low developed countries to advice their Governments

b. the training of foreign experts in other countries c. the training of local employees by the foreign experts

d. assisting Governments in acquiring technical employees, tools and raw materials 2. Granting guarantees for the investment of private American capital in low developed areas The goal was to encourage development and peace in low developed areas which will also help protect against communism.

The Dutch were asked to join the program. At first the government was very reserved. On the 3rd of October 1949 the Netherlands decided to spend money on the development of developing countries for the first time, even when they were still receiving aid themselves from the Marshall Plan. The country donated 1,5 million Guiders to the U.N. for their program for international technical aid. This amount was based on the U.N.’s estimated ‘technical assistance’- budget of 30 million Guilders in the first year. There are several reasons why the Netherlands saw advantages:

a. by training foreign experts in the Netherlands, Dutch expertise, business trade and industry would make the country widely known.

b. sending Dutch experts for U.N. missions as well as advising less developed countries, could open export possibilities

c. in the light of the conclusion of the de-colonization, because of their foreign knowledge, the Dutch experts could be successful in assisting other foreign countries

The Committee Withall (Werkcommissie Inzake Technische Hulp Aan Laag-ontwikkelde Landen – Working Committee Concerning Technical Aid to Low Developed Countries) was put into place to prepare and draw up the technical assistance in the Netherlands. Under the Commission’s supervision, a small agency was set up to execute the increasing assistance activities6.

It was clear that the countries were selected taking into account economic interests. Also, in the light of the colonization, the Netherlands wanted to participate in the U.N. as they wanted to be part of something good.

6_{Source: Nota Betreffende De Nederlandse Bijdrage Aan Het Programma Der Verenigde Naties Voor Technische Hulp Aan}

(10)

1.1.2 1.1.21.1.2

1.1.2 More concerns about dMore concerns about development aid during the 1950sMore concerns about dMore concerns about development aid during the 1950sevelopment aid during the 1950s evelopment aid during the 1950s

Halfway the 1950s, people became more concerned about the development of poor countries. The decisions made by the government were influenced by the public as well. From 1954 father Simon Jelsma held a speech at a square in The Hague on Saturday afternoons. He pled for worldwide peace, an equal distribution of welfare and the reduction of poverty. As a consequence, in 1956 the Dutch organisation for international assistance (Novib - Nederlandse Organisatie voor Internationale Bijstand) was founded, in which the father became an important member of staff7.

The government also displayed the importance of development aid. In 1956Minister of Foreign Affairs in the second cabinet-Drees, Luns, developed the very first development policy document. The government preferred a multilateral approach to the question on how to help the lower developed countries. Reason for this was that they believed that bilateral aid was often driven by the political or economical interest of the country that issued aid, which is less attractive to de-colonised countries. In addition, when the U.N. closely collaborates with the International Bank and other specialized

organisations, more expertise and better prioritization of the issues at hand will be available. Also, it was believed that a country had to have strong capital power in order to bring about an impressive result. And a small country, such as the Netherlands, can only join a few projects in a small number of countries. The government felt that when the Dutch expertise was distributed through the U.N., the country’s influence and participation position would be stronger, than operating from a bilateral point of view8.

On occasions, the government made an effort to get the Dutch citizens involved in

development aid. In a radio broadcasting, Mansholt, the minister of Argiculture in that period, asked the citizens for food aid for India. He reminded everyone of the ‘Hongerwinter’ in 1944/1945, the extreme winter at the end of World War II when 20,000 Dutch people died of food shortage or froze to death, and how thankful everyone was for the food that was distributed. He asks the Dutch to donate milk powder, dried potatoes, etc. In addition, in 1955, Dutch queen Juliana told her subordinates that it is a moral duty to do improve welfare for the poor; it is “the white man’s burden’’. In 1957, Prince Bernard, who was general chairman of Novib at the time, said it is was a threat for economic stability and believed that the continuation of civilisation was dependent on finding an answer for these problems. He claimed that the era in which nations find solutions themselves was over and it was a problem in the world the Dutch cannot move away from.

1.1.3 1.1.31.1.3

1.1.3 Dutch pDutch policy changes in the 1960sDutch pDutch policy changes in the 1960solicy changes in the 1960solicy changes in the 1960s

During the 1960s the development of the developing countries became an important focus for the U.N. The organization was very optimistic about its ability to increase welfare in these countries. In this period, it was claimed that the system of putting into place national development programs for the

7

http://www.oxfamnovib.nl/id.html?id=3690

8

(11)

social and economic sector was more accepted and understood by the low developed countries. In addition, the focal point went more towards the development as a whole in stead of focussing on the growth of some sectors. Furthermore, it was increasingly realized that social reform should go together with economic growth, in stead of solely focussing on economic growth; social reform was perceived as a condition to economic development. In addition, the importance of acquiring knowledge in relation to economic progress was acknowledged. From an economic point of view education was recognized as an investment. Also, the underdeveloped countries realized that they should execute economic and social reforms in order to achieve a steady improvement in welfare.

This reception was visible through the acceptance of interference of the IMF and World Bank in case of financial and economic problems. However, in this period a number of problems became evident. Even though the acceptance of the interference was there, because of the lack of experts and data in some countries, they were not able to create a suitable development program. Furthermore, the amount of development aid was not sufficient in order to tackle the problems. Much more

knowledge and capital was needed. Also, the agricultural production had increased little in comparison to the growth in the population. As a consequence the food problem barley improved, which

deteriorated the basis of economic growth. In addition, the terms of trade weakened. As a result, the low developed countries’ trade position worsened and made development aid more difficult. Also, the expertise and technology were not adapted well enough to the countries’ particular problems. Much knowledge from the western countries were difficult to apply. Consequently, technical assistance was less effective.

The need for a conference to identify the problems developing countries were facing, also in terms of trade position in the world, led to UNCTAD in 1964. The United Nations Conference on Trade and Development (UNCTAD) promotes the integration of developing countries into the world economy. UNCTAD aims to help structuring current policy debates and development thinking, especially in bringing together domestic policies and international action to ensure mutual support for sustainable development. In the cabinet-Cals, Bot was the very first Dutch minister put in charge of all development aid affairs from 1965 until 1967. In 1966 he issued a policy document on assistance to developing countries. It was focussed on an internationally coordinated policy and a structural development strategy that encompassed changes in the world economy. The Netherlands would embark upon changes in the global trade environment in which developing countries should be players as well.

Also in this period, the Dutch economist J. Tinbergen, who was chairman of the U.N.’s development planning committee from 1966 until 1974, worked up the one percent gross domestic product (GDP)-target to be given as official development aid by developed countries to the poorest countries, as a strategy for the next development decade. UNCTAD too was a contributor to the 0.7% target eventually adopted by the United Nations General Assembly in 1970. The Netherlands were one of the few countries that were able to meet this target. Even though the Dutch government was

reluctant to spent much money at that time, minister of development aid in the cabinet-De Jong, Udink, threatened to resign if this goal would not be reached.

(12)

widened extensively. For example, a World Food program was set up., the U.N. set up a Special Fund for pre-investment projects and the International Development Association had started with its

activities. Secondly, the realization of the E.E.C. (European Economic Community) would contribute to development aid by issuing financial and technical aid to colonies and former colonies of E.E.G members. Third, the U.S. pressured the European countries to increase development aid seeing that Europe, also because of the Marshall aid, had fully recovered, and because of the U.S.’ difficult balance of payment condition. Fourth, the Dutch contribution to development aid was relatively high, but the country’s position declined as other western countries intensify their involvement. In addition, the Dutch position in terms of technical aid tended to decline as tropical expertise diverged and aged due to a lack of new experts. Fifth, Dutch businesses and churches displayed an increase in interest for development aid. Last, in the U.S. and in some European countries development aid activities became centrally coordinated by the government and sometimes by an institution.

At this point in time, multilateral development aid is still preferred by the Dutch. Next to the advantages given above, an additional reason was that, if a small country such as the Netherlands would support only a few countries, the Netherlands might risk being pressured politically and economically by the receiving country to distribute more aid than is financially feasible. Bilateral development was not excluded, but would have a more supplementary role.

In addition, the next norms were taken care of in the light of changing conditions in

development aid. International organizations with developed countries as their members, can have a useful coordinative role in the development aid. However, it was believed that these organizations have to limit their assistance to those low developing countries that are linked to the organization’s member countries. In addition, the receiving countries should be associates of this organization as well. Assistance to countries that are less linked to the developed member countries, were less welcomed, as development aid was preferred to be issued, as described above, in the most wide-ranging way. Next, a responsible distribution of available aid to the developed countries should be aimed for. A focal point is that, as a consequence of the links of E.E.C. members to African countries, not only African countries should be assisted, but also Asian and Latin-American countries. Special assistance to recently de-colonized countries should be maintained. Next, all Dutch development aid activities should be well coordinated, and not only governmental activities, but also actions from the private sector for example. If possible, Dutch economic and technical aid projects should only be executed when these are part of a program.

The eventual Dutch development aid policy of the 1960s was expressed into eight categories of programs, funds and initiatives:

1. Development programs of the U.N. and its specialized organizations such as the World Bank and the International Development Association. The Dutch policy would remain focussed on issuing development aid through these channels.

2. E.E.C. activities. As for the E.E.C., aid was initially meant for the economic

(13)

3. O.E.C.D. tasks. Next to assisting member countries, the O.E.C.D (Organisation for Economic Cooperation and Development), especially the Development Assistance Committee, issued aid mainly on a bilateral basis.

4. The sending, and the education of experts. One of the ways of technical bilateral aid issuance was to make available experienced and young experts, and learning facilities as well as small, elaborate projects in the educational and demonstrative areas.

5. A project program. It became visible that the costs of some extensive Dutch bilateral projects were difficult to estimate, while risks were high. Therefore, decreasing expenditure on these projects were expected. As a result a yearly amount of 2,5 million guilders was

comprised into the budget for a bilateral program of extensive bilateral aid.

6. Arrangements concerning the provision of capital. Bilateral financial assistance for countries outside the kingdom against favourable conditions, was initially not preferred. This aid was believed to be adequate through multilateral channels only. At that time possibilities on this were discussed considering the Dutch entrance to the International Development Association.

7. Arrangements to encourage private capital. In the developing countries there was a large need for capital. Limited government capital made private capital an important financial source. A disburser of private capital likes to see a profit for lending funds, while developing countries need gifts or loans against favourable conditions, direct investment in commercial businesses were believed to be the best way to undertake this.

8. Institute for social development planning. The Netherlands was prepared to devote 3,6 million guilders to the setting up of an institute for social development planning. Reason was that existing planning institutes’ work was limited and occasional. In addition, it was believed that, at these institutes, there was a lack of knowledge of the criteria of social development priorities in different sectors.

From 1960 the amount of development aid increased substantially, from almost 195 million Dutch Guilders or 0,44% of the GNP in 1960, to 662 million Guilders or 0,69% of GNP in 1969. The increase in the development aid budget in fact did not necessarily mean that assistance was

expanded, but the main difference could be explained by the assistance that was financed through the capital market which was guaranteed by the government before, but was from 1966 financed through the consortia and consultative groups9. From 1960 until 1967, the budgets for development aid, except for 1960, were higher than the amount spent. Reasons given are that capacity did not match the project goals, such as the shortage of experts, and that changes or delays have taken place at the developing countries and/or at the international organizations.

Dutch development aid in this period was distinguished by aid within the kingdom and aid outside the kingdom. Bilateral aid within the kingdom comprised of technical aid and capital aid. Initially this was a result of the major budget support to New Guinea from 1960 to 1963. After 1963 aid to Surinam and the Dutch Antilles was increased. In 1969 aid within the kingdom was about 25 % of

9

(14)

the total of Dutch development aid. Dutch aid outside the kingdom encompassed multilateral and bilateral aid, of which bilateral aid contained technical and financial aid. From 1960 until 1964 around 50% of the budgeted development aid consisted of multilateral aid. After 1964, this percentage declined to around 25% in 1969.

In the bilateral aid outside the kingdom two trends were visible, the rise of the Dutch technical aid programs (1962 – 1966) and the rise of the bilateral capital aid programs. In 1966 this was

budgeted for the first time. In 1960 there were only three elements, the expert program, the assistant-expert programs, and fellowship programs. Around 1963 the technical aid program started to develop through the adding new components such as projects and volunteers and through the enlargement of existing programs. The technical aid was perceived as a donation. Technical assistance projects comprised of technical aid and capital elements, in which the financial part should be smaller than the technical aid. One criterion was that transfer of knowledge should take place. As a consequence, not the most urgent projects were chosen. At that time aid projects were not much integrated into the other Dutch forms of aid, neither internationally.

Bilateral aid as a percentage of total Dutch development aid increased from less than 1% in 1960 to about 19% in 1969. In 1966 Dutch bilateral aid starts for Indonesia. In 1967 this aid is coordinated by Intergovernmental Group Concerning Indonesia (IGGI), which consisted of this country’s most important creditors. The group is not a consortium of consultative group, but the World Bank and the IMF were consulted during its activities.

Mainly capital aid was preferably focussed to countries with a low level of welfare, that hardly know any possibilities to acquire capital in another way, and are envisaged to use aid effectively. The first two criteria are easier to measure than the last one. There was a strong and increasing focus on India, Pakistan, and Indonesia. In the evaluation report of development aid of 1969 it was concluded that the three criteria above are not applied as a starting point for the selection of those three

countries. In addition, some countries such as Greece, Turkey, who received Dutch capital aid in the past, did not or barely met these requirements.

1.1.4 1.1.41.1.4

1.1.4 IIIImportance of mportance of mportance of mportance of tttthe he he distribution of wealthhe distribution of wealth and policiesdistribution of wealthdistribution of wealth and policies and policies and policies in the 1970s in the 1970s in the 1970s in the 1970s

In the 1970s the Dutch government increasingly realised that the focus on economic growth that would enhance the position of the developing country in the world and would be effective in fighting poverty, was questionable, as growth was achieved but the yields did not reach the people that needed it the most. In 1973 McNamara, president of the World Bank, also concluded that a large part of the poorest 40% of the developing countries’ population did not profit from the high growth figures of GNP10. On top of that, in the Netherlands social and third world movements were in advent in this period. In the background, the higher level of welfare, and the upcoming television at which people could watch what was going on, on the other side of the world, made the community more supportive of development aid.

10

(15)

Consequently, this recognition altered the development aid policy to an addition of the notion of distribution, next to the notion of economic growth. During the 1960s two basic assumptions were the basis of the development aid policy, namely the removal of bottlenecks which makes the

development process move itself into the right direction, and by determining what the right direction is priories have to be set up by the developing country itself. It remained questionable whether these assumptions would positively affect welfare of the entire society. Therefore the importance of the relationship between economic growth and the distribution of income was introduced as an unequal distribution of income and would negatively influence growth and development. However, the possibility of focussing solely on structural long term development which would not make the poor people better off, was taken into consideration. In order to tackle the problems of an unequal

distribution it was proposed to focus a new policy on changes in economic and social structures which would create a more equal distribution of knowledge, power and income. The policy should focus more on the poorest people of a developing country. It was believed that only then complete development will take place which would serve as a basis of macro-economic growth.

At that time, it was believed that the developing countries endeavoured economic, political and social independence as quick as possible and wanted to posses a carefully selected developing model. In the light of this self-reliance method short term development aid could be issued to enhance the country’s development process in such a way that it barely influences the country’s independence. From a micro point of view aid programs could be set up that encourage people to ownership and initiative of economic, social or political development processes, which promotes commitment.

In a document of the 1975 budget it is noted that the existence of a social political structure that enables a policy focussed on the developing country’s improvement, ensured that the whole community would profit from development aid. In addition it is noted that special attention was drawn to its human rights policy. However, often there is some tension between equally distributing the profits from the development process on one hand and the self-reliance method executed by the country itself on the other hand. In the past this was generally solved by accepting priorities that were set up by the elite. As a consequence, profits from development did not reach the poor and empowered the income and power gap. Preferably, the best combination of the two targets was believed to be determined by the country. It was believed that this could be achieved in two ways. First, the expenditure of

development aid and prioritizing the needs of the poor aid should be discussed with local authorities. Second, the spending development aid should go through those channels that ensure that the poor are reached as much as possible.

In the same document it is also suggested that another dimension of aid should be added to Dutch development aid, the alleviation of acute emergency situations. Reasons given were increasing scarcity, the experience that necessary structural changes are put into place very slowly, and the realization that the groups that are not reached through development aid are larger than expected. Besides, some acute emergency situations were that persistent that they had become more structural than incidental.

(16)

issued. This meant that the existing criteria, i.e. the level of poverty, the actual need for assistance from developed countries, policy focussed on development of the entire community and in addition, giving attention to human rights, became of more importance as they had to be taken into

consideration too during decisions on specific projects and channels per country11.

Pronk, who was minister of development aid during the cabinet Den Uyl (1973-1977) added Upper-Volta (later on Burkina Faso), Northern-Yemen, Sri Lanka, Jamaica and Cuba, to the focus countries. General focal countries were Bangladesh, India, Indonesia, Kenya, Pakistan, Peru, Sudan, Tanzania, and Surinam. Special focus went to Colombia, Egypt, Nigeria, Tunisia, Turkey, and Zambia. The minister was being criticized for focussing on Cuba and Indonesia. The criterion for choosing Cuba was ‘the level of existence of a social-political structure that enabled the creation of a policy focussed on the development of the entire community’, which was criticized as being politically ideological. The minister claimed that attention was merely paid to the country’s executed policy and not to the political signature of the government. The selection of Indonesia was felt as a contradictory choice as the minister claimed earlier that no aid should be issued to countries that largely violated human rights.

The cabinet-van Agt was set up in 1977 when Den Uyl failed to form a second cabinet. In this period the Dutch economy deteriorated, which led to massive unemployment and an increasing budget deficit. De Koning became the new minister of development aid and removed some countries, such as Cuba and Jamaica, of the list of focal countries. The minister realised that there was a lack of

specialised resources to assist developing countries. He claimed that, by reducing the number of focus countries, the quality level of development aid could be preserved. When Jamaica was removed from the list of focus countries, the Dutch government promised to grant this country financial resources for the next 4 or 5 years, in order to complete existing projects. However, in 1980, the year of the

elections, that money was pulled together and donated in one amount to the Bank of Jamaica. No clear reason was given for this pre-disbursement.

1.1.5 1.1.51.1.5

1.1.5 Changing perspectives startChanging perspectives start to emergeChanging perspectives startChanging perspectives start to emerge to emerge in the 1980s to emergein the 1980sin the 1980sin the 1980s

According to Molenaars and Renard (2007) Dutch development aid from 1980 – 2000 was more focussed on structural development programs than the periods before. Nekkers believed that this had to do with upcoming of the Four Asian Tigers, the regions that demonstrated high growth rates and brisk industrialization without development aid12.

In 1981 the second cabinet-van Agt was formed. Van Dijk, who was successor to De Koning as minister of development aid, was asked to produce a memorandum on the policy of focus countries. However, this was never created as the cabinet fell in 1982 as a consequence of the disagreement of the labour party-ministers on the financial and economic policy, and especially on the funding of the employment policy. As a result, the third cabinet-van Agt was formed. This minority government functioned as a transition cabinet, mainly to call the elections.

11_{Nota Bilaterale Ontwikkelingssamenwerking (1976)}

12

(17)

In the next cabinet, cabinet-Lubbers, Schoo was assigned as minister of development aid. In 1984, she published the memoranda ‘Enrichment Bilateral Policy’ and ‘Development Cooperation and Employment’. The budget from development assistance remained 1,5% of the Net National Income. It was claimed that fighting poverty and economical self-sufficiency should be combined. Next, the effectiveness of development aid became a focal point. In addition, in terms of bilateral aid, the

development of the rural areas and the industrial development was focussed on. Also, the policy stated that the position of females in the developing countries had to be concentrated on and ecological aspects were of importance too. Finally, the private sector, business community, and social

organizations would be used more often. It was expected that the Dutch economy and employment profited from development assistance. The list of focal countries were changed into 10 program countries, 20 sector countries and 25 regional countries in three regions (Southern African, the Sahel-countries, and Central-America).

In 1986, the second cabinet-Lubbers, Schoo was succeeded by Bukman, who did not change much in Schoo’s development aid policy. In 1989, Bukman did present the memorandum ‘Quality, a first move for the 1990s’ in which attention is drawn to topics such as employment opportunities in developing countries. In addition a note was created on extra development aid to countries in which a political process of democratization was happening. When a new democracy emerged, such as the Philippines, the country should be assisted not only politically, but economically as well. In this period, a new region is added, de Andes region, with 5 regional countries Bolivia, Peru, Chile, Columbia and Ecuador. Sector country the Philippines is included as well. At this point the number of assisted developing countries added up to 61.

1.1.6 1.1.61.1.6

1.1.6 PrimaryPrimary Dutch selection criteria in the 1990sPrimaryPrimary Dutch selection criteria in the 1990s Dutch selection criteria in the 1990s Dutch selection criteria in the 1990s

When the second cabinet-Lubbers was replaced by the third cabinet-Lubbers in 1989, Bukman was substituted by Pronk, who had been minister of development aid before, in the cabinet-Den Uyl from 1973 – 1977. In 1990 the memorandum ‘A World of Difference’ was issued. Main goal of the development aid policy became a permanent fight against poverty. Education, employment and health care needed more attention. In addition, the position of women in developing countries and ecological problems played a more central role in development aid. In 1992 Pronk fiercely criticized Indonesia’s human rights policy. As a consequence, Indonesia reacted ferociously which led to a termination of Dutch development aid. In this year, in fact, 15 countries were removed from the list of assisted developing countries. Reason for this was because of the countries’ policy’s; in China, Sri Lanka and Sudan human rights were largely violated, which made bilateral aid unfeasible.

(18)

country should have a decent human rights policy. Secondly, there should be a proper social and economical policy and thirdly, aid should be used for what is was intended for.

Herfkens was the next minister of development aid in the second cabinet-Kok in 1998 and changed a number of items in the development aid policy set up by Pronk previously. In 1999 she reduced the number of countries that received development assistance from about 100 to 50; the minister wanted to issue structural aid to a reduced number of countries. In addition, she wanted to adapt the selection criteria introduced by Pronk:

1. First criterion is the existence of a proper social and economic policy. 2. Secondly, the governance quality, including corruption, human rights, and

democratization.

3. Thirdly, the poverty level and 4. Fourthly, the need for help.

Then there were some additional conditions for the countries that meet these criteria. For example, the quality of existing aid programs, the country’s role in the support of the system of laws in its region, and the cultural or social and economical relationship with the Netherlands. As a consequence, there would be fewer countries that receive a long-lasting structural Dutch development aid, while more countries are eligible for limited development aid. As minister of development aid, Herfkens produced important results in basic health care, such as the fight against AIDS, polio and malaria, and the availability of affordable medication. In addition, she fought for primary education, debt relief and aid to Africa. Concerning trade she managed a better entrance to the European Union market and made an effort for the achievement of the international 0,7 norm in other countries.

1.1.7 1.1.71.1.7

1.1.7 More pronouncedMore pronounced importanceMore pronouncedMore pronouncedimportanceimportanceimportance of results from 2000 of results from 2000 of results from 2000 of results from 2000

In 2002 cabinet-Balkenende starts off without a minister of development cooperation. Development cooperation became a State Secretariat. In this same year this cabinet ends and at the start of 2003 the second cabinet-Balkenende with van Ardenne-van der Hoeven als minister of development cooperation. In 2003, she published the policy note ‘Indebted to each other. A

development cooperation policy for the years ahead’. Starting point was that the 0,8% of GNP would be spent on development aid, would remain. In this policy the importance of results was more pronounced, which would be measured by a new assessment method. In addition, citizens, companies, institutions, organisations and governments are more involved in development

cooperation. One list of 36 partner countries would be created with whom will be cooperated bilaterally for multiple years. In addition, there would be a stability fund to be able to quickly fund peace, safety and development activities13 .

In the third cabinet-Balkenende, which was a minority government functioned as a transition cabinet, mainly to call the elections and to submit the budget for 2007. Van Ardenne-van der Hoeven remained minister of development cooperation. In November 2006 Koenders, who was a Member of Parliament at that time, asked the Dutch Lower Chamber about the government’s opinion about very

13

(19)

specific conditionalities, i.e. the requirements a government needs to meet in order to receive development aid. In 2002, the IMF set up Conditionality Guidelines in which the leading principle is that conditionality should only be applied to economic arrangements that are essential to meet the goals of the program. In addition, 2005 the World Bank executed a Review of Bank Conditionality which led to Good Practice Principles. These principles focus on ownership of the recipient country, and state that conditionality should only be applied to economic arrangements that are essential to meet the goals of the program and that these may not be used to force extra government reforms on this country that are not part of its policy agenda. The Dutch government answered the question posed by Koenders that it is in favour of these policy changes. The government believed that, where

necessary, it was suitable to use conditionality for essential arrangements in order to be able to achieve the specific goals of that program.

At the end of 2006 the fourth cabinet- Balkenende was formed and after 100 days, thus half way 2007 the policy program was presented. Koenders became the new minister of development cooperation. In October 2007, Koenders wrote the policy letter ‘Everyone’s Concern’, in which it is stated that the Dutch government stands by the importance of good governance. However, the government realized that the focus on good governance by donor countries therefore led to the situation in which countries that needed the assistance the most were not reached because they did not meet the conditions to receive program aid. As a result, it was concluded that focussing on achieving a program’s goal cannot lead to a selection of merely those countries that are successful in achieving their development goals. Therefore, the Dutch government decided , together with other donor countries, to deliberately support fragile countries, as part of the list of partner countries, i.e. as the countries that receive assistance. The Netherlands use three profiles to which 40 developing countries are divided:

1. Accelerated Millennium Development Goals (MDG)- achievement. Main criteria: low income country, fragility problem

is not dominant, government structures are suitable enough to work with 2. Safety and development. Main criteria: Fragility or massive inequality blocks the

reduction of poverty

3. Extensive relationship. Middle income country or moving towards that status, fragility problem is not dominant.

For an overview of the countries that are divided into these three categories, see appendix 1.

1.1.8 1.1.81.1.8

1.1.8 From an From an IFI From an From an IFI IFI IFI point of viewpoint of viewpoint of viewpoint of view

(20)

goals, it was decided to support countries that are less likely to be able to meet these criteria too, as part of the list of partner countries. All of these countries were then grouped into three profiles.

The concept of Conditionality relates to the selection of certain countries, and has gone through different stages throughout the years in international development. From a financial support point of view, the concept has evolved in the undertakings of the International Financial Institutions (IFI); the IMF and the World Bank and has become more prominent in international development programs. Conditionality in development aid policies is used nationally as well as internationally in aid institutions, in order to ensure a higher rate of aid effectiveness such as by providing incentives to recipients’ governments to implement policies that are believed to improve the country’s welfare.

The next section describes how the concept evolved at the IFIs and how this influenced their disbursement of aid.

1.2

1.2 The past

The past of the IFI’s Condi

The past

of the IFI’s Condi

of the IFI’s Conditionality

of the IFI’s Condi

tionality

The IMF and the World Bank were founded after the agreements in Bretton Woods in 1944. In the light of rebuilding the international economic system after World War II, the early goals of the IMF were to disburse short-term BOP (Balance of Payment) credits and stabilize post-war financial systems; the World Bank’s ultimate goal was to promote long-term growth in member countries. At that time, Conditionality was not intertwined into their lending activities yet in the same way it is at present, but it increasingly began to develop (Dreher, 2002). For example, around the end of the 1970s and the beginning of the 1980s, assistance was disbursed already at a higher level of Conditionality than in the mid-70s (Dell, 1981).

1.2.1 1.2.11.2.1

1.2.1 IMF ConditionalityIMF Conditionality IMF ConditionalityIMF Conditionality

The International Monetary Fund lends to help its members deal with balance of payments problems and restore sustainable economic growth. Also, the IMF frequently shares its knowledge with member countries by providing technical assistance and training in a broad range of areas, such as central banking, monetary and exchange rate policy, tax policy and administration, and official statistics.

Since around the 1950s, the IMF lending involved government commitment on macroeconomic policies from the borrowing country to enable this country to repay the loan. Initially, the industrial countries used the IMF for temporary financing in case they were facing balance of payment (BOP) difficulties. However, from around the beginning of the 1980s, these increasingly accessed world capital markets, while more and more developing countries turned to the IMF as their main source for BOP credit (Polak, 1991).

(21)

a clear division was made already between poor-performing, low income developing countries, to which SAF was issued, and the better performing industrial countries who would be more likely to repay ESAF.

Due to the accumulating, complex and structural problems of the developing countries that increasingly turned to the IMF, the organisation had to change its course to a more long-term perspective which went beyond financial assistance and to provide more structural assistance. This also influenced the Conditionality attached to it. After an extensive review in 2002, the IMF recognised the importance of strong country ownership as foundation for successful economic policy programs. Country ownership refers to sufficient political support within the country to implement the development plans. It requires sufficient institutional capacity for defining and implementing these plans. Therefore, it is believed that development aid is most effective when it is driven by the demand from the country, and is additional to the country’s own development plans14

1.2.2 1.2.21.2.2

1.2.2 Compliance with IMF Program Conditions Compliance with IMF Program Conditions Compliance with IMF Program Conditions Compliance with IMF Program Conditions

The loans that the IMF issue, consist of different phases. The organisation uses different tools in order to see whether a country is still following the policy program it agreed on.

First there are the prior actions. Before the IMF provides assistance, a country agrees to take certain actions beforehand to ensure success of the program and which ensures the IMF that the country is on the right track. Next, there are performance criteria that have to be met in order to receive the agreed amount of financial aid. The IMF uses two types of performance criteria; structural performance criteria and quantitative performance criteria. Structural performance criteria refer to structural measures that are believed to be essential to the program’s success such as a restructuring of the energy sector, while quantitative performance criteria entail macroeconomic policy variables such as a maximum level of government borrowing. Structural benchmarks are measures that cannot be monitored well enough to be performance criteria or are for small steps in a reform process. An example is the introduction of a value-added tax in Mauritania —a single structural objective, but one that takes a long time to achieve—involved a series of 19 structural benchmarks. Another tool is a program review, which is used as assessment of the program’s objectives and to discuss possibly necessary adaptations of the program15.

1.2.31.2.31.2.3 World Bank Conditionality1.2.3 World Bank ConditionalityWorld Bank Conditionality World Bank Conditionality

The "World Bank" is the combined name used for the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Together these organizations provide low-interest loans, interest-free credit, and grants to developing countries. It supports the efforts of developing country governments to build schools and health centers, provide water and electricity, fight disease, and protect the environment.

(22)

In the 1980s en 1990s, the World Bank’s structural adjustment programs, and the Conditionality attached to it, were focussed on resolving short-term imbalances and promoting higher economic growth. Conditionality was used for improving the early reforms. However, after reviews of the effectiveness of development assistance, it was concluded that chances are higher that reforms are being prolonged when the reform program had been initiated by the country’s government itself and was suited to that country’s specific circumstances. Therefore, the view toward policy-based lending and the Conditionality attached to it increasingly evolved. Even today, the debate is still continuing about what the appropriate type of Conditionality should be that is appended to development assistance.

1.2.4 1.2.41.2.4

1.2.4 Compliance with WB program conditionsCompliance with WB program conditionsCompliance with WB program conditionsCompliance with WB program conditions16161616

The World Bank uses a Project Cycle in which projects that the World Bank finances, are conceived and monitored. The selectivity criteria are based on an extended evaluation of a country’s policy environment.

In order to access World Bank lending, first of all it is required that the country has its own development plan. In low-income countries the Word Bank uses a Poverty Reduction and Strategy Paper (PRSP) that explains the country’s development priorities and strategy. The World Bank and other aid agencies then integrate their assistance into the country’s own strategy. Then, the Country Assistance Strategy (CAS), which is a framework for the World Bank’s assistance to a country, is prepared in cooperation with the government and interested stakeholders. In case of low-income countries, the CAS is based on priorities defined in the country’s PRSP.

Next, once a project has been identified, the World Bank creates a Project Concept Note (PCN) which is a document that describes the basic elements of the project, its proposed objective, likely risks, alternative scenarios to carry out the project, and an expected timetable for the project approval process.

During the preparation phase, the technical, institutional, economic, environmental and financial issues concerning the project will be studied and addressed. Such an evaluation is necessary for the World Bank to help ensure that the country is environmentally sound and sustainable.

In the appraisal phase, the World Bank reviews the work that has been done during the identification and preparation. After that, the World Bank and the country that requests the financial assistance, negotiate on its final shape. When both parties come to an agreement on the terms and conditions of the loan and following approval, the loan agreement is formally signed by their representatives.

Once the loan has been approved, the borrowing government, with technical assistance from the World Bank, prepares the specifications and evaluates bids for the procurement of goods and services for the project. The World Bank reviews this activity to ensure that its procurement guidelines have been followed. If they have, the funds will be disbursed.

16

(23)

After the completion of a project, the World Bank’s Operations Evaluation Department (OED), which is an independent evaluation unit within the World Bank, conducts an audit to measure its outcome against the original objectives.

1.3

1.3 Empirics on

Empirics on Good Policies, Good Governance and Conditionality

Empirics on

Good Policies, Good Governance and Conditionality

Looking at the emergence of the concept of Conditionality in Dutch development aid history and in the IFIs as well, it can be concluded that a recurrent theme in Conditionality is, the existence of Good Policies in a recipient country. When looking at the definition of Good Governance by the World Bank For, Good Policies seem to be a prerequisite for Good Governance. The World Bank defines Good Governance as:

“…the traditions and institutions by which authority in a country is exercised for the common good. This includes:

I. the process by which those in authority are selected, monitored and replaced,

II. the capacity of the government to effectively manage its resources and implement sound policies, and

III. the respect of citizens and the state for the institutions that govern economic and social interactions among them.”17

Following the World Bank’s view, one would expect to find numerous explanations and evidence of the importance of Good Governance as a condition for aid to be effective in aid effectiveness literature. However, empirical evidence appears to be inconclusive and Good Policies is a much discussed topic.

1.3.1 1.3.11.3.1

1.3.1 Empirics on Conditionality until the 1990sEmpirics on Conditionality until the 1990s Empirics on Conditionality until the 1990sEmpirics on Conditionality until the 1990s

As the previous section described, the nature of Conditionality has changed over time. Before the 1990s Conditionality was, for example, more often attached to short-term aid programs. During this period, the effectiveness of Conditionality already was a vivid topic of debate among researchers. Among the reasons why Conditionality seemed to be ineffective, recipients’ poor compliance rates and donors’ lack of enforcement are mostly discussed.

Until around the 1990s, little empirical evidence was found on the effectiveness of Conditionality in relation to aid. A lot of arguments given seem to be a poor compliance rate with respect to its effectiveness to produce the intended results, such as growth or poverty reduction. For instance, Killick (1984) researched studies until the early 1980s and concluded that there is little statistical evidence that countries developed the intended way as a consequence of the use of Conditionality. After Spraos’ (1986) analysis of IMF data from 1971 – 1980, he also claims that there seems to be little convincing evidence that compliance with Conditionality could have improved the effectiveness of certain IMF-supported programs. Poor borrower compliance with the requirements seem to be one of the reasons of the ineffectiveness of Conditionality.

17

(24)

Also, there appeared to be a lack of donor enforcement. In other words, donor sanctions did not seem to be adding to an increase in aid effectiveness. Easterly (2005) researched the impact on recipients’ policies during the period 1980–1999, in which repetitive policy-based adjustment lending took place. He did not find a positive impact on their policies. Heckelman and Knack (2005) explore the same period and analyse the effect of aid on market-liberalizing policy reform, which would lead to faster economic growth. They find that higher volumes of aid lead to slower reform.

Though, is there a way Conditionality can improve the effectiveness of an aid program? In the pre-1990 period, it is frequently noted that Conditionality can add to aid effectiveness when there is ownership of the policy. For example, Mosley (1987) claims that Conditionality could have enhanced the effectiveness of a financial transfer in case it is additional to what the recipient would have done anyhow.

1.3.2 1.3.21.3.2

1.3.2 Empirics in tEmpirics in the next dEmpirics in tEmpirics in the next dhe next dhe next decade ecade ecade ecade

It seems that from around the late 1990s empirical conditionality aid effectiveness literature is mainly dominated by reactions on Burnside and Dollar’s (1997/2000) paper on Good Policies. The first version of this working paper was issued in 1997. This paper has created a new direction to empirical literature on the relationship between foreign aid and growth, by being the first to address economic policies in the aid-growth discussion. They use World Bank data on foreign aid in order to determine whether the effectiveness of aid will be greater in an environment with low institutional and policy distortions and attempt to predict a recipient’s growth rate by using its budget surplus, inflation rate and openness as determinants of Good Policies, by means of regression analysis. In other words, they use a policy index that intends to show the recipient’s growth rate given its budget, inflation and openness policies. They combine this policy index with foreign aid and find that aid has a positive impact on growth in developing countries with good fiscal, monetary and trade policies. They conclude that aid has a positive effect on growth in developing countries with institutions and policies that perform above average, whereas aid has no positive effect in countries characterized by average policies. The World Bank definition above lays out that one aspect of Good Governance is the ability of the country’s government to implement policies that are in the country’s best interest. Therefore, Good Policies seem to be a part of Good Governance.

The papers from the last decade mainly discuss the concept of Good Policies. Burnside and Dollar’s (1997/2000) papers on Good Policies are one of the few papers that find empirical proof that Good Policies do add to the effectiveness of aid. Many disagree about this relationship. Most counter-argument given relate to methodological errors in data used and offer adaptations. The importance of environmental factors is discussed as well. In addition, numerous comments are given on using Good Policies as Conditionality for development aid and on the use of Good Governance for aid effectiveness in general.

(25)

(1997/2000) and which would change the research’s outcome since Dalgaard and Hansen (2001) feel that these observations are possible leverage points of the aid/policy interaction term, in stead of being outliers. Brumm (2003) addresses another aspect of Burnside and Dollar’s (1997/2000) research. He believes that there are measurement-errors present in the proxy used for economic policy and uses a covariance structures analysis and finds that the coefficient of the variable that combines budget, inflation and openness policies is negative and statistically significant. Therefore, he concludes that foreign aid negatively affects economic growth even for recipient countries with Good Policies.

A smaller amount of literature discusses different aspects of the recipients’ environment in relation to Good Policies, growth and aid effectiveness. For example, Collier and Hoeffler (2004) comment on the case in which recipients are recovering from a conflict and research the contribution of policy to growth in these types of recipients. They use World Bank CPIA (Country Policy and Institutional Assessment) data and find that growth is more sensitive to policy in post-conflict societies. Dalgaard, Hansen and Tarp (2004) address the importance of climate, which is seen as an evident environmental characteristic and influences the effectiveness of foreign aid. While finding weak evidence of a strong link between policies and aid, they do find that aid does add to growth, but that the size of this effect depends on climate-related circumstances such as the fraction of cultivated land in a tropical area. Guillaumont and Chauvet (2001) argue that, next to Good Policies, exogenous environmental factors, such as climatic shocks and terms of trade, are important factors that determine aid effectiveness. They feel that aid should be allocated to recipients with an environment that is vulnerable to external shocks as the occurrences of these shocks increase the need for aid which would increase aid effectiveness. They pose that aid could lessen negative shocks and support Good Policies.

Papers, such as from Dalgaard and Hansen (2001) conclude that one should be cautious in designing a development program based on the Good Policies stance that is connected to the World Bank’s report ‘Assessing Aid – What Works, What Doesn’t, and Why’. In this same respect, Hermes and Lensink (2003) claim that there are other options available such as providing aid in order to assist countries in developing Good Policies, in stead of using it as Conditionality. Easterly, Levine and Roodman (2004) too, are concerned about using Good Policies as an answer to aid effectiveness. They also replicated and extended the data Burnside and Dollar used for their research on the link between aid, policies and growth, and which raised more doubts about the effectiveness of aid.

‘‘‘‘The Use and UsefulnessThe Use and UsefulnessThe Use and UsefulnessThe Use and Usefulness of Conditionality of Conditionality of Conditionality of Conditionality’ ’ ’ ’ –––– A special focus on the Least Developed Countries

‘‘‘‘The Use and Usefulness

The Use and Usefulness

The Use and Usefulness of Conditionality

The Use and Usefulness

of Conditionality

of Conditionality

of Conditionality’ ’ ’ ’ ––––

A special focus on the Least Developed Countries

Abstract

Abstract

Abstract

Abstract

List of Abbreviations

List of Abbreviations

List of Abbreviations

List of Abbreviations

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Introduction

Introduction

Introduction

Introduction

PART I

PART I

PART I

PART I: WHY CONDITIONALITY IS USED

: WHY CONDITIONALITY IS USED

: WHY CONDITIONALITY IS USED

: WHY CONDITIONALITY IS USED

1.1

1.1

1.1

1.1

From a national point of view:

From a national point of view: Dutch development aid

From a national point of view:

From a national point of view:

Dutch development aid

Dutch development aid

Dutch development aid

1.2

1.2

1.2

1.2

The past

The past of the IFI’s Condi

The past

The past

of the IFI’s Condi

of the IFI’s Conditionality

of the IFI’s Condi

tionality

tionality

tionality

1.3

1.3

1.3

1.3

Empirics on

Empirics on Good Policies, Good Governance and Conditionality

Empirics on

Empirics on

Good Policies, Good Governance and Conditionality

Good Policies, Good Governance and Conditionality

Good Policies, Good Governance and Conditionality