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Donor bureaucratic organisation and the pursuit of performance-based aid through multilateral trust funds

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Abstract

Multilateral trust funds have become an increasingly prominent funding mechanism in international development. Yet marked differences exist in the extent to which donors support trust funds. In this study, we argue that differential support for trust funds originates in donor domestic politics. Specifically, it results from differences in national bureaucratic rulebooks that incentivise aid officials to support trust funds more or less. Because trust funds place a high premium on performance and results, aid officials from donor countries whose aid bureaucracies are set up to promote performance and results are more likely to support trust funds than their counterparts from aid bureaucracies that are less performance-oriented. We find robust support for differential use of trust funds in terms of incidence of usage, type of preferred fund and outsourcing behaviour, drawing on a data set of World Bank trust funds. Our project contributes to the understanding of international development cooperation by mapping donor political economies to the rise of trust fund usage. We also contribute to a better understanding of the global diffusion of performance-based evaluation.

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Notes

  1. Trust funds have become indispensable for many organisations. Current total volume is US$ 20 billion (Reinsberg 2017a), accounting for 85% of the World Food Programme and 80% of the United Nations Development Programme.

  2. The governance structure of trust funds involves three constitutive elements: (1) they are governed separately from core resources of the organisation; (2) their donors can take policy decisions that do not need approval of the Executive Board; (3) donors may have special tailored reporting requirements, as agreed with the trustee.

  3. This resonates with a burgeoning literature on informal governance, which emphasises how stakeholder countries use informal channels to influence international organisations (e.g. Kleine 2013; Westerwinter 2019). For other external influences on World Bank programing see, e.g., Dreher et al. (2009), Kilby (2013).

  4. Across Scandinavian countries, performance-oriented principles have come to undergird the management and delivery of goods and services within and outside country, and led to a significant increase in outsourcing to non-state actors in international development including trust fund networks, other international organisations, and non-governmental organisations. See Dietrich (2016) for more discussion on market-based approaches to governance across Scandinavian countries.

  5. Author interview with Swedish Executive Director of the World Bank, Washington, D.C., 6 August, 2013.

  6. Author interviews with Australian and Canadian Executive Directors of the World Bank, Washington D.C., 19 August 2013 and 8 August 2013, respectively.

  7. Author interview with British Executive Director of the World Bank, Washington D.C., 27 August 2013.

  8. Author interview with U.S. Executive Director of the World Bank, Washington D.C., 20 August 2013.

  9. Author interview with senior French government official, Ministry of Finance, Paris, July 3, 2013.

  10. Author interview with German Executive Director of the World Bank, Washington D.C., July 3, 2013.

  11. This includes the 30 DAC members and 5 observer states (Table A1 in the Supplemental Appendix).

  12. The FY 2002‒2013 period is the longest possible for which detailed information on trust fund contributions are available.

  13. Table A2 in the Supplemental Appendix provides an overview of our empirical strategy.

  14. The measures are share of outsourcing, human resource management, performance assessments, independent regulators, performance budgeting, and performance pay, measured as scale-free index values (with the exception of outsourcing, which is calculated as a share of total output).

  15. We obtain this by taking the difference of the exponentiated linear predictions for both hypothetical cases. The average donor is engaged in 89 trust funds.

  16. Figure A3 in the Appendix shows the bivariate correlation after partialling out the effect of control variables. The plot shows that the UK is an outlier, supporting more trust funds than what would be expected based on control variables.

  17. Table A4 shows the descriptive statistic for the regression sample.

  18. Table A13 in the appendix shows the descriptive statistics for the regression sample.

  19. The lack of significance is the likely result of the short time series and the related loss of power. Reassuringly, the direction of the effects is preserved.

  20. As part of ongoing efforts to improve its development impact, the World Bank Group has engaged since 2001 in a series of reforms of its management of trust funds in four phases (such as strengthening financial controls and oversight (phase I: 2001‒2007); mainstreaming trust funds in WBG processes and procedures (phase II: 2007‒2013); and improving the strategic oversight and management of the entire trust fund life cycle (phase III: 2013‒2017). In addition, the second and third phases also tried to reduce the inefficiencies caused by the proliferation of small trust funds by progressively raising the minimum threshold to establish new trust funds to USD 1 million first (phase II), and USD 2 million (phase III).

  21. Given the use of observational data, our results are not causal but nonetheless strongly suggest that performance-orientation is an important determinant of trust fund use.

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Authors and Affiliations

  1. Department of Political Science and International Relations, University of Geneva, Blvd du Pont d`Arve 40, 1205, Geneva, Switzerland

    Simone Dietrich

  2. School of Social & Political Sciences, University of Glasgow, Adam Smith Building, Bute Gardens, Glasgow, G12 8RT, United Kingdom

    Bernhard Reinsberg

  3. Department of Government, University of Essex, Wivenhoe Park, Colchester, CO4 3SQ, UK

    Martin C. Steinwand

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  1. Simone Dietrich
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Correspondence to Martin C. Steinwand.

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Dietrich, S., Reinsberg, B. & Steinwand, M.C. Donor bureaucratic organisation and the pursuit of performance-based aid through multilateral trust funds. J Int Relat Dev 25, 709–738 (2022). https://doi.org/10.1057/s41268-022-00259-x

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