Aid for the poor, not for the consultants
ActionAid International, the South African NGO and watchdog, has released a new report, Real Aid 2, criticizing what they call an excessive use of highly-priced consultants by development agencies:
One quarter of the aid provided by rich countries - or $20bn a year – funds expensive and often ineffective western consultants, research and training instead of going directly to the people who need it most… Expatriate consultant typically cost around $200,000 a year with more than one third of this spent on school fees and child allowances – spending which would not be needed if local consultants were used.
In Cambodia, for example, consultants fees were $17,000 a month while government salaries were only $40. In Ghana, even relatively inexperienced consultants earned per day what government officials earned in a month. In Sierra Leone, according to one former UK-funded consultant, daily take-home pay was the same as the Auditor General’s monthly salary.
The numbers are striking, but the real issue is not really high salaries. If we believe that the consultants are the best at what they do and that their work is second-to-none, then often the costs will be worth it and the greatest development impact will be achieved. The key thing is that we have the evaluation mechanisms in place to make sure that they are worth their costs and that our procurement mechanisms are fair and transparent. Many of these consultants may very well not be worth what they are getting.
The real reason why it is so important that we hire more local consultants is not to save money, but rather to teach and train the experts and practitioners that are necessary for reforms and programs to survive once consultants move on. (Not to mention that locals will often have a better grasp of realities on the ground.) Another challenge of the aid curse is that frequently highly skilled workers, such as doctors and lawyers, quit their jobs to become drivers and secretaries at donor offices due to the inflated salaries. This is especially a problem when aid siphons off good workers from the government who are “poached” by large donor projects.
The ActionAid report also claims that almost half of all aid fails to directly target the poor – or what they call phantom aid.
See the related story from which I stole this post’s title. Also see a previous post on the staffing challenge in Aceh.
Comments (8)
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Curious why people are not angry at the local corrupted officals, who make more than that, and most importantly, contribute nothing but create troubles by numerous forms of regulatons. Why do they become so angry only on foreigners, who by the way are paid by foreign governments instead of from taxing local people.
It's unfair!
Posted by: R-Squared | Jul 6, 2006 7:36:21 PM
Without the context, $17,000 a month seems high. But this is out of context. Comparing it with government salaries in totally different economies is not helpful to solving the problem.
There is a problem with capacity building. Once you give someone skills, why would they stay with a government position with a low salary. This is about economics and incentives.
I fully agree in the importance of evaluation. I think improving this would help to correct the wage price for expats and national staff alike.
Posted by: Paul Lawrence | Jul 7, 2006 5:09:26 AM
Thank you for a very balanced entry on the challenge of development aid. I would, however, take issue with three points:
1. First, you mention that the consultants are worth it if they are the best. Question - are they the best PER DOLLAR? Considering the premium attached to an expat, I must be skeptical.
2. Second, I agree that evaluation mechanisms are essential. However, with the caveat that the evaluation is as good as the person evaluating.
3. You mention that expatriates are hired to train local experts. If that is the case, has the ratio of local to expatriate consultants risen considerably over the past decades?
Some further comments, which I developed into a general public choice analysis, are at my blog: http://www.planetd.org/blog/?p=140
However, I must thank you for a balanced, and extremely informative entry and references.
Posted by: Dweep Chanana | Jul 7, 2006 8:17:02 AM
Having done a few weeks consultancy, several years ago, and having worked for an international org for a few months (tax exempt as they are) I guess I've gained a little from this consultancy "scam", are learnt a few things too.
One thing I noticed at the time, about 10 years ago, was that this issue of high fees was already being raised in Zimbabwe - but then consider where they've gone since.
R-Squared asks why not complain about local corruption? - well folks do, which is perhaps why this issue of consulants fees is rarely mentioned.
Personally my thoughts are that the business of providing aid needs to be opened up far more. Sure we should watch for corruption, but that's no excuse for not hiring people with real technical skills when they are needed.
At present it seems many are pretending that previous experience of working as an ex-pat is some sort of high value skill - it isn't. Certainly Western gov't departments shouldn't be sending their civil servants out as consultants without putting the work out to tender.
Posted by: Michael Saunby | Jul 7, 2006 1:57:59 PM
The expat salaries are IMHO not really the big issue in the report. And in a way it's a bit sad that this takes all the headlines from the otherwise very laudable initiative from ActionAid. The critique of donor-supply driven aid is the main culprit of the report, and technical assistance and consultants is only part of this.
In attempting to disaggregate the aggregate aid expenditure on a comparative basis, ActionAid is addressing a real problem. Given a possible future availability of such data for longer time spans, studying aid effectiveness might actually start to make some sense.
ActionAid's methodology might at least be a starting point. If not for anything else then for the purpose of provoking big donors into engaging in some countervailing efforts.
Lars
Posted by: Lars | Jul 9, 2006 8:49:31 PM
Mentioning fee/salary without its relation to output is meaningless. It is not unusual that the $17,000 paid to a consultant may produce only a fraction of that in benefits. If so, the government counterpart should inform the donor representative expditiously. No point in complaing after the fact!
On the other side, the $40 per month slary + benefits paid to a government employee may also be producing only a fraction of that in useful output. In fact, in some cases, it generates negative effects such as sloth, impeding progress and corruption.
So, seeking accountability from both consultants and civil servants is long overdue.
Posted by: Sam Rao | Jul 20, 2006 10:27:34 PM
While it is clearly true that a large amount of aid is mis-spent, some through the inappropriate provision of technical assistance, some in other ways, the Real Aid 2 report misses the point. Consultants are paid according to their opportunity cost. I work as an international advisor in a developing country government and my salary is about ten times that of my local colleagues. However, my opportunity cost is the next best salary I can earn back in the UK. In fact my salary here is probably somewhat less than what I could earn back home and compares only reasonably well with what my friends with similar qualifications in the UK earn. I work here because I want to have an impact on development.
Complaining about the gap in salaries between consultants and local civil servants is really no different to complaining about the the gap between bus drivers in say Nairobi or London.
Posted by: RR | Jul 21, 2006 8:28:13 AM
My experience in several post - conflict countries has been that in order to attract the appropriate person with the right technical, as well as other non - tangibles (language, personal, cultural) skills, you have to pay a pretty hefty package. Otherwise, why would any sane ex - pat take a job where from both a professional and personal development standpoint, conditions are challenging and uncertain. They range from poor health facilities to unmotivated local counterparts who you are trying to capacity build to uncertain political and security situations. "Capacity building" is a phrase I hear often as if building the capacity of your local counterpart, especially in the poorest of countries, can take only 1-2 years. This is simply not the case. As an ex -pat assigned to a local counterpart, one is trying to work against the current of poor local pay resulting in lack of motivation, poor nutrition which affects concentration and productivity, different set of cultural values, varying levels of education, lack of optimism on prospects for the future, and a whole host of other issues that are outside of your control, no matter what level of effort put in. Not a typical day job is it? Meanwhile, colleagues in the developed world, while not changing the world, have more likelihood of having greater results with the same level of effort. What level of pay would you need to be compensated to take on such challenges?
Posted by: Kathy Khuu | Jul 22, 2006 4:05:31 AM