Janine Wedel - Collision and Collusion - The Strange Case of Western Aid to Eastern Europe

The project was successful in its immediate objectives. However, unknown to the British, at the same time, the Hungarians were receiving Canadian assistance with World Bank funding to establish a wider network of Job Clubs.… With the benefit of hindsight this may not have been the best use of scarce resources from both donor and recipient.62

But some donor officials argued that time and money were often wasted by requiring recipient governments to correspond with a wide variety of agencies, each with its own procedures, criteria, and information flows. Reducing project duplication, for example, would have required each specific donor to review other donors’ projects before issuing a call to potential contractors for proposals. With individual strategic goals, capabilities, and time frames, it often was not in the self-interest of bilateral donors to coordinate assistance.

Nevertheless, “aid coordination” was a popular topic of discussion among donors, and many meetings, including those of the G-24—charged with the daunting task of coordinating all the programs—were devoted to this purpose. Meetings among G-24 officials at high political levels bore few concrete results in coordinating specific projects, because the officials present often were not at the working level and not well enough versed in actual conditions and projects. As Alan Mayhew, the former head of the EU’s PHARE program, summed it up, “The G-24 coordination process never coordinated.”63 Through invocations that would continue for the duration of the aid effort, officials called for “better coordination” and critics decried the “lack of coordination.” The Institute for East West Studies, which conducted several studies of aid to the region, concluded that “emphasis should not be on increasing financial commitments but rather on improving disbursement procedures of the donors and the absorptive capacity of recipients.”64

To rectify problems of coordination (or at least to appear to be doing so), donors widely discussed and even set up some databases and “clearinghouses.” One clearinghouse that received a lot of attention was set up by the OECD. The OECD Register, an online database of technical assistance to Central and Eastern Europe, was located at OECD headquarters in Paris. Established for use by donors and recipients in planning and coordinating aid projects, the information contained in the Register ostensibly provided “an overview of assistance being given in relation to needs and priority areas, with a view to identifying duplication, overlap, mismatches and gaps.”65 But no database or technology, no matter how sophisticated, could overcome the fundamental reality that programs were set up to serve the strategic and cultural agendas of individual donors. Technical mechanisms could not provide incentives to solve problems that were fundamentally political.

However, there were cases in which multiple donors funded “demonstration” projects, often high-profile ones, as we will see in chapters 2 through 4. Some donor officials suggested that coordination among donors could occur when they worked together, even sharing costs, on specific large and complex projects.66 But only in cases in which multiple donors saw individual benefits in coordinating projects did aid coordination occur.

Just as important as impediments to coordination, neither the organization of the aid effort itself, nor the pressure to spend quickly, were generally conducive to innovating, incorporating recipient input, or dealing effectively with the societies of the region. Despite new mechanisms, institutions, and programs created amid the excitement of the aid effort to the Second World, the nuts and bolts employed in much of the effort were similar to those employed in the Third World. This was partly due to long-established regulations and procedures, designed to minimize misuse of funds, that could not be bypassed or could be skirted only through the special authorities or high-level political interventions described earlier. As the EU’s Mayhew reported, to reduce corruption, the PHARE program was “set up in the African style … where you have a delegation in country that has to carry out all sorts of checks, so it becomes bureaucratically very heavy.”67

Further, although donors perceived the Second World as unique, they had little real understanding of its historical, economic, political, and sociological experiences, and little organizational capacity to deliver new programs. Following 40 years of Cold War foreign aid, during which capitalist and communist countries aided the Third World in an attempt to buy loyalties, the aid programs most available were those that had been implemented in the Third World. Almost by default, donors set many of them into motion. Many were ill-matched to recipient needs and stifled innovation.

For example, USAID, with its panoply of preexisting, standardized rules and congressionally mandated regulations, generally discouraged risk taking and allowed little flexibility.68 There was pressure to put a well-crafted square peg into the latest round hole, in the manner of “We have this program in Honduras. We can implement it in Hungary.” Civil servants who had handled Cold War aid were given Second World assignments, in which, they strongly suspected, their careers would benefit more by fulfilling bureaucratic mandates and maximizing spending than by developing programs tailored to recipient needs. Almost any bureaucrat, no matter how removed from the setting or lacking in host-country expertise, could perform adequately simply by adhering to the guidelines.

Standard contracting procedures also worked against aid flexibility. Under a long-developing body of regulations,69 contracting procedures could be numbingly complex and time consuming. Administered from Brussels, PHARE was constrained by regulations designed to ensure fairness that often worked against effectiveness. The mandated “geographical balance” among its 15 member states sometimes meant not hiring the consultants with the most expertise. This point was not lost on the recipients. As a Polish newspaper reported in 1994: “In the post-war years everyone knew what the Marshall Plan was. Today in Central and Eastern Europe it is common knowledge that there are strings attached to the money coming from Brussels.”70

And so the donors’ bureaucracies, largely designed for operations elsewhere, rattled and clanked into Central Europe, and later into Russia and Ukraine. There they encountered, and colluded and collided with societies that functioned in some fundamentally different ways from their own. A high-level donor official characterized the challenge as such: “The bureaucracy puts all sorts of obstacles in the way to prevent you from reaching your political objectives and then criticizes you for failing to meet them.”71

DILEMMAS OF AID RELATIONSHIPS

One of the most critical aspects of aid-program structure was the extent to which it incorporated recipient input (and from whom it drew this input). The EU tended to treat the nations of Central Europe more as potential partners than did the United States. This difference in attitude was evident in the way control was exercised and recipient input structured. U.S. assistance maximized Washington’s control over aid to Central Europe, with planning and management authority in the United States, rather than with U.S. personnel overseas. Important decisions (as well as many less important ones) were made at home, rather than in the field. At first, USAID field representatives had no signature authority to disburse funds and served only as advisers to the U.S. ambassador in the recipient country and reporters to Washington. Because USAID staff in the region generally had little authority (a clause in some consultants’ contracts stipulated that any agreements made with USAID representatives overseas were not legally binding), decision making was often delayed.