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| Why donor countries are supporting local procurement | Why donor countries are supporting local procurement |
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| Considered in isolation, the idea that aid money should be used to buy local goods and services in beneficiary countries is a no-brainer. Why waste time and funds bringing basic relief items into a country that already has them? Why not maximise aid effectiveness by allowing local businesses – potential drivers of local development in their own right – to benefit? | |
| Local procurement has the potential to create more jobs, increase local capacity, generate greater tax revenues, and take positive steps towards country ownership. Aren't these the objectives stated in aid effectiveness agreements like the Paris Declaration and the Accra Agenda for Action? | |
| The obvious problem, of course, is that local procurement can't be considered in isolation. Other factors come into play: local suppliers may fail to meet the required quality standards; goods may be available more cheaply elsewhere; donor funding may be misappropriated, or fail to reach its intended beneficiaries. | |
| No less significant are political considerations. At a time when household budgets are squeezed, foreign aid is increasingly regarded as an expensive luxury by taxpayers in wealthy countries. | No less significant are political considerations. At a time when household budgets are squeezed, foreign aid is increasingly regarded as an expensive luxury by taxpayers in wealthy countries. |
| When Britain pledged a further £133m to developing country climate schemes in Doha, former chancellor Lord Lawson of Blaby was in the vanguard of a predictable rightwing backlash. It was much the same story in February, when USAid relaxed its procurement regulations. News that the world's largest donor was aiming to channel approximately 30% of its funds through local institutions in developing countries by 2015 was greeted with dismay by US contractors and prompted expressions of concern in Congress. | When Britain pledged a further £133m to developing country climate schemes in Doha, former chancellor Lord Lawson of Blaby was in the vanguard of a predictable rightwing backlash. It was much the same story in February, when USAid relaxed its procurement regulations. News that the world's largest donor was aiming to channel approximately 30% of its funds through local institutions in developing countries by 2015 was greeted with dismay by US contractors and prompted expressions of concern in Congress. |
| Despite such misgivings, however, local procurement can reap dividends. A case in point is the Health Commodities Project, a four-year programme carried out in Nigeria under the auspices of the UK's Department for International Development (DfID) and the Nigeria Partnership for Transforming Health Systems. | Despite such misgivings, however, local procurement can reap dividends. A case in point is the Health Commodities Project, a four-year programme carried out in Nigeria under the auspices of the UK's Department for International Development (DfID) and the Nigeria Partnership for Transforming Health Systems. |
| The project, which began in 2005, was designed to address healthcare shortcomings in five Nigerian states where a lack of drugs and medical supplies had left staff demoralised and undermined public faith in the system. Local procurement was fundamental in turning the situation around; medicines and supplies were all sourced locally, either directly or through local agents for international manufacturers, as was logistical support. | The project, which began in 2005, was designed to address healthcare shortcomings in five Nigerian states where a lack of drugs and medical supplies had left staff demoralised and undermined public faith in the system. Local procurement was fundamental in turning the situation around; medicines and supplies were all sourced locally, either directly or through local agents for international manufacturers, as was logistical support. |
| The initiative led not only to improved attendance at primary and secondary healthcare facilities, where more than 20 million people are now able to access medical supplies and services, but also to new horizons for the suppliers involved. | The initiative led not only to improved attendance at primary and secondary healthcare facilities, where more than 20 million people are now able to access medical supplies and services, but also to new horizons for the suppliers involved. |
| "We've moved from buying goods for the Nigerian programmes from local suppliers to buying globally from some of the best ones, so it's opened up new markets for them outside Nigeria," says Bryan Richmond, supply chain director for Crown Agents, who were appointed by DfID to manage the project. | "We've moved from buying goods for the Nigerian programmes from local suppliers to buying globally from some of the best ones, so it's opened up new markets for them outside Nigeria," says Bryan Richmond, supply chain director for Crown Agents, who were appointed by DfID to manage the project. |
| "They're exporting, taking on new people, their businesses are growing; it's allowed them to develop their own ways of working. And it wasn't just local suppliers. We used local contractors to fix roofs and install locks at the stores where drugs were kept, and we used local security companies to make sure the commodities were safe. The benefit to the Nigerian government is clear, because there's more employment and therefore more taxes." | "They're exporting, taking on new people, their businesses are growing; it's allowed them to develop their own ways of working. And it wasn't just local suppliers. We used local contractors to fix roofs and install locks at the stores where drugs were kept, and we used local security companies to make sure the commodities were safe. The benefit to the Nigerian government is clear, because there's more employment and therefore more taxes." |
| It was the outcome DfID had hoped for, providing value for money while building local capacity and strengthening the foundations of country ownership. Achieving it was a painstaking process, however. | It was the outcome DfID had hoped for, providing value for money while building local capacity and strengthening the foundations of country ownership. Achieving it was a painstaking process, however. |
| "When we started in Nigeria we had all sorts of people coming out of the woodwork purporting to be serious suppliers," says Richmond. "So we had to make thorough financial checks, inspect business premises, look at quality control mechanisms, and ensure local agents were who they said they were. It took a long time, but it's been worth it." | "When we started in Nigeria we had all sorts of people coming out of the woodwork purporting to be serious suppliers," says Richmond. "So we had to make thorough financial checks, inspect business premises, look at quality control mechanisms, and ensure local agents were who they said they were. It took a long time, but it's been worth it." |
| As the project demonstrated, adapting to local circumstance is crucial. But what if those circumstances are extreme? In Pakistan, food security has become a major issue in the wake of repeated heavy flooding. The World Food Programme (WFP) has received substantial in-kind donations of wheat flour this year – 50,000 metric tons from central government, and two further 11,500-ton contributions from the provincial governments of Sindh and Balochistan – but the deployment of those locally procured resources has presented challenges. | As the project demonstrated, adapting to local circumstance is crucial. But what if those circumstances are extreme? In Pakistan, food security has become a major issue in the wake of repeated heavy flooding. The World Food Programme (WFP) has received substantial in-kind donations of wheat flour this year – 50,000 metric tons from central government, and two further 11,500-ton contributions from the provincial governments of Sindh and Balochistan – but the deployment of those locally procured resources has presented challenges. |
| "Because there's no cash with these donations, we have to look to other donors to provide the handling, storage and distribution costs," explains Robin Lodge, head of resource mobilisation for WFP Pakistan. "We call this twinning. Donors tend to feel quite good about this, because it's much more cost-efficient than spending the money they give us on procuring goods for which they then still have to meet handling, distribution and processing costs." | "Because there's no cash with these donations, we have to look to other donors to provide the handling, storage and distribution costs," explains Robin Lodge, head of resource mobilisation for WFP Pakistan. "We call this twinning. Donors tend to feel quite good about this, because it's much more cost-efficient than spending the money they give us on procuring goods for which they then still have to meet handling, distribution and processing costs." |
| USAid has been a notable supporter of WFP's local procurement activities in Pakistan. In the wake of the 2010 floods, the agency made $70m (£43M) available to the WFP for local food procurement; Lodge welcomes the agency's growing flexibility. "We are getting more and more money from them in cash," he says, "which is absolutely great for us because of the local procurement aspect: if the food is already here, why should we bring it in?" | USAid has been a notable supporter of WFP's local procurement activities in Pakistan. In the wake of the 2010 floods, the agency made $70m (£43M) available to the WFP for local food procurement; Lodge welcomes the agency's growing flexibility. "We are getting more and more money from them in cash," he says, "which is absolutely great for us because of the local procurement aspect: if the food is already here, why should we bring it in?" |
| USAid's changing approach is designed to promote country ownership, says Susan Reichle, assistant to the administrator at the agency. "The goal is local ownership and sustainability. Ultimately, our goal is to work ourselves out of a job, not to be in countries ad infinitum. As President Obama says, no country likes to be dependent on aid." | USAid's changing approach is designed to promote country ownership, says Susan Reichle, assistant to the administrator at the agency. "The goal is local ownership and sustainability. Ultimately, our goal is to work ourselves out of a job, not to be in countries ad infinitum. As President Obama says, no country likes to be dependent on aid." |
| Yet by engaging in local procurement, do donors not risk encouraging a different sort of aid dependency? On the contrary, argues Richmond, donor investment paves the way for independence. "Dealing with and benefiting from aid proceeds gives local suppliers the confidence and financial security to go out and seek other business," he says. | Yet by engaging in local procurement, do donors not risk encouraging a different sort of aid dependency? On the contrary, argues Richmond, donor investment paves the way for independence. "Dealing with and benefiting from aid proceeds gives local suppliers the confidence and financial security to go out and seek other business," he says. |
| The key thing is to commit to the process over the long haul, adds Richmond. "It's important to keep expanding the supply base, because you don't want to end up with cartels developing or only a small number of local suppliers benefiting." | The key thing is to commit to the process over the long haul, adds Richmond. "It's important to keep expanding the supply base, because you don't want to end up with cartels developing or only a small number of local suppliers benefiting." |
| Donors should be prepared to dig in, however. "Anyone getting in to this I definitely advise a lot of patience, a lot of listening, a lot of partnership," says Reichle. "Really be willing to go out into the field and get your hands dirty." | Donors should be prepared to dig in, however. "Anyone getting in to this I definitely advise a lot of patience, a lot of listening, a lot of partnership," says Reichle. "Really be willing to go out into the field and get your hands dirty." |
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