The OECD should give up control of the aid agenda

New governance structures for aid, and greater input from recipient countries, are required for a very different world

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Bangladeshi commuters wait for public transport in rush hour during Ramadan. Aid-recipient countries should have more control over the aid agenda. Photograph: Munir Uz Zaman/AFP/Getty Images

The decline of western power does not mean the decline of the west. The former is not only a certainty; it is already a reality. Power is relative, so the rise of power elsewhere automatically diminishes the power of others. But it is how the west reacts to these new realities that will determine whether it suffers actual decline or responds to this geopolitical repositioning in such a way as to enhance its own interests and those of others.

The west has two options. Either it leads the process, whereby power and responsibility in global governance become more democratic, encouraging all countries to be brought in on a more equal footing (the G20 being a step in this direction). Or it resists (for example on the issue of World Bank and IMF governance), thus squandering long-term influence over the kind of changes that are anyway taking place.

One aspect of the west's dominance has been its control of the aidagenda. The Organisation for Economic Co-operation and Development (OECD) was set up in 1961 as a club of rich, mostly western, nations. It soon established a development assistance committee (DAC) to manage aid flows to poor countries, often ex-colonies. Aid is not just charity – it has been and remains an integral part of foreign policy, shoring up political support and economic opportunities in other parts of the world. That is why so far it has sat fairly comfortably in an OECD committee.

The OECD-DAC has been integral in discussions about how aid can be best used to promote development, not just the interests of donors. Arguably the most important role it has played in the last 10 years or so has been to transform pressure from civil society and recipient countries for "better aid" based on recipient-country control (or "ownership") into a fairly successful international bureaucratic agenda. The Paris Declaration on Aid Effectiveness (pdf) is not just a good set of principles, it is also a technocratic process of evaluation and monitoring that is leading to some important (if slow) changes.

The historic imbalances of power remain the same, and will do so as long as countries need aid as a fundamental part of their economies, rather than as an optional and useful extra source of funds. But the declaration and accompanying process have lent power to the countries insisting that donors support national priorities and systems, and to donors and civil society groups pressuring recipient countries to focus more on the poorest. This should mean that aid has been used more effectively for poverty reduction.

So the OECD team responsible for this area of work should be proud of what they have achieved to date. How much harder it will be, then, to relinquish control of this process. But that is the next crucial step if the Paris agenda, and the DAC itself, is to remain useful and legitimate. Why? There are three reasons.

First, non-OECD countries, such as China, India, South Africa, Brazil and Venezuela, are increasing in importance every year as financial supporters of poorer or smaller countries. DAC aid is about $125bn a year compared with non-DAC aid estimated at between $30bn and $60bn. It is nonsensical for a set of principles to cover part of the aid a country receives but not the rest. The OECD's instinct is to try to integrate these countries into the Paris process. But however welcoming the OECD tries to be, these new powers don't want to be part of an old world club – and they don't need to. They will increasingly be setting their own rules.

Second, the OECD's way of giving aid is outdated. That is partly why the Paris process got started in the first place. It is founded on a post-colonial client relationship that is being broken apart not only by the large new donors, but by the proliferation of smaller-scale south-south co-operation that is demonstrating new ways for countries to support one another's development. Not only are the terms "donor" and "recipient" anachronistic, but even the word "aid" itself needs to be shelved – all countries benefit from development co-operation, so a word implying charity is misleading.

And third, the new era of aid effectiveness will be ever more recipient-led. The Paris process has supported attempts begun by civil society in the 1980s to insist that power over aid strategy and spending be increasingly in the hands of recipient countries. The OECD has overseen the growth of a broad-based working party on aid effectiveness that brings countries together in a more or less balanced way to discuss the policy and process.

As we approach the High Level Forum on aid effectiveness in South Korea in November, all the talk is of leadership from recipient countries. Indeed, probably the most important statistic about the Paris agenda to date is that while only 34 recipient countries took part in the initial monitoring survey in 2005, that number rose to 55 for the second survey in 2007, and in the current survey, to be published later this year, 91 countries are expected to return data.

But if the OECD can find me one of those 91 recipient country government that believes the DAC should remain the central cog in this process, I would be surprised. New governance structures are required for a very different world.

The OECD needs to make a bold statement clearly relinquishing overall co-ordination responsibilities of the aid effectiveness agenda and offering to play a different, although still significant, role in a new way of managing aid effectiveness at a global level. By acting against its instincts in this way, it would ironically secure its influence and vital contribution to the gradual evolution of the role of publicly sourced development finance.