This report presents the findings and recommendations of the 2023 development co‑operation peer review of the Netherlands. In accordance with the peer review methodology, it does not cover all components identified in the peer review analytical framework. Instead, the report focuses on four areas of the Netherlands’ development co‑operation which were selected in consultation with the Netherlands’ partners and representatives of the Dutch government. Firstly, it analyses the Netherlands’ overall development co‑operation architecture and systems to determine whether they are fit for purpose in the context of the Dutch reform agenda. It then explores the Netherlands’ policies and processes through the lens of engagement in fragile contexts, its commitment to advance locally led development, and finally, policy coherence challenges at the intersection of trade and climate. For each of these areas, the report identifies the Netherlands’ strengths as well as the challenges it faces, the factors contributing to the Netherlands’ achievements and the opportunities or risks that lie ahead.
OECD Development Co-operation Peer Reviews: Netherlands 2023
Findings and recommendations
Abstract
Context: A reinvigorated commitment to development co‑operation
Political and economic context
A four-party coalition has governed since 2021. The centre-right People’s Party for Freedom and Democracy (VVD), headed by Prime Minister Mark Rutte, has led four coalition governments since 2010. The government coalition spans four parties from centre left to centre right. Priorities set in the 2021 coalition agreement include the fight against climate change, housing, health care, security, equal opportunities, socio-economic security by reducing poverty and debt, education and investment (Government of the Netherlands, 2022[1]). The agreement also includes a dedicated chapter on international affairs, with foreign trade and development co‑operation as a central element.
Economic growth is slowing, with inflation, energy supply and climate change high on the agenda. Economic growth has been consistently at 2% or higher since 2015, and the contraction following the outbreak of COVID-19 was weaker than in the Eurozone (-3.9% compared to -6.1%). Following a 4.3% expansion in 2022, economic growth is projected to slow to 0.8% in 2023 and 1.1% in 2024 (OECD, 2022[2]). A small budget deficit (1.1% in 2022) allows the government to provide substantial support to households to cope with inflation. In the fight against climate change, plans to reduce nitrogen-based emissions, which have implications for domestic farming, have led to protests, while the temporary continuation of domestic gas extraction is equally controversial.
Development co‑operation context
The Ministry of Foreign Affairs (MFA) takes the lead in development co‑operation and can count on a network of highly engaged institutions and stakeholders (see Figure 1). A dedicated Minister for trade and development co‑operation (BHOS) oversees these portfolios in the MFA. The Directorate General for International Co‑operation (DGIS) is responsible for policy and programmes for nearly all development co‑operation activities (100% in 2021, 98.8% in 2020). The Netherlands emphasises the Dutch Diamond Approach to development, where government, civil society organisations (CSOs) that are strong advocacy and delivery actors, research institutions with deep expertise, and a globally connected private sector, collaborate on development co‑operation. While there is no dedicated implementing agency, the Netherlands Enterprise Agency (RVO) and the Dutch Entrepreneurial Development Bank, FMO, are experienced implementation partners for programmes that involve private sector activities, supported by the newly founded Invest International.1
Figure 1. Overview of the Netherlands' development co-operation system
Note: Shaded boxes indicate parts of the system managing development co‑operation budgets within the Ministry of Foreign Affairs. RVO = Netherlands Enterprise Agency. FMO = Dutch Entrepreneurial Development Bank.
Public support for development co‑operation is high, but so is pressure for accountability. Survey data from 2022 shows that 90% of people in the Netherlands think it is important or very important to partner with countries outside the European Union to reduce global poverty (European Commission, 2022[3]). However, only 54% agree that development co‑operation should be a priority of the national government, far below the EU average of 67%. The Dutch parliament, and notably its Committee for Foreign Trade and Development Co‑operation, is strongly engaged in development co‑operation and questions of policy coherence. Parliamentary motions influence government policies and increasingly budget allocations, which occasionally leads to tensions around priorities. Pressure to demonstrate short-term development results and political attention on individual incidents of fraud has been high, leaving less space to discuss how development co‑operation can best achieve systemic change and long-term impact.
The Netherlands’ development co‑operation draws on a strong multilateral foundation. Multilateral partners, through which half of Dutch ODA is channelled, highly appreciate the Netherlands as a development partner. They value the active engagement in governance bodies, where the Netherlands plays leading and convening roles and acts as a critical friend. The Netherlands is also recognised for its advocacy on priorities such as climate adaptation, women’s rights and gender equality, as well as sexual and reproductive health and rights (SRHR). It strives to provide high-quality funding. This encompasses high shares of multi-annual core funding, softly earmarked resources in line with its priorities as well as a willingness to be the first mover on key issues, thus helping to mobilise others.
A new development co‑operation policy provides a basis for continuity with a clear focus on strengths
The new “Do what we do best” development policy has reaffirmed continuity with a focus on Dutch strengths. Since 2022, a minister from the liberal party, VVD, has overseen the Dutch development portfolio. Despite this change in political leadership, the development policy continues its focus on food security, water, sexual and reproductive health and rights and rule of law (Government of the Netherlands, 2022[4]), strengths that have been confirmed by partners in the consultation process. It also maintains the focus on least developed and fragile contexts in Africa and the Middle East, while the link between trade and ODA will now be the focus of work in 14 “combination” countries (see next section for description of focus and combination countries). This continuity aligns well with the ambition to engage over the long term and adapt and scale solutions that work.
Putting the Netherlands back on a path towards meeting its commitment of providing 0.7% of its gross national income (GNI) as ODA is an important achievement. Some parties in the coalition were sceptical of development co‑operation while others were strongly supportive. The coalition agreement represents a compromise (Government of the Netherlands, 2022[1]), committing to increase the Official Development Assistance (ODA) budget, while catering to the priorities of different parties. The Netherlands is thus reversing a decade of declining ODA levels which had decreased from 0.81% as a share of GNI in 2010 to 0.52% in 2021 (OECD, 2022[5]). Increases are expected to bring the ratio back up to 0.65% by 2025.2 In 2022, ODA stood at USD 6.5 billion (preliminary data) or 0.67% of GNI, a substantial increase.
However, risks for the co‑operation programme from fluctuating in-donor refugee costs – already highlighted in the previous peer review – are not yet resolved. The Court of Audit warned that in-donor refugee costs could be substantially higher than budgeted (Netherlands Court of Audit, 2023[6]). Indeed, most recent budget plans indicate that substantially higher portions of the MFA’s ODA budget will be spent on in-donor refugee costs over the coming years (Government of the Netherlands, 2023[7]). This could not only deplete the rolling ODA reserve but also leave less ODA to be spent in developing countries. To ensure additional funding for hosting Ukrainian refugees, it was agreed to limit the amount of ODA used to finance ODA-eligible costs to EUR 150 million.3 Applying such a ceiling on a regular basis would allow for reliable planning, which is critical for the Netherlands’ ambition to tackle complex challenges in its development programming over the long term. Alternative good practices that other DAC members have employed involve fully delinking development co‑operation and in-donor refugee costs in the budget process and either reporting on both to the DAC or choosing not to report in-donor refugee costs as ODA.
The development of key policy documents and new country strategies is enabling the Netherlands to push ahead towards its ambitious objectives. In addition to the “Do what we do best” policy, the Netherlands has also issued its first global climate strategy (Government of the Netherlands, 2022[8]) and global health strategy (Government of the Netherlands, 2022[9]). It has also updated the action plan for policy coherence (Government of the Netherlands, 2022[10]), developed a new Africa strategy in a broad consultative process and adopted a policy on multilateralism and human rights. Drawing on the “Do what we do best” policy, country teams at MFA headquarters and embassies have developed new Multi-Annual Country Strategies (MACS). Together with thematic theories of change, the Netherlands has a substantial body of guidance to steer its efforts over the coming years.
The new Feminist Foreign Policy further bolsters the Netherlands’ leadership on gender equality and empowerment of all women and girls; its promotion across MFA and government will help to achieve maximum impact. Partners highly value the Netherlands as a champion of gender equality and SRHR and have high expectations that the policy will give further impetus to Dutch leadership and ways of working. As set out in a joint Letter to Parliament (Government of the Netherlands, 2022[11]), the Netherlands will promote gender equality, and in particular the rights of LGBTIQ+ people, through international agenda setting, systematic integration in policies and co‑operation funding, as well as within the Ministry’s own functioning. While the country can build on a long history of substantial development co‑operation efforts for gender equality, it will be particularly important to ensure that the policy is mainstreamed across all MFA activities, including trade and diplomacy, and that staff are incentivised to apply the policy through institutional mechanisms such as annual reviews and objective setting.
Recommendation
1. To ensure the continuity and predictability of its engagement, the Netherlands should continue efforts to mitigate the effects of fluctuating in-donor refugee costs on other ODA expenditure and maintain the positive trajectory towards 0.7% of GNI.
2. To expand its international leadership on gender equality and women’s empowerment, the Netherlands should continue to operationalise the Feminist Foreign Policy across government and work closely with partners internationally.
A fit-for-purpose system: Building on ambitious reforms
The Netherlands has made much progress towards a better focused portfolio, but challenges remain
The Netherlands has recognised dispersion of its development co‑operation programme as a key challenge limiting impact. Dutch development co‑operation has a clear thematic focus in line with its strengths. However, fragmentation and dispersion related to the spread of projects across partner countries, within partner countries, as well as the number of funding instruments used, reduces impact.4 OECD-DAC peer reviews as well as Dutch evaluation and oversight reports have all recommended reducing fragmentation, pointing to challenges for sustainability, impact, as well as staff capacity and quality of engagement with partners. In 2019, MFA launched a dedicated initiative to reduce the number of projects and countries covered called “Less, Better, More Flexible” (Minder, Beter, Flexibeler [MBF]; see Figure 2 and lessons for a second phase in Box 1).The commitment to increase focus is strongly reaffirmed in the “Do what we do best” strategy, as a key working method to achieve “more extensive programmes on fewer themes and for the longer term”.
Figure 2. A dedicated initiative to focus on greater impact
Three different categories of partner countries allow the Netherlands to differentiate the extent of its engagement.
12 focus countries for development co‑operation with a broad relationship: In particular, least developed and fragile contexts, where the Netherlands mobilises substantial resources.
10 focus countries for development co‑operation with a specific relationship: Co‑operation focused on challenges where the Netherlands can add particular value.
14 combination countries (3 also being focus countries): Mostly lower middle-income countries where the Netherlands pursues synergies between development co‑operation and trade promotion, with focus on the green and digital transitions.
It is also willing to exit partnerships, building on past experiences to ensure it manages exits responsibly.
The Netherlands will need to test if its engagement is sufficiently focused. With its level of funding, the Netherlands is generally among the 10 most significant providers in the 12 broad focus countries, albeit not among the largest. The more limited engagement in the two other categories is understandable, in order to maintain co‑operation partnerships with a larger set of countries despite limited resources. In addition, several thematic programmes allow for engagement beyond the priority countries. The MFA encourages a greater focus and has, for example, reduced the number of partner countries from 70 to 40 in private sector development. However, from 2020 to 2022, the overall share of funding allocated to focus countries has not increased (32%), and the funding to other countries not decreased (around 10%)5. Moving forward, the Netherlands will need to test if its limited engagement in many countries allows it to make a difference in its priority sectors.
The “less, better, more flexible” (MBF) initiative has helped reduce the number of projects, but further progress is still needed. In headquarter-funded programmes, the number of activities decreased by 33%, although progress is uneven across sectors, as was the baseline. Average project size has also increased. However, the overall number of centrally funded projects remains high and project size by country small, resulting in significant pressure on staff capacity as well as risks related to impact. Internal monitoring for 2021 calculated average annual disbursements by country and project of EUR 0.4 million for headquarters-managed programmes and EUR 0.8 million for embassy managed programmes. In Uganda, these averages are already substantially higher (EUR 0.8 million and EUR 1.3 million respectively). Nonetheless, the project management burden is high: in 2022, the embassy in Uganda directly managed 23 programmes, but was also expected to be aware of and provide support for 76 programmes with disbursements financed from headquarters.
DGIS is working on a vision for scaling up impact and stepping up long-term investments. Internal reflections usefully stress that scaling up impact is not the same as scaling up programme budgets, the latter not always conducive to advancing locally led development (Locally led development: Addressing structural barriers needed to meet high ambitions). It is therefore essential to design and implement programmes in a way that considers opportunities for increasing development impact within larger programmes, with appropriate mechanisms that allow for issues and can prevent programme interruption. Building in learning that helps identify approaches or implementing partners suitable for larger investments will be essential. As such an approach requires continuity and long-term engagement, the Netherlands has started developing programmes with a 10-year time horizon, both at headquarters and embassy level. This is good practice.
The breadth of in-country engagement is an overlooked challenge. While the Netherlands has a clear thematic focus, pursuing all priorities in partner countries leads to portfolios that encompass numerous sectors. Of the 12 main thematic funding lines, countries with a broad relationship receive, on average, funding in 9.8 areas, whilst countries with a specific relationship receive funding in 9.3 areas. Adequately covering such a wide range of sectors constitutes a significant challenge for embassies, and risks affecting the Netherlands’ ambition to engage in-depth on each complex challenge. In practice, it means that embassy staff cover some sectoral engagements part-time, limiting their ability to engage in design, monitoring and political dialogue. It also means that the Netherlands’ footprint in individual sectors varies significantly. As the Netherlands moves into the second phase of MBF, it would be important to consider the effects of thematic spread in each country.
The number of funding instruments supporting private sector engagement in achieving development objectives remains high. The 2017 peer review had recommended rationalising private sector instruments to avoid dispersion. The Netherlands’ Policy and Operations Evaluation Department’s (IOB) policy evaluation of private sector engagement came to a similar conclusion and has as one of its recommendations to “limit the number of policy instruments” and “prevent fragmentation” (IOB, 2022[12]). However, at present, there are still more than 50 different ODA and non-ODA instruments available to engage the private sector to achieve development goals (IOB, 2021[13]). This makes it challenging for embassies and partners to identify suitable funding avenues, can impede scaling up and creates risks of duplication and insufficient co-ordination.
Tracking the impact and implications of streamlining efforts will be important to achieve and maintain focus. Partner country demands, changing political priorities, current events and media attention are factors that can easily lead to an expanding portfolio. The Court of Audit welcomed current progress but also warned of persistent pressures to expand the portfolio again (Netherlands Court of Audit, 2023[14]). It will therefore be important to document the benefits of a less dispersed programme, as well as the challenges of any remaining areas of fragmentation. The MFA could explore how it can respond to additional demands in a way that explicitly entails a lower level of engagement. Rather than creating new funding instruments and directly managing projects, an alternative could be to increase core or softly earmarked funding for multilateral or international civil society organisations combined with regular policy dialogue.
Box 1. Initial lessons from streamlining the co‑operation programme for greater impact
The MFA has drawn a number of lessons that will inform a second phase of the MBF initiative (see Figure 2).
In particular, the strategic focus needs to be on greater impact, to avoid restricting efforts when not needed or beneficial. This can help guide internal reflection (e.g. to manage tensions with locally led development) as well as support engagement with accountability institutions such as parliament and the Court of Audit, who can inquire if the MFA is now better placed to achieve impact.
A second phase, “MBF 2.0”, will therefore place greater attention on the workstreams “Better” and “More flexibly”, notably to strengthen adaptive programming and scale successful approaches. It will also track “internal” impact, notably staff capacity and job satisfaction.
Streamlining efforts should be quickly integrated into existing management processes. Rather than an add-on exercise, a reflection on focusing efforts should be part of country strategy design, annual planning and regular consultation in management and staff networks. It is important that embassies are systematically included in consultation. Learning across teams and portfolios will continue to be an important feature.
The MFA, along with stakeholders, could explore how it can sustain focus, notably responding to additional demands in a way that entails a significantly lower level of engagement.
Note: This practice is documented in more detail on the Development Co‑operation TIPs • Tools Insights Practices: https://oe.cd/58z
Greater flexibility in the thematic approach will be essential to ensure bilateral co‑operation can be locally led and adaptive to fragile contexts
Dutch development co‑operation is fundamentally thematic rather than geographic. This is true for the budget, the institutional set-up as well as programming. Five thematic budget lines6 under the development and trade (BHOS) budget constitute the bulk of Dutch ODA (61% in 2023; other large expenditure items include budget for International Development Association (IDA) replenishment and in-donor refugee costs). These are managed by the Directorate General for International Co‑operation (DGIS), which is organised into four thematic departments (and a co-ordinating/advisory staff unit).7 Geographic departments and institutional functions are shared across the foreign ministry. Programming is also largely driven thematically. While a small share of resources is delegated to embassies (14%), thematic departments decide on the bulk of programmes (see Figure 3). As a result, central programmes account for the highest proportion of funding in all country categories and half of the BHOS budget managed by the MFA is not allocated by country (see Table 1. ). This differentiates the Netherlands’ co‑operation from many DAC members where budgeting, decision making and programming centre around partner countries (with the European Commission’s Neighbourhood, Development and International Cooperation Instrument a prominent example).
Figure 3. Flow of development co‑operation and trade budget to headquarters and embassies
Note: Colours correspond to the four main thematic budget articles, which are managed by four thematic departments within the Directorate General for International Co‑operation. See endnotes 5 and 6.
Table 1. BHOS allocations by country type - central and embassy
Million EUR current, 2021-22 average
Source: Based on internal cash payment data provided by the Netherlands.
The Dutch thematic approach has several important advantages. It strengthens the Netherlands’ systemic perspective, linking work to influence global policy with programming in country co‑operation, as set out in the thematic theories of change (ToC). This also drives the Netherlands’ ambition to influence global processes and system-wide change, working closely with key multilateral and civil society partners and launching global programmes of large volumes. Focusing on areas of Dutch expertise, the thematic approach enables strong ties with stakeholders based in the Netherlands as well as opportunities for the Dutch private sector. It also makes the aggregation and communication of results easier, with clear links to the Sustainable Development Goals (SDGs). Finally, it strengthens learning across countries.
However, in its current form, the Dutch thematic approach poses a challenge to co‑operation that is responsive, and locally owned and led. Although both a thematic and a geographic approach are useful, they have different effects when it comes to development effectiveness principles. The primary political entity where development co‑operation takes place and where decisions need to be debated with stakeholders is in the partner country, not within the sector. In contrast, thematic budgets are a key factor in the high levels of decision making concentrated in the Netherlands as compared to embassies. Thinking thematically pushes consultation and partnerships towards leaders in the respective policy area, be they international or in Dutch civil society, research, the private sector or multilateral organisations. This also explains why authorities and stakeholders in partner countries are less closely involved, or not directly associated at all in the process. With this approach, the responsibility for locally led development remains with intermediaries.
Thematic approaches can make adaptation to country contexts more challenging. Design of programmes at headquarters across multiple countries increases the risk of uniform approaches that are not adapted to country context. Embassies are not necessarily consulted on these programmes, do not always have capacity to monitor them, and where they can, their advice is not systematically integrated. Creating synergies between embassy-managed and centrally managed programmes is also difficult. The Netherlands is also unable to present the full extent of its results by country for improved mutual accountability. Thematic silos make work across sectors more challenging, even where these would be good development practice (e.g. water-energy-food nexus, a focus on resilience, or mainstreaming of refugee responses). This is reinforced by thematic accountability for thematic budget lines.
Increasing flexibility and links between headquarters and embassies is a useful first response. Thematic funds delegated to embassies can to some extent be flexibly used within the overarching thematic budget article if operational circumstances give rise to this, whereas at headquarters funds must be used within the sub-article to which they were originally assigned. The amount that can be shifted between themes at embassy level has been increased to EUR 2.5 million a year. Embassies can also request to move or raise the budget once a year. Thematic theories of change recognise the importance of working cross-departmentally and activities in one theme can contribute to results in another. Joint country teams produce the country strategies, and strategies and annual plans now reflect most programmes that are centrally managed in addition to delegated activities. This needs to be followed by close engagement during implementation to ensure that synergies between programmes can be maximised. More systematic co-design and co-funding of activities could be a basis for establishing shared responsibility for the achievement of short- and long-term goals. Lessons could be drawn from a pilot scheme aiming at cross-departmental alignment in five countries8 outlined in the ToC for Private Sector Development (MFA, 2022[15]).
Moving forward, the Netherlands needs to consider how it can better balance the strengths and challenges of its thematic approach. At present, levels of delegation to embassies range from 0% (e.g. sustainable trade, refugee reception in the region) to 50% or more (food security, and security and rule of law). The MFA could therefore ensure that staff have a clear understanding9 of when a programme should be centrally managed, i.e. when the benefits of a central programme significantly outweigh the drawbacks of not delegating resources to country level. This would also give embassies more foresight and inform capacity planning at both embassy and central level. Secondly, within centrally managed programmes, there is room to strengthen the adaptation to country context and local ownership, allowing greater flexibility in multi-country approaches and ensuring embassies and local stakeholders are associated at design stage.
Strategic workforce planning is beginning to yield results, but will require continued attention
Staff numbers, definition of career paths and stability of contracts have all improved, however heavy workloads and effect on staff well-being persist. The allocation of EUR 10 million for the recruitment of additional staff in DGIS has resulted in new overseas postings. Conversion of contracts from temporary to permanent is increasing. External recruitment targets areas where retirements are forthcoming. General and specialist career paths have been outlined and routes of entry for trainees and contractors have been established and include a focus on diversity and inclusion. Continuing to monitor the implementation of ten recommendations on workforce planning made in 202010 alongside staff satisfaction will be important to maintain momentum. In a 2021 staff survey, 57% of DGIS staff said their workload was too heavy or far too heavy, higher than in any other part of the MFA (InternetSpiegel in collaboration with Effectory, 2021[16]). Survey results indicate that staff are engaged in and enjoy their work, which is an excellent basis for management to build on.
Achieving a balance between diplomatic and development expertise remains challenging and attracting staff to postings in fragile contexts is particularly difficult. Some protection of key functions from rotations within DGIS would facilitate further expertise accumulation, while increased mobility between diplomatic and development tracks would avoid silos and create a larger pool of talent for the MFA. Despite incentives, staff are reluctant to take up posts in fragile contexts and recruiting senior staff will be particularly important in addition to the new posts that have been created at a junior level. As this is a common issue among donors11, an OECD peer learning exercise on human resource management in fragile contexts made several recommendations relating to incentives and career development that could be considered. Individual DAC members have piloted various approaches12 but evaluation of success is not yet available (OECD, 2015[17]).
Capacity in embassies requires further attention in line with expected increases in delegated budget and involvement in management of central programmes. Plans to increase the level of delegated budgets will need to be accompanied with assessment of human resource needs at country level, while time involved in central programme design should also be factored in. Partners during the country visit also indicated that they would welcome additional input from embassy staff, for example taking an active role on steering committees, but that workloads were too high to allow this level of engagement. Achieving further focus at country level would support deepened engagement. Pursuing locally led development may also require increased capacities at embassy level and new skillsets for both embassy and headquarters staff. For example, adaptive management approaches to better react to changes in local context will be necessary at both levels. Capacity development plans could also consider increased sensitisation to power dynamics among partners and building requisite knowledge and flexibility to execute different types of financing arrangements as appropriate to context, project, and partners (see section “Locally led development: Addressing structural barriers needed to meet high ambitions”).
Following up on the staff survey and the exploratory report on racism in the foreign ministry (Ministry of Foreign Affairs, 2022[18]) provides an opportunity to acknowledge the strong role of local staff and demonstrate willingness to engage on grievances. Approximately one-third of development staff are locally hired, and retention is high13. Local staff are recognised by colleagues and partners as central to preserving institutional memory and building local networks, critical for contextualised engagement. However, local staff have few advancement opportunities, many staying in the same role and at the same grade for the duration of their engagement. In addition, the racism report highlighted individual incidents and systemic issues. While commissioning the racism report is highly appreciated by local staff, expectations for action are now raised and clear follow-through on the Management Response (Government of the Netherlands, 2022[19]) will be an important start. Connecting the response with embassy efforts would provide a unique opportunity to discuss structural challenges and invite insight from local staff to inform ministry-wide decision making on these issues going forward.
A strong learning culture provides an excellent basis for even greater focus on sustainable impact
The Netherlands has a long-standing learning culture built on critical reflection, multi-stakeholder problem solving and a willingness to act on lessons. Strong monitoring and evaluation and close collaboration with research and advisory institutions and stakeholders generate substantial analysis and actionable recommendations on complex development challenges. There is a culture of sharing experiences and learning, through joint teams, communities of practice, and dedicated knowledge platforms that include external stakeholders. An internal “fail fest” bolstered the value of learning from mistakes (see Box 2). Compulsory government responses to evaluations and policy advice as well as quality assurance requirements ensure that insights effectively inform decision making on both policy and programming. Prominent examples are the decision to focus efforts, as well as a substantial rethink on how aid and trade can respond to evaluation findings, for instance focusing more on sectors rather than individual businesses.
Box 2. A “fail fest” helped the DGIS deepen its learning culture by celebrating learning from mistakes
Setbacks and failures are regular occurrences in development co‑operation, just as in any other policy area. Failures are a rich source of learning, which in turn can improve development co‑operation. However, public expectations as well as internal culture often create incentives to gloss over failures rather than draw lessons. A staff survey highlighted that co‑operation staff saw room for greater learning from mistakes (InternetSpiegel in collaboration with Effectory, 2021[16]).
To celebrate the value of learning from mistakes, the Directorate General for International Cooperation (DGIS) organised a “fail fest”, where colleagues openly shared and learnt from each other’s failures. The MFA Senior Management Board appreciated the value of such openness and there is interest in organising a “fail fest” for the MFA as a whole.
Several factors were critical for the success of the event:
Leadership: Management supported the event and shared own failures.
Honesty: Presentations focused on actual mistakes without a positive spin at the end.
Coaching: A theatre group advised staff on how to tell their “fail story” in an engaging way.
Atmosphere: An external location in a relaxed setting supported a positive team environment.
Source: Internal staff notes, Ministry of Foreign Affairs.
Stakeholders recognise the need to shift attention from quantitative results to sustainable impact. Responding to political and public expectation, the Netherlands has made significant investments in collating and reporting results information, presented in an online portal (OECD, 2021[20]). Aggregation of quantitative indicators (such as populations reached) is a key element in this regard. For instance, in “Do what we do best”, the government underlines that additional funding will provide 50 million people with renewable energy and four million people with better nutrition. While very useful for communication, the government recognised it focused too much attention on quantitative short- and medium-term results, a problem also identified in IOB evaluations. This made it harder to ensure that programmes fully respond to the development need in a given context and focus on sustainable impact. To shift its approach, the MFA is piloting the tracking of qualitative indicators for policy influencing and stories of change in its funding of civil society organisations (CSO).
The MFA is making significant investments in long-term approaches and continuous learning from operations. The MFA has committed to expanding evaluative work towards longer-term systematic reviews, more ex post evaluations, as well as checking for unplanned effects. Several new programmes have 10‑year commitments, with reassessment possible after five years. Each new multi-annual country strategy must include a dedicated learning agenda. Programme guidelines similarly encourage the integration of learning, and new guidelines will reinforce focus on adaptive management. Learning will be a critical element to enable scaling and investing in approaches that work. The new CSO programme has a EUR 25 million budget for learning, including cross-country evaluations and research. As good practice, learning also includes actors in partner countries, which will support generating locally relevant findings and increasing their uptake, as experience from other DAC members shows (OECD, 2021[21]).
Sufficient staff capacity is essential for the deeper learning effort. The new learning agenda creates additional expectations of staff. They will need to invest in designing, overseeing and participating in learning activities and synthesising and documenting lessons, including through using a new project management tool. In response, the MFA has already increased staff capacity for Monitoring, Evaluation and Learning, including through a dedicated unit as well as focal points across departments, who exchange through a community of practice. In addition, management will need to ensure that the MBF initiative effectively reduces the project management workload and reserve dedicated time for learning purposes. For learning efforts on centrally managed programmes, it will be important to include both expatriate and local embassy staff to ensure lessons benefit the full co‑operation system. The CSO programme mentioned in the previous paragraph sets a good precedent in this regard.
Risk management systems need to build on strong foundations and evolve for engagement in challenging contexts
The Netherlands recognises the importance of managing and taking risks in its development co‑operation. The focus on fragile and even extremely fragile contexts speaks to the Dutch commitment to work in environments with significant risks: security (for staff and partners), political (exposure at home due to governance issues in partner countries) and operational (facing setbacks and challenges to delivering results). At the same time, scrutiny of development co‑operation in parliament and by the public is high and can lead to avoidance of risk. In “Do what we do best”, the government sets out this dilemma: it does everything to keep risks at a minimum but fully recognises that calculated risk taking is necessary to achieve impact. Staff and partners highly appreciate this commitment to manage rather than avoid risks – much in line with the Busan agreement (OECD, 2020[22]) and the DAC Recommendation on the Humanitarian-Development-Peace Nexus [OECD/LEGAL/5019] – and now await more detailed guidance for its practical application.
Effective, ongoing dialogue with key stakeholders including parliament and the public can support risk management efforts. This could involve communicating on overall risk appetite, managing risk across the portfolio and the quality of risk managements systems. As undertaken by the United States (USAID, 2022[23]) and the United Kingdom (HM Government, 2020[24]), the Netherlands could develop a risk appetite statement that sets out the level of risk it is willing to take across a range of risk types, and different contexts. Such an exercise would provide an opportunity to engage key stakeholders in the discussion of dilemmas and trade-offs, concerning, for example, locally led development initiatives. The Netherlands could also explain how risks are spread across the portfolio, to illustrate that within and across countries and programmes, some activities have a lower risk, others a higher risk. This could in turn lead to better agreement on the overall risk profile of the portfolio. Finally, active communication on systems, both to manage risks and respond when risks materialise, could help ensure that single incidents do not jeopardise the entire co‑operation programme, but rather serve as a prompt to verify if risk management systems are effective, since a well-functioning risk management system will cause more incidents to surface rather than less.
Risk management systems have improved but remain focused on fiduciary risks. A centralised unit, the Quality Control and Supervision Department (FEZ) guides Ministry-wide risk processes, with a focus on three categories: strategic, discussed at MFA board level and translated into Multi-Annual Country Strategies (MACS); tactical, managed through the annual plans; and operational, managed through partner assessment and oversight. The MFA recently put new measures in place in response to recommendations on risk management by the Court of Audit. Further system improvement could respond to partner concern that risk management is focused on fiduciary risk. Focusing attention on a wider array of risks in line with international commitments (See Annex B) can help to strengthen a more comprehensive approach. The Netherlands could apply approaches and lessons learned from its strong track record of reducing the risk of sexual exploitation, abuse and harassment (SEAH) in the development sector to other risk categories.
Risk identification capacity has been stepped up but needs to be complemented by supportive processes for management and mitigation along with stronger guidance for embassies. Guidance for the recent round of MACS included increased focus on context-specific risk identification. FEZ worked with country teams on scenario planning. A newly created community of practice on risk facilitates discussion of issues arising across teams. However, clearer processes for institutional management14 would guide and reassure staff. Increased use of shared analysis with other donors and partners at country level could complement internal efforts and offset capacity constraints of embassy staff.
Partners have highlighted the need for fairer risk sharing, in contrast to the current practice of transferring operational and financial risks to partners. The Netherlands is well placed to become an international leader on this topic, building on its work in the humanitarian sector as joint partner of the Risk Sharing Initiative (IASC, 2023[25]) under the Grand Bargain process.15 Approaches to risk sharing developed under this initiative for the humanitarian sector in which all actors - donors, intermediaries, and implementing organisations - are engaged in collective rather than organisational-based risk management (IASC, 2023[25]) could inspire action in development programming. Given the strong focus on fragile contexts, a more granular or nuanced approach to risk management will bolster the Netherlands’ ability to demonstrate results and promote sustainable development (See next section on Working in fragile contexts).
Recommendation
3. Building on the “less, better, more flexible” initiative to focus on sustainable impact, the Netherlands should
a. preserve progress made in streamlining the portfolio and ensure allocations remain focused on thematic and geographic priorities
b. continue initiatives to strengthen its human resource capacity
c. address fragmentation within portfolios and across funding instruments, where the co-operation system cannot mobilise capacity and resources at scale.
4. While preserving the strengths of its thematic approach, the Netherlands should ensure it is responsive to local contexts by
a. increasing financial and reporting flexibility between themes
b. increasing financial delegation where doing so supports strategic aims, enhancing embassies’ capacity accordingly, and strengthening embassies’ role in tailoring programmes to local contexts.
5. The Netherlands should further enhance its risk management approach by guiding staff on balancing different risks and objectives, notably through developing a risk appetite statement, focusing on risk-sharing over risk-transfer with implementing partners, and proactively engaging with all accountability stakeholders.
Working in fragile contexts: An example in strategic patience and flexible, long-term engagement
A strong focus on engagement in fragile countries is supported by clear working methods and a long-term perspective
The Netherlands has enhanced its approach to fragility significantly since the last peer review. The focus on fragile contexts is supported by clear working methods, partnerships based on flexibility and innovation, as well as learning and acting on lessons. To support the strong focus on fragile contexts, “Do what we do best” introduces tailored working methods to improve the quality and conflict-sensitivity of aid in fragile settings including: adaptive programming and calculated risk taking, an integrated approach, engaging in critical but constructive dialogue, investing in long-term objectives, and a strong focus on learning. It is now working on translating these principles into practice. The policy explicitly acknowledges findings from recent evaluations noting that “short-term success is often an illusion”, especially in fragile contexts, and that longer-term perspectives are necessary for impact.16 This is starting to translate into longer programming cycles in some thematic areas and there is a clear appetite across the system for a longer-term focus. Partners describe the Netherlands as a critical friend consistently looking to build new approaches, learn and course correct.
The Netherlands’ principled and quality financing is consistent across the humanitarian, development and peace (HDP) nexus, with a commendable focus on peace. In 2021, ODA to fragile contexts amounted to over 84% of the Netherlands’ country-allocable ODA. Total ODA to peace interventions17, which includes prevention, runs at around 23% over the past decade, and 22% in 2021, well above the average for DAC members of 12% in 2020 (OECD, 2022[26]). In fragile contexts, this share rises to 26% in 2021 (see Figure 4). The Netherlands leads global contributions to women’s rights organisations and movements. In 2021, it contributed 10% of its total peace ODA to activities in this sector, reflecting its commitment to gender equality and underlining the critical role of women’s contribution to peace, prevention and sustainable development. The same year, support to democratic participation and civil society received close to a quarter of the Netherlands’ peace ODA18. Enabling institutions like the Netherlands’ Institute for Multi-Party Democracy, especially in challenging political environments like Mali, Burkina Faso or Myanmar supports inclusive political processes, advocacy and civic space. In Yemen, support to think tanks and processes such as the Yemen International Forum helps ensure an inclusive dialogue among all Yemenis, promote peace objectives and inform the internationally supported peace process19.
Figure 4. Netherlands ODA to fragile contexts across the humanitarian, development and peace (HDP) nexus (2012-21)
Note: Bilateral, gross disbursements, USD millions (2020 prices)
Source: OECD Creditor Reporting System 2023 and States of Fragility Platform (OECD, 2023[27])
A stronger focus on cross-sectoral and political economy analysis could lead to greater impact across the HDP nexus. The MACS and annual plans processes provide the platform for country teams to engage in more iterative analysis across themes and sectors which can strengthen the integrated approach. In fragile contexts, analysing political economies across sectors is particularly important to help shape a realistic definition of success and guide both risk-informed political engagement and conflict-sensitive programming. In practice, this analysis should help to connect headquarters and embassies, and their respective programming, more systematically and strengthen the role of country teams in linking programmes across thematic areas. This can increase focus on broader resilience objectives and inform the Netherlands’ adaptive programming approach. For instance, interventions in the water sector could be more deliberately linked to thematic programmes on, for example, food security, health outcomes, agriculture, private sector development as well as migration and displacement, whilst aligning social cohesion and stabilisation initiatives run by political sections in Embassies. This would help mitigate the temptation to create additional silos with projects where the HDP nexus is an aim in itself, and instead promote broader alignment, coherence and complementarity through programmatic approaches.
Leveraging its position in multilateral bodies and organisations is central to the Netherlands advancing its priorities in fragile contexts and could serve to rally other partners. The Netherlands deliberately works through the multilateral system to deliver on its political and development objectives. Working through Team Europe Initiatives, EU joint programming or key positions on multilateral boards enables the Netherlands to advance policy priorities and standards at the international level. For instance, the Netherlands has worked across the UN system to secure consistent language on sexual exploitation, abuse and harassment (SEAH) in all its contracts and has pushed a strong mental health agenda in humanitarian and development action. Partners would welcome more efforts to encourage other donors to follow suit. Where the political dialogue is constrained or where domestic conditions limit options, for example on budget support, the Netherlands leverages its position with the European Union, the United Nations and World Bank to contribute to common objectives whilst sharing risk, responsibility and engagement in political dialogue. This is well illustrated with the Rule of Law programme in Uganda (see Box 3).
The Netherlands is well placed to continue championing engagement in fragile contexts and approaches to risk management as the DAC and others grapple with these questions. The consistent attention to learning and improving, including though a strong evaluation function, is central to the Netherlands’ ability to engage in fragile and politically constrained settings. The MFA and IOB are generating a valuable body of evidence20 through their willingness to tackle difficult questions head on, such as improving risk management, engaging in politically complex contexts and the effectiveness of the Dutch humanitarian policy. The Netherlands stands in good stead to continue championing these issues while the DAC community can benefit from its experience as it continues to reflect on what ODA can realistically achieve in fragile and extremely fragile contexts21.
Efforts to balance accountability and legitimacy concerns provide a strong basis for continued Dutch engagement and enhanced dialogue in fragile countries
The Netherlands is working hard to stay engaged in the toughest places, recognising that the cost of exiting and re-engaging can be high. Dealing with sudden contextual change continues to be a challenge but emerging practice provides a strong basis for a structured and iterative approach in the most complex settings. The focus on fragile contexts entails a higher probability of having to deal with political instability and degraded political dialogue with partner country authorities. The events of 2021 in Afghanistan were an extreme example of what can happen when the political and security context changes abruptly. The MFA has started to develop mechanisms to assess the Netherlands’ position if a sudden contextual change occurs, for instance a coup. This involves a joint analysis of political and security relations, the development co‑operation portfolio, safeguards, risk, exposure, do no harm, protection of individuals, and the needs of local populations to inform decisions on maintaining, scaling down, or ending programming. The process is political and can take time, as seen recently in Burkina Faso or Mali where decision making escalated to ministerial level and took several months, but crucially allows for an informed and empowered decision on whether and how to stay engaged. Through this adaptive approach the Netherlands can continue to maintain trust and nurture local networks even where development programming has been scaled back significantly, as seen for instance in Yemen over the past decade, whilst remaining poised to scale up again when possible. This approach is good practice.
Staying engaged in fragile settings means focusing on peace, prevention and politics, and the Dutch integrated approach could further reinforce its role as a long-term partner for stability. In these contexts, development is a political endeavour. A 2021 evaluation highlighted tensions in approaches to preventing violent extremism between short-term security interventions and longer-term prevention strategies deployed by political and development co‑operation departments within the MFA, calling for closer co-ordination and common frameworks between political and development instruments (IOB, 2021[28]). In Mali, IOB found that the integrated approach in the Dutch contribution to the United Nations Multidimensional Integrated Stabilization Mission in Mali (MINUSMA) had not clearly been defined and became an aim in itself as opposed to a structured way of drawing on a range of policy instruments (IOB, 2022[29]). In Uganda, where the eventual political transition is expected to be complex, the MACS and annual plans give limited insight into the role of Dutch development co‑operation in supporting a peaceful transition. A clearer articulation of shared strategic objectives for prevention and peace can help bolster the integrated approach in practice, incentivise early action in support of stability and foster closer alignment of political, peace and development action for long-term impact. It can also support closer links between central and delegated budget lines including instruments dedicated to human rights, stability, societal development and cultural activities managed outside of development co‑operation.
Deliberate and sustained engagement with domestic audiences is important to support the Netherlands’ commitment to fragile contexts. The focus on fragility comes with an increased focus on risk and accountability, recognised in the Netherlands’ development policy. In practice partners describe a tendency to focus on managing fiduciary risk at the expense of getting things done, driven largely by increased scrutiny from domestic constituencies. The Netherlands is investing in risk management capacities and has trialled options to increase the public’s understanding of the complex realities in fragile contexts. The experience of the Rule of Law sector support, especially in Uganda, has shown that sharing more detailed information on programming is a good way to deal with domestic risk appetite (see Box 3). A sustained effort to ensure continued engagement with stakeholders such as political advisors and technical staff, parliament, legislative committees, other government departments, but also media outlets and interest groups, is key to increasing public understanding and to counter disinformation and misinformation, often circulated through social media, around the importance of engagement in politically constrained contexts. Evaluations and evidence, where the Netherlands holds itself to account and does not shy away from asking difficult questions, can also be a powerful tool to support domestic accountability and legitimacy, contributing to setting realistic ambitions, changing the narrative and demonstrating the value of development responses to fragility.
As a constructive partner willing to engage in critical dialogue, the Netherlands could do more to foster the trust that is essential for political dialogue. The Netherlands defines itself as a “critical but constructive” development partner, yet the appetite for acknowledging political dialogue appears to have waned as the Netherlands has moved away from direct support to governments (see further details in Locally led development: Addressing structural barriers needed to meet high ambitions). In the most complex environments, there can be an inherent tension between the political risk of supporting an undesirable government and the ethical risk of not intervening in support of the most in need. Defending continued political engagement, especially towards domestic audiences, can be challenging. Clarifying how political dialogue and development programming inform each other beyond risk management, for instance through a theory of change and shared strategic objectives anchored in MACS and annual plans, can provide useful entry points for more structured exchanges with governments. In countries like Uganda where no structured political dialogue is in place, finding ways to share more information on the outline of Dutch development co‑operation with partner governments beyond specific programmes, for instance through annual exchanges and where useful with likeminded partners, could help build the trust that is essential for dialogue. Where the formal political dialogue is constrained, as in Ethiopia since the onset of the conflict in Tigray, regular technical and working level engagement co-ordinated with close partners like the European Union facilitates readiness to re-engage when conditions allow. Civil society actors and other non-governmental partners in these situations rely on the Netherlands (and others) to maintain a dialogue with government and continue efforts to protect civic space.
Box 3. Staying engaged under pressure in Uganda’s Justice, Law and Order Sector
When police cars financed by the Netherlands as part of a refugee protection project were identified in police operations against members of the opposition ahead of presidential elections, the Dutch government needed to consider how best to respond. Coverage in Dutch news outlets and parliamentary inquiries brought high pressure to react both quickly and strongly. The government considered suspending the refugee project and scaling down its engagement in the Ugandan Justice, Law and Order Sector (JLOS). However, close dialogue with project partners, the embassy and Ministry headquarters led the Netherlands to adopt a more balanced approach.
The embassy led robust dialogue with the government of Uganda that helped strengthen accountability for the incident. The refugee project itself was maintained, although all activities with police were halted. However, Dutch support for a separate but related multi-donor Justice, Law and Order Sector programme was initially suspended. Ultimately the Netherlands withheld a significant payment to the sector programme, as a clear signal that the Ugandan government had not taken sufficient steps in terms of accountability. Civil society partners highlight that despite the challenges, engaging with the police in the Justice, Law and Order Sector is critical. The Dutch government decided that support to the police will be limited to instances where it is indispensable for the programme.
Weighing its objective to contribute to sustainable development in Uganda with the heightened risks of difficult incidents, the Dutch government concluded that it would continue its engagement in the Justice and Law Sector. Its long-standing support in this sector has positioned it as a reliable partner, able to engage in critical but constructive dialogue with Ugandan partners. Domestically, the Dutch government clearly communicated its approach to parliament (Ministry of Foreign Affairs, 2022[30]), pointing also to the needs and the feedback from local (civil society) partners. Information sharing and the Netherlands’ zero tolerance for inaction helped explain the rationale for the decisions taken and led to more understanding and acceptance of the possible risks involved.
In May 2023, Uganda adopted an "anti-homosexuality bill" that goes against the (human rights) values that the Netherlands stands for. In response, the Minister announced that the Netherlands would stop the support to the Justice, Law and Order Sector (JLOS) and that support to the protection of the LGBTQI+ community would continue. In the meantime, the Netherlands continues to engage in dialogue with the government on all levels.
Promoting development approaches to forced displacement would benefit from more contextualised and mainstreamed responses
A designated budget has allowed for innovative programming to incentivise collaboration of multilateral agencies, while better contextualisation is a work in progress. Drawing on significant ODA allocations for refugee reception in the region, the Netherlands has designed the innovative centrally managed “Prospects” partnership programme to help incentivise closer humanitarian-development programming among multilateral agencies22. Reconciling a top-down policy approach to programming with the bottom-up needs of refugees, priorities at embassy and country-level, in-country presence of multilateral agencies, and inclusion approaches remain a challenge. A mid-term evaluation (Ecorys, 2022[31]) has highlighted the administrative burden on partners and donor alike, whilst the approach remains fully dependent on Dutch funding over the long term. An “Opportunity Fund” within the programme allows greater tailoring to country context but flexibility is limited to the specific component. There is scope for a reflection on the programme’s sustainability and on its donor base. A more structured approach to learning and exchange at regional levels in the Horn of Africa and in the Middle East and North Africa would help capitalise on the multi-country design in the forthcoming second phase.
This longer-term approach to displacement could do more to build on the growing good practice of integrating responses to displacement into development programmes. The Prospects programme promotes development approaches to displacement, in line with increasing calls for development policies that are responsive to the socio-economic needs of forcibly displaced people. Yet its thematic funding and centrally managed design make it a de facto standalone initiative that does not reach a transformative scale at country level. In Uganda and in other Prospects countries, the Netherlands could continue to prioritise its current programme whilst at the same time driving a more inclusive approach where forcibly displaced people are part of sectoral programming where relevant. Introducing mechanisms to track results and outcomes for refugees and host communities across thematic budget lines such as “sustainable development, food security, water and climate”, “sexual and reproductive health rights” or “regional stability” would help the Netherlands demonstrate the full extent of its portfolio and contribution in support of forced displacement. This is even more important for long-term sustainability and impact, and in view of the growing needs related to climate-induced displacement disproportionately affecting fragile and conflict-affected contexts23.
Beyond programmes, the Netherlands could engage more in shaping the narrative on development approaches to displacement and to fragility. In a European and national context where migratory pressures at the border and security are key political questions, raising awareness of the differences between economic migrants and refugees fleeing conflict can help build a more nuanced understanding of the Netherlands’ engagement. “Do what we do best” sets out to tackle the root causes of poverty, terrorism, irregular migration and climate change. Communicating clearly around the complexity of these issues, and how development co‑operation can help address them, is important to ensure that expectations are realistic and that the case for supporting those most left behind in fragile contexts does not get obscured by political discourse. Staying engaged with domestic audiences to help shape the narrative is therefore important for the long-term effectiveness of the Netherlands’ engagement in fragile contexts.
Recommendation
6. To strengthen the impact of its integrated approach in fragile contexts, the Netherlands should use country teams to conduct more regular context analysis, articulate strategic objectives for prevention and peace, and engage in tailored political dialogue and diplomatic efforts.
Locally led development: Addressing structural barriers needed to meet high ambitions
Recent focus on locally led development has resulted in a number of initiatives, but clarity on definition and operationalisation is needed
A focus on locally led development is evident in key strategy documents. The “Do what we do best” policy lists “Listen to young people and localise” as one of its six working methods (Government of the Netherlands, 2022[4]). The design of the new Africa Strategy was informed by consultations with African stakeholders, and commits to gradually deepening locally led development, with specific targets in the short, medium, and long term24 (Government of the Netherlands, 2023[32]). The 2020 Youth at Heart Strategy (Government of the Netherlands, 2020[33]) and the establishment of the Youth Advisory Committee (YAC) (Government of the Netherlands, n.d.[34]) demonstrate the Netherlands’ acknowledgement of the need to design programmes with the input of stakeholders, though more could be done to increase representation of partner countries on the YAC. The 2022 Feminist Foreign Policy makes explicit reference to the importance of adapting to local context, investing in female and local leadership, and involving local and women’s organisations in policy and decision-making processes (Government of the Netherlands, 2022[11]). Recent thematic theories of change25 similarly highlight the importance of local context and actors and can inspire updates of other theories of change26. The Policy Framework for Strengthening Civil Society and subsidiary grant instruments focus on supporting local CSOs and local ownership (Government of the Netherlands, 2022[35]).
The Netherlands’ development co‑operation programme already shows commitment to and displays many characteristics of locally led development. The Netherlands is noted by its partners for providing core support to multilateral and CSO grantees, for its flexible reporting requirements, co-creation of project concepts with grantees, attention to community engagement in project implementation, support to local innovation, amplifying the voices of local partners on a global level, and adaptive management in some sectors. These approaches contribute to alignment with the three action areas (shift and share power, channel high quality funding as directly as possible, and publicly advocate for locally led development) outlined in the 2022 Donor Statement on Supporting Locally Led Development, of which the Netherlands is a signatory (USAID, 2022[36]).
Capitalising on learning opportunities can inform a shared vision for operationalising locally led development. An internal working group and topic specific communities of practice are already established. The MFA could generate insights for their consideration by capitalising on the relative maturity of locally led development in the civil society and humanitarian fields27. This could include disseminating lessons from early adopter departments and frameworks28, a wider sharing of outputs from learning collaborations with partners29, and taking inspiration from guidance for localisation in the humanitarian community30. Reflecting, as part of an MFA-wide process, on a recent evaluation of Dutch humanitarian assistance, which highlighted barriers to locally led development (IOB, 2023[37]), could help to highlight similar issues and prompt discussion on solutions in other areas of programming. The MFA could also leverage its strengthened monitoring, evaluation and learning capacity to establish clear baselines and assessments of outcomes of locally led approaches. While some development co‑operation providers have set quantitative targets for locally led development31, a flexible qualitative framework could support a range of success criteria and open space for varied approaches32.
The Netherlands can build on its reform agenda to incorporate locally led development into its ways of working
The Netherlands has made progress in consulting local stakeholders but can further improve. Recent multi-annual country strategies (MACS) were generally widely consulted, although this is at the discretion of embassies. Guidance underpinning the 2023-2026 cycle emphasised the importance of political economy analysis and alignment with local demand to increase impact. The assessment criteria also include the extent to which MACS are responsive to country-specific context. However, MACS are primarily considered internal documents (responding to Dutch thematic priorities) and there is no process for formal engagement with the partner government. The Netherlands could consider more systematic involvement of key constituencies. Partners indicated that they would welcome more consultation on annual plans, which serve to operationalise the country strategy. In strategies and programming, clearly differentiating between what is internal and what can be shaped through consultations could encourage more openness.
Greater delegation of budgets could strengthen embassies’ role in advancing locally led development. In addition to embedding locally led development more fully into centrally managed programmes, increasing the delegated budget for embassies is another important avenue to advance locally led and owned approaches. Embassies play a pivotal role in connecting local actors to opportunities, originating projects and shepherding them to scale. Where projects are implemented by international partners, embassies ensure the close involvement of local actors. Local partners that have received funding from both embassy and headquarters appreciated the close dialogue and ease of interaction with the embassy. The 2017 peer review had already recommended providing greater delegation to embassies. While the recommendation is even more pertinent with the increased focus on locally led development, embassies’ delegated budget continues to account for only 14% of resources. In addition, the Netherlands could further leverage its already strong donor co-ordination role in partner countries to advocate with their counterparts for locally led ways of working.
Ambitions to scale impact and volume of ODA provide significant opportunities for locally led development, but also challenges (see A fit-for-purpose system: Building on ambitious reforms). Scaling up impact requires attention to how impact can be made sustainable within the local context, i.e. integrated into local systems, with local stakeholders enabled and ready to maintain and build on results. This can clash with the ambition to scale up project volumes. Larger grants and compliance requirements may put funding out of reach of local organisations and instead incentivise partnerships with organisations with significant absorption capacity (e.g. international CSOs, UN organisations). Similarly, the move towards long-term funding might lock out potential local partners. It is therefore important that scaling up project impact considers involvement of local partners, either by building in a scaling trajectory within larger programmes (e.g. scale up resources for successful partners) or maintaining sufficient flexibility outside larger programmes. Integrating local partners in scaling efforts would also help address the capacity constraint of managing too many projects. Articulating how both scaling and locally led objectives will be pursued in thematic theories of change would encourage consideration of trade-offs and necessary support from the beginning of engagement with local partners. Reflecting on programmes designed to scale embassy pilots (Box 4), can help to identify good practice and avoid pitfalls. While the volume of financing involved is small compared to other programmes and does not offer the level of support that would satisfy scaling ambitions nor underpin the shift in power that locally led development demands, useful lessons can inform future approaches.
Box 4. Scaling efforts that reinforce locally led development: Learning from the Uganda land titling initiative
To ensure that scaling and locally led development objectives are mutually reinforcing, the Netherlands can learn from existing mechanisms. A project on land tenure in Uganda offers an example.
Secure land tenure is vital for the large proportions of populations in low- and middle-income countries that rely on land for their livelihoods. In Uganda, a legal framework for land governance has been put in place. However, it was predominantly large institutional landowners that benefitted from this legislation, as a provision for customary land titling, more suitable and affordable for smallholder farmers, was underutilised. The Embassy of the Netherlands in Uganda identified this important gap and successfully partnered with the local branch of the Global Land Tool Network (GLTN) to enable access to the customary titling option. The two-year, EUR 0.5 million pilot was later scaled through the Netherlands Enterprise Agency (RVO) LAND-at-scale programme to a EUR 3 million, 4-year engagement.
Several good practices begun in the pilot phase were built on in the scale phase, indicating the importance of considering locally led development principles early in the project lifecycle.
A systems approach to engagement with a range of local partners: The pilot targeted capacity building and reimbursement of costs to local government for implementing and overseeing the administrative system. Under LAND-at-scale, this scope has been expanded to include organising farmers into associations to apply for permits to use wetlands and the creation of a platform for communities to interface with local government on this topic.
Aligned with local priorities: Land tenure is listed in Uganda’s national development plan as key to achieving its agro-industrialisation ambitions. The government has a target to title all land by 2040. The project took the additional step of aligning with food security priorities. Central government staff report that their continued engagement during the scaled phase helps dialogue on future policy priorities.
Valuing contextual knowledge: The process to turn proposals into RVO-managed projects is carried out in collaboration with embassies and local stakeholders, helping to ensure that project-specific knowledge built up during the pilot is not lost.
Key challenges in maintaining locally led principles emerged in the scaling phase which can be instructive for future programming.
A long gap between pilot and decision on scaling can undermine momentum. A two-year gap between the end of the pilot phase and the granting of financing for the scaled project risked eroding trust built between local stakeholders, as well as having a deleterious effect on the capacity that had been created and the buy-in of local and national government.
Risk of missing opportunities with other local thematic programmes. The GLTN noted that during the pilot phase, when directly managed by the embassy, more deliberate links were made across themes. Under the new scaled scenario, reporting is directly to the RVO in the Netherlands and only the food security team acts as a point of contact in the embassy, resulting in missed opportunities to promote synergies, for example with Rule of Law projects.
Source: (Netherlands Enterprise Agency, 2022[38]), LAND-at-scale, https://english.rvo.nl/subsidies-programmes/land-at-scale; (Land portal, 2021[39]), “Securing land tenure in Uganda”, https://landportal.org/blog-post/2021/10/land-scale/securing-land-tenure-uganda-collaborative-approach-address-root-causes-food; (GLTN, 2023[40]), Global Land Tool Network, https://gltn.net/
Relationships with civil society and government partners will need to evolve further to fully integrate locally led development
The Netherlands is well-placed to advance locally led CSO partnerships through innovative financing and management models with intermediary organisations. The consortium model, in which one lead organisation manages a grant for a group of organisations, features strongly in the Netherlands’ ways of working with civil society. Research on the use of intermediaries found that the Netherlands was one of a few countries that has adopted new measures and processes to promote accountability for localisation (Charter4Change, 2022[41])(see Box 5). The Netherlands would be particularly well placed to support movements aimed at changing the relationship with intermediary organisations, such as the Pledge for Change (Pledge for Change, 2023[42]). To further enhance its practice, the Netherlands could draw on the experience of other donors33. This includes flexibility on overhead costs, ensuring pass through of flexibility on spending and reporting to subsidiary grantees, agreeing with partners on the number of sub-contracting tiers, allowing for changes to planned activities to support the emergence of local solutions, and options for reporting to allow local CSO voices to be heard. Defaulting to using local consultants and knowledge partners wherever possible could help to remove power imbalances that can be introduced when external experts are brought into unfamiliar contexts. It also helps to develop a pool of in-country expertise to inform decision making.
Box 5. The Netherlands is making strides to localise CSO support through intermediaries
The Netherlands’ Policy Framework for Strengthening Civil Society (2021-2025) explicitly acknowledges that “To relieve the increasing pressure on civil society organisations, an approach is needed that is closely aligned to the local situation and which gives local organisations more say in how the Netherlands can contribute” (Government of the Netherlands, 2022[35]). Subsidiary grant instruments including Power of Voices (PoV), Power of Women (PoW), and Leading from the South (LFS) have innovated new approaches to support this overall policy vision, many of which are in line with the OECD/DAC Recommendation on Enabling Civil Society [OECD/LEGAL/5021], in particular recommendations 4b. and 4c., including:
requesting a statement of roles and responsibilities of local partners with regard to programme design and decision making in consortia
requiring lead parties to undertake capacity building in local organisations on monitoring and evaluation, financial accountability and substantive reporting
restricting the role of international non-governmental organisations to consortium partner only and not eligible to be a lead party
giving consortia flexibility in applying the MFA results framework
displaying flexibility in reporting for local organisations, for example accepting video reporting
An evaluation of the first phase of Leading from the South (2017-2020) found that among its successes was a systemic shift in the perception of capacity of local women’s rights organisations and women’s funds based in the Global South to handle large grants. While PoV and PoW have not yet been evaluated, current partners reported several improvements on previous grant instruments including greater flexibility of funding, responsiveness to local needs, and focus on capacity building.
Source: (OECD, 2022[43]), "In Practice, The Netherlands partner with local women’s rights organisations and feminist movements for gender transformative change”, https://www.oecd.org/development-cooperation-learning/practices/; (Leading From The South, n.d.[44]), "Leading from the South”, https://www.leadingfromthesouth.org/.
Attention will be needed to the levels of direct financing for local CSOs. Compared with other DAC members, the proportion of the Netherlands’ ODA provided to local CSOs (8.7% of the bilateral ODA to and through CSOs in 2021) is relatively high and partners note the relative flexibility of Dutch funding, in particular funding which is embassy managed. However, in line with Recommendation 4a of the OECD/DAC Recommendation on Enabling Civil Society (OECD, 2021[45]) and in response to raised expectations as a result of locally led development commitments made, the Netherlands could consider increasing this proportion. In addition to increasing volumes of funding, continued measures are needed to counter financial dependence on consortium leads, short-term contracts and inflexible budgets, as reported by Southern-based CSOs in a 2019 IOB report (IOB, 2019[46]). While the updated policy framework provides some response to these issues (Box 5), ongoing reflections within the Dutch CSO community on shifting power to Southern-based CSOs notes a number of persistent problems, including eligibility criteria (Partos, 2023[47]). Only three of twenty Power of Voices alliances are led by organisations based outside of the Netherlands. Local CSOs also underlined the importance of allowing for higher levels of overheads, as they are competing against many international organisations who have had decades to become established. Providing more resources to support local CSOs in their institutional capacity could be a more sustainable investment, considering that a portion of overhead funding granted to intermediary organisations funds their oversight of local partners. Partnering or pooling resources for local CSOs with other donors would help to mitigate the risk of increasing the administrative burden and cost for local organisations to an unsustainable level.
Capacity strengthening for local CSOs could be more closely guided by locally led principles and objectives. During the peer review, local CSO partners said that they highly appreciated the integration of organisational development, for example on monitoring, into programmes. Particularly highlighted was experiential learning, such as exchange programmes with Dutch expert institutions, and facilitation of regular interaction with other grantees in the same field to inspire new approaches and partnerships. However, partners expressed concern about capacity building aimed at increasing compliance with donor requirements (Leach, 2017[48]). Ensuring focus on locally led principles in both the process of capacity building (for example, prioritising two-way knowledge exchange) and agreed outcomes of capacity building are therefore critical.
The Netherlands faces internal constraints when engaging with partner governments. A parliamentary motion in 201234 halted the use of general budget support, but also affected government-to-government co‑operation more generally. The Netherlands has also phased out sector budget support and makes less use of core and pooled funding than other donors,35 even though these modalities could be particularly well suited for its thematic approach and ambition to support systemic change. Budgets and strategies are rarely co-signed with partner governments and consultation with bodies with responsibility for development co-ordination is low, potentially eroding good relations. During the peer review, staff frequently expressed that “we cannot work with government” and pointed to the challenges of increasing authoritarianism36.
Dutch development co‑operation recognises that partner government institutions are key stakeholders in Dutch priority sectors, as both regulator (e.g. private sector development, agriculture) and service provider (water, health, rule of law). In Uganda, programming engages with central government in the challenging justice sector (see Working in fragile contexts: An example in strategic patience and flexible, long-term engagement), supports local authorities on land titling (see Box 4 ), provides public infrastructure through the DRIVE instrument, based on government-to-government financing agreements and is exploring results-based financing. Theories of change often cite partnership with local government as an alternative to central government engagement and local government capacity building features where relevant in programming and through targeted programmes such as “Sustainable Development through Improved Local Governance (SDLG)” (UCLG, 2022[49])
The Netherlands can clarify appropriate means of consultation and partnership with local and central governments in its development co‑operation. To assist staff, the MFA could provide clear guidance on which options for engaging with government exist, and when those are suitable within the parameters set down by parliament. This would help prevent defaulting to minimal interaction. Options could include increased communication with related ministries, such as Ministries of Finance, around annual plans. Communication could also be considered via EU representation in countries where bilateral relationships may be difficult. Assessing the balance in each partner country between support to local government to sustain results in policy areas of Dutch interest and more general empowerment programmes would help to inform a more systematic approach.
Mainstreaming locally led development in multilateral and private sector support would accelerate progress
Multilateral funding can be used to channel support to governments and combine resources with other providers to improve local impact and support regional development objectives. Channelling high proportions of ODA through multilateral organisations, is a helpful counterbalance to the lack of government budget support as these will go on to support partner governments. In addition, engaging in activities with other donors through multilateral platforms, e.g. through Team Europe Initiatives (EU, 2022[50]), commissioning exploratory research on options for multi-donor pooled funding, and championing locally led development through its chairing of the Nordic Plus group37, provides opportunities to scale good practice and influence the decision making of other donors, though donor co-ordination alone does not guarantee engagement with partner countries. Building on its strong multilateral standing, for example as Dean of the World Bank Governors, the Netherlands is well-placed to use this influence to advocate for the inclusion of local actors in multilateral programming, and the wider adoption of locally led principles in the multilateral space. This could help avert the risk that high levels of funding to multilaterals crowds out the financing available for local actors or that multilaterals act as mediators of local voice and priorities. As the Ministry of Foreign Affairs, the Ministry of Finance, and the Central Bank share responsibility for multilateral engagement (for example MFA and MoF rotate deputies to the International Development Association between each fundraising round) a harmonised approach to locally led development between responsible agencies would increase impact.
Further support to the private sector in partner countries could be achieved by removing common barriers to contracting, notably under the bilateral infrastructure programme Development Related Infrastructure Investment Vehicle (DRIVE) and other funding mechanisms such as Develop2Build (D2B)38. Building on its local private sector development, the Netherlands, in co‑operation with its partner countries39 and co-financiers, could encourage the involvement of local businesses in Dutch-supported contracting opportunities. Of the USD 140 million in contracts awarded in 2021, 53% went to contractors in the Netherlands while just 24% went to contractors in developing countries40. A closer look at the contract awards data shows that companies from developing countries are less likely to be awarded larger contracts, although local contractors often take part in the implementation.41 Focusing on improving contracting practices could help to remove common barriers for suppliers in developing countries. This could be done by ensuring that opportunities are widely publicised in the recipient country and aiming, where possible, at limiting contract size and complexity (e.g. by unbundling larger contracts into multiple lots). For large and complex infrastructure projects that may be difficult to unbundle, the Netherlands could explore the possibility of setting further incentives for local sub-contractors or local labour, which could yield a more sustainable development impact. More widely promoting and circulating funding opportunities for private sector entities, regardless of Dutch affiliation, to support development objectives would also help to raise awareness and uphold the DAC Recommendation on Untying ODA (see Annex B).
Recommendation
7. To further operationalise a locally led development approach, the Netherlands should
a. define objectives and success criteria for locally led development across the full range of its thematic portfolios and partnerships, not limited to civil society
b. strengthen consultation of partner country stakeholders in priority-setting and annual planning cycles
c. give emphasis to local stakeholders in its efforts to scale up impact.
8. The Netherlands should ensure it systematically considers options for engaging with national as well as sub-national governments in partner countries as key stakeholders, and, tailored to each context, reflect this in its dialogue and programmes.
Policy coherence: A strong basis for further progress
Mobilising support for tackling significant negative spillovers from trade and consumption will require strong political effort
As a highly globalised economy, trade hub and agricultural centre, reducing the Netherlands’ global footprint is a key policy coherence challenge. Trade represents a significantly higher share of its gross domestic product (156% in 2021) than in most economies of a similar size (World Bank, n.d.[51]). The country is a hub for commodity trading and the world’s second largest exporter of agricultural products. However, while trade can generate positive development impact, the current profile of the Dutch economy creates substantial negative spillovers for countries elsewhere. The government recognises this, as indicated in the Sustainable Development Spillover Index, where the Netherlands ranks 160th out of 163 economies (Sachs et al., 2022[52]). Dutch consumption, re-export and production creates emissions, pressure on natural resources and affects land use in low- and middle-income countries (Government of the Netherlands, 2022[53]; Lucas, Brink and Van Oorschot, 2022[54]). An example of the challenge is seen with soy imports for livestock (destined for export) that contribute to deforestation (Kuepper, 2022[55]). Making a shift towards a more sustainable economic model and addressing concerns of affected stakeholders will be a major challenge.
Greening the Dutch economy will bring new opportunities but also challenges for developing countries. The transition to a more sustainable economy can open business opportunities for developing countries, for example through participation in more sustainable value chains or a circular economy. However, to compete in these new markets rather than being excluded from them, developing countries will need to adjust. The Dutch Environmental Assessment Agency therefore highlighted that developing countries will require support to seize these opportunities (Lucas, Brink and Van Oorschot, 2022[54]). Conversely, sourcing of raw materials (metals, rare earth minerals) required for a low emissions transition in the Netherlands must be accompanied by action on responsible business conduct to avoid negative social and environmental effects in source countries.
In key policy documents, the Dutch government has raised awareness of spillover effects and expressed its strong commitment to act. In 2022, the Netherlands submitted its third action plan for policy coherence for development to parliament, citing as its first priority the scaling back of its water, food and climate footprint (Government of the Netherlands, 2022[10]). Many of the secondary objectives specifically touch upon trade and consumption, such as the greening of export finance, supporting climate and development-friendly positions in EU trade discussions, making supply chains deforestation-free, improving raw material sourcing and reflecting biodiversity protection in trade. These aspects are also prominent in the Netherlands’ first Global Climate Strategy (Government of the Netherlands, 2022[8]), as well as in the Raw Materials Strategy (Government of the Netherlands, 2022[56]), both adopted in late 2022. In contrast, despite dedicated studies by the Dutch Environmental Assessment Agency, the 2023 Circular Economy Strategy is much less explicit on trade and engagement with developing countries as part of a global circular economy (Government of the Netherlands, 2022[57]).
Ambitious national due diligence legislation and greater progress on the green transition would enhance the Netherlands’ credibility as a leader in the field of trade and climate change. Draft Dutch legislation on due diligence for businesses proposes that businesses develop an action plan on the adverse effects on climate change, similar to what is done for environmental, social and governance risks (The House of Representatives of the Netherlands, 2022[58]). However, policy documents such as the policy coherence action plan stress preserving a level playing field with neighbouring countries, to reflect private sector concerns and achieve greater effects on value chains. This creates the risk of waiting for others to take action, rather than building coalitions and leading by example, which could ultimately help reach a more ambitious level of action for all countries. Regarding, the green transition, the Netherlands is not on track to meet the 2030 emissions targets (Government of the Netherlands, 2022[59]). At EUR 4.5 billion in 2020 (OECD IEA, 2020[60]), fossil fuel subsidies are more than twice as high as Dutch climate finance. Its fossil fuel sector only achieves “fairly low” transparency (EITI, 2022[61]). Greater progress on its ambitious climate agenda would also support the Netherlands’ role in international advocacy.
Global citizenship education could bolster public support for development-friendly policies but is currently a blind spot in Dutch development co‑operation. Ensuring that the population of the Netherlands has a good understanding of how they relate to the Dutch global footprint and negative spillovers will be critical to garnering support for challenging policy reforms and to shifting consumer behaviour. This is explicitly recognised in the 2022 SDG report (Government of the Netherlands, 2022[53]), and in the “Do what we do best” strategy, where the government indicates that it wants to invest in greater awareness of the Sustainable Development Goals (SDGs). This would be a much-needed reversal, as funding for development awareness was substantially cut in 2011, and a dedicated organisation for development awareness was discontinued in 2018. An ongoing curriculum reform has raised the profile of solidarity and sustainability in formal education, and the multi-stakeholder platform “SDG Nederland”42 brings together a wealth of engaged public, private and civil society actors. However, unlike other DAC members, such as Ireland, and in line with international commitments such as the Berlin Declaration (UNESCO, 2021[62]) and the Dublin Declaration (GENE, 2022[63]), there is not yet a concerted effort of all concerned ministries and stakeholders, or adequate resourcing, to drive development awareness in both formal and non-formal education.
Strong policy coherence mechanisms could further benefit from a deeper engagement of line ministries
The Netherlands’ policy coherence action plan combined with a wide range of mechanisms and tools has helped drive policy change. The dedicated action plan combined with regular reporting to Parliament is good practice, as it provides an impetus for concerned ministries to regularly consider negative spillovers of policies under their purview. An “SDG test” of draft legislation requires an assessment of effects on developing countries, for which there is detailed guidance. Spillovers are extensively discussed in national SDG reporting and are part of statistical SDG monitoring (Statistics Netherlands, 2022[64]). These mechanisms have driven adjustments to policies, both in international engagement as well as domestic policy. This has been highlighted through IOB-led evaluations, for example in the areas of tax (IOB, 2021[65]) and responsible business conduct (IOB, 2019[66]). The evaluations also highlighted further room for progress, such as a need for better understanding of developing country interests and closer interaction between ministries. These results have in turn informed the latest policy coherence action plan. Raising awareness of the action plan across government and at embassy level will be important for its implementation.
Institutional measures could encourage reflection by line ministries on how their policies contribute to global sustainable development. Despite the positive focus on coherence challenges in cross-government policy documents, this does not always translate into day-to-day work or high-level co-ordination (IOB, 2023[67]). Despite having an obligation, ministries often do not complete the “SDG test” in sufficient quality or a timely manner (Government of the Netherlands, 2022[53]). In response, the policy coherence action plan foresees biannual meetings between the MFA and key ministries to identify relevant legislation early on. Building on the overall good co-ordination across government, the MFA could foresee regular follow-up exchanges with key ministries, similar to the close engagement with the Ministry of Finance on tax issues. The government, for instance, the Prime Minister’s Office or the Ministry of Finance could also consider requiring all ministries – beyond those directly concerned by the policy coherence action plan43 – to demonstrate how their work contributes to the SDGs, including in developing countries and at global level. As a good example, the MFA is using the SDGs as a basis for discussing quantified targets for the Dutch agricultural footprint with the Ministry of Agriculture.
The Netherlands could expand its good practice of multi-stakeholder dialogue to enhance debate on policy coherence. The Dutch culture of mediating between all societal stakeholders on challenging issues (the “polder model”), combined with a high awareness of policy coherence in Parliament, civil society and the private sector, provides a strong basis to make progress on coherence challenges. To promote learning and debate on responsible business conduct, for example, the MFA has had good experiences with multi-stakeholder sectoral agreements, overseen by the Social and Economic Council of the Netherlands (see Box 6). A vast multi-stakeholder effort also led to the adoption of the National Climate Agreement (Government of the Netherlands, 2019[68]). Building on these experiences, the government could institute multi-stakeholder platforms for priority coherence challenges. Such platforms could help ensure that a development perspective is integrated early in the policy-making process and support the arbitration of difficult trade-offs. They would also enhance accountability, obliging all stakeholders to demonstrate a constructive engagement in the process.
Box 6. Multi-stakeholder sectoral agreements that promote Responsible Business Conduct
Respect for standards in Responsible Business Conduct (RBC) is a key element in enabling the contribution of private sector actors to sustainable development. However, application of standards in practice often faces challenges. Companies do not always have sufficient knowhow to assess and address risks and may worry that RBC costs will weaken their position vis-à-vis less engaged competitors.
To disseminate standards, raise awareness and change business practice, the Dutch government has supported the creation of multi-stakeholder sectoral agreements (SER, n.d.[69]). In more than a dozen different sectors such as textiles, food or insurances, the agreements have brought together government, business, trade unions and civil society. Agreements set voluntary standards of better business practice and have encouraged a sharing of experiences and learning. The agreements have increasingly reflected climate change challenges, such as the risk on food value chains, attention for climate risk in pension fund investments, and the need for sustainable and responsible sourcing in renewable energy value chains.
Evaluations showed that the agreements have improved dialogue, generated learning, raised awareness of standards and led to improved reporting (IOB, 2019[66]; Royal Tropical Institut KIT, 2020[70]). However, while covering important market shares, the agreements did not reach all companies or all high-risk sectors. The government’s long-term (ambitious) target of 90% of companies applying due diligence standards was not reached.
A key lesson learnt is that a smart policy mix is necessary to promote RBC and the government is working on due diligence legislation. Voluntary agreements can help prepare businesses and garner support for legislation but can also serve to question the need for regulation (Change in context, 2019[71]). To enhance the added value of sectoral agreements, the evaluation recommended that the government set clear standards and provide (positive and negative) incentives for wide participation, as well as pursue opportunities for international upscaling.
Note: This practice is documented in more detail on the Development Co‑operation TIPs • Tools Insights Practices platform at https://oe.cd/58B
The comprehensive trade, aid and climate finance toolbox could achieve greater impact
In international advocacy, the Netherlands successfully combines climate and development-friendly trade agendas. It has a track record as a strong advocate for trade, reflecting developing countries’ concerns in EU trade agreements (IOB, 2021[72]), for example, with the World Trade Organization, on access to medication (OECD, 2021[73]) and with the OECD on responsible business conduct (Change in context, 2019[71]). It is also very active in climate diplomacy, having campaigned for ambitious mitigation targets, co-chaired the NDC (nationally determined contributions) partnership and being a champion of sustainable water management and advocate for climate adaptation finance. A dedicated climate envoy enhances government co-ordination. Good examples for linking trade and climate diplomacy at EU level include advocacy on due diligence legislation, such as support to developing countries in the fight against deforestation and inclusion of “scope-3 emissions” along the value chain (Government of the Netherlands, 2022[74]). An important complement to working with stakeholders in the Netherlands is work to influence international value chains and build wider coalitions (Change in context, 2019[71]). A good example is the Amsterdam Declaration Partnership to fight deforestation in commodity trade.44
Increasingly climate-aligned export support is another positive example of the Netherlands linking trade and climate. Internationally, the Netherlands is part of the Export Finance for Future (E3F) initiative45 that promotes a stronger reflection of climate change in the Arrangement on Officially Supported Export Credits. Nationally, the government has enacted the phase out of export support for all fossil energy production by 2023 (not limited to coal). However, partners criticised the decision, as it allowed for a one-year transition period (despite an initial announcement in 2020), pointing to frequent negative side effects of fossil fuel extraction in developing countries. As one of the seven OECD Members to do so, the Netherlands has a dedicated climate change methodology (“Green Label”) to assess each export credit (OECD, 2021[75]). To incentivise green exports, conditions allow a larger insurance coverage and softer criteria for small investments. Moreover, the government provides investment loans to support the greening of production of exports (Atradius Dutch State Business, n.d.[76]). An additional incentive could be set for exporters that commit to reducing climate emissions, similar to Dutch good practice for climate-aligned public procurement (OECD, 2022[77]). Trade promotion also has a growing sustainability focus, for instance when considering which companies to invite for trade missions. It will be important to track if these valuable efforts lead to a substantial greener export portfolio.
A revised approach to aid, trade and investment can help deepen institutional collaboration and align all instruments towards systemic change. The “Do what we do best” strategy, and a new theory of change on private sector development, underline the Dutch ambition to link trade, local job creation and climate, in particular in the aid and trade “combination” countries (MFA, 2022[15]). The Netherlands can build on a comprehensive toolbox that covers the full range of approaches at international, national and partner country level (See Table 2). It is one of the most important providers of aid for trade and investment. However, there is still room for improvement. For example, the different instruments tend to work in isolation. At the MFA headquarters, co-ordination between the international co‑operation and trade directorate-generals (DG) could improve (IOB, 2022[12]), with key CSO partners only interacting with DGIS, but not with the trade DG. At country level, embassies can play a crucial role in ensuring coherence. However, they have difficulties navigating instruments, are not always consulted and have limited capacity to engage (IOB, 2022[12]). Collaboration between embassies and the Netherlands Enterprise Agency (RVO) is close, while exchange with the Dutch Entrepreneurial Development Bank, FMO, is much less frequent. A forthcoming theory of change for trade, aidand investment provides an important opportunity to set clear priorities in line with Dutch expertise and trade profile and ensure that all actors and instruments work toward the same objectives.
Table 2. The Dutch policy coherence engagement on trade, climate and development
The Netherlands makes good use of its comprehensive toolbox, but some aspects require attention.
Note:▲Green triangles denote good practice; ●orange circles indicate that progress is being made but more could be done; ▼red triangles flag areas where progress is needed
A greater focus on systemic change can help strengthen the climate relevance of private sector development efforts. For 2023, the Dutch government estimates that only 13% of the MFA’s private sector engagement budget will be climate relevant. This indicates much room for progress. In response to a very critical evaluation (IOB, 2022[12]), the new private sector development theory of change (ToC) puts much greater emphasis on systemic change such as creating a regulatory environment that supports responsible business conduct. This aligns well with Dutch efforts to promote responsible business conduct at home and internationally, and responds to developing countries’ needs to meet import market standards. The ToC also includes work on transforming markets in select value chains which can contribute to “reaching tipping points which lead market players to make ongoing improvement” (MFA, 2022[15]). The importance of climate and sustainability for value chains is highlighted, acknowledging opportunities and risks for producers. A pilot seeks to overcome thematic silos, notably with food systems programmes. This is a good start to enhance the climate relevance of the portfolio, considering the focus of the Dutch food portfolio on local private sector development and food security and the dedicated expertise of agricultural attachés in many embassies. However, there are more opportunities for synergies, notably on the climate/energy portfolio, as identified, for example by embassy staff in Uganda, thanks to their regular exchanges at embassy level.
Dutch efforts to mobilise climate finance from the private sector could focus more on development additionality. FMO is the leading actor for private climate finance in the Dutch system (with substantial amounts mobilised through multilateral entities). Its new climate action plan sets out a long-term goal to reach a net-zero portfolio by 2050 and portfolio targets of EUR 10 billion in climate action (FMO, 2022[78]).46 However, while the Climate Strategy stresses that the Netherlands wants to “invest in breakthrough potential”, evidence indicates room for improvement. A policy evaluation on private sector engagement highlighted less evidence for additionality, pointing to support for middle-income countries and already strong partners and insufficient tracking of longer-term effects. Specifically for climate finance, an evaluation highlighted that a greater share of private climate finance targeted mitigation and middle-income countries47 (IOB, 2021[79]). The evaluation also found additionality less convincing for projects sitting between innovation and near commercialisation. A comparative study of development finance institutions highlighted the importance of deploying more high-risk capital for more sustainable technologies, but underlined FMO’s limited risk appetite within its AAA-rating (Attridge and Novak, 2022[80]). Government and FMO will therefore need to explore how the Netherlands can enhance the development additionality of its private climate finance and further increases its attention to climate adaptation. This is the clear ambition of the Dutch Fund for Climate and Development, although an evaluation indicates this remains a work in progress (Itad, 2021[81]).
Focusing on opportunities for Dutch companies means opportunities for maximum development impact will be missed. The Global Climate Strategy stresses that climate action will create opportunities for Dutch business in both adaptation and mitigation. However, “to contribute to the future earning capacity of the Netherlands” (one of Invest International’s main objectives) (Invest International, n.d.[82]) does not necessarily mean best development impact (Invest International’s other objective). Indeed, a recent evaluation explicitly recommended focusing on the development needs of developing countries and less on commercial potential (IOB, 2022[12]). Both internal and external stakeholders assume that the objective of awarding 70% of contracts to Dutch companies under the DRIVE and D2B programmes will likely skew business development towards the Dutch offer. This could exacerbate risks that support will focus on middle-income countries that can afford Dutch services (as was already highlighted in a climate finance study by IOB), or on solutions that do not involve local partners (under the Dutch Climate and Development Fund, less than half of project sponsors were local entrepreneurs48). The Netherlands has substantial experience in putting development impact at the start of project design, before identifying whether or not there are suitable Dutch solutions. Embassies can play a key role in this regard. The Netherlands will need to carefully test that it supports those projects with highest development impact.
The engagement in combination countries provides an opportunity for the Netherlands to drive the integration of climate change in trade and development efforts. For various combination countries, the Netherlands is a major import partner (e.g. of agricultural products and garments). As these countries are large economies, making progress in the sustainability transition is of particular relevance in the global fight against climate change. However, considering the challenges outlined above, the MFA will need to ensure its focus is on development impact. As only few embassies in combination countries manage larger delegated budgets, attention is needed to ensure they are fully equipped to play their role in helping to reflect demand and context in the design and implementation of new programmes. Initial reflections of the embassy in South Africa show that embassies can help identify solutions that respond well to local demand. At the same time, facilitating exchange between combination countries – and with other focus countries – could have a potential to influence value chains more widely, and build coalitions for international efforts.
Recommendation
9. To strengthen the engagement of all stakeholders on policy coherence challenges, the Dutch government should ensure line ministries systematically assess and address global and transboundary effects of their policies, expand the use of multi-stakeholder approaches to advance policy coherence priorities, and invest further in global citizenship education.
10. The Netherlands should ensure that maximum development impact rather than commercial objectives remains the key factor in decision making in its private sector engagement and enhance the cohesiveness of private sector development efforts for systemic change.
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Notes
← 1. The Netherlands Enterprise Agency (RVO) is a public institution which acts as an implementer for some of the Netherlands’ private sector partnerships. The Dutch Entrepreneurial Development Bank, FMO, is a public-private partnership, with 51% of shares held by the Dutch state and 49% held by commercial banks, trade unions and other members of the private sector. It manages a number of funds which blend official development assistance (ODA) with other resources. Created in 2021, Invest International is a joint venture of the Ministry of Finance (51%) and FMO (49%). It manages investment programmes previously managed by RVO.
← 2. Increases are planned across the portfolio, in particular for climate, refugee hosting in partner countries, humanitarian assistance and the combination of trade and development co-operation.
← 3. Even with this measure, the total in-donor refugee costs in 2022 stood at USD 946 million or 14.6% of Dutch ODA.
← 4. The need to focus and prioritise goes beyond bilateral co-operation, as underlined by an evaluation of Dutch EU co-ordination (IOB, 2022[83]).
← 5. Authors’ calculations based on internal data provided by the MFA.
← 6. Peace, security and stability; sustainable economic development, trade and investment; sustainable development, food security, water and climate; social progress (including education); strengthened frameworks for development (encompassing contributions to multilateral organisations).
← 7. Sustainable Economic Development Department, Social Development Department, Department for Stabilisation and Humanitarian Aid, Inclusive Green Growth Department, and Bureau of International Co-operation
← 8. The programmatic approach to sustainable economic development (PADEO) is being piloted in Ghana, Tunisia, Uganda, Sudan and Kenya and aims to align with the programme for Vocational and Higher Education (BHO) of the Social Development Department (DSO) and the Food Systems Approach of the Inclusive Green Growth department (IGG).
← 9. A “Code of conduct” to support this type of decision making already exists.
← 10. In 2020, ten recommendations were made to inform a multi-year staffing strategy. These include: building staff expertise in a small number of themes; recruiting to replace planned retirements; increasing career prospects for thematic experts; making overseas posts broader in theme and using local expertise to draw up recruitment profiles; increasing attractiveness of semi-hardship posts; improving recognition of performance; creating functions for generalists on high-profile themes/activities; enhancing career prospects of trainees, laying out career paths for management and promoting relevant language skills.
← 11. See, for example, the DAC Peer Review of Switzerland, https://www.oecd-ilibrary.org/docserver/9789264312340-en.pdf?expires=1678707657&id=id&accname=ocid84004878&checksum=8FD32414170C912825DB5172C9AF3D2F
← 12. Switzerland, for example, undertook a pilot scheme where two staff rotate every two to three months between the positions of Head of Co-operation in Burkina Faso and Desk Officer for Burkina Faso in Bern (see https://www.oecd.org/dac/peer-reviews/DAC-mid-term-Switzerland-2022.pdf). Other countries combine hardship with non-hardship postings, either making hardship postings mandatory or pre-requisites for particular grades or roles, or emphasising in recruitment material the expectation that staff will undertake certain postings. See also this Peer Learning brief on Building, buying and borrowing staff and skills, DCD/DAC(2020)48.
← 13. Staff cite favourable pay levels, flexible working conditions, formal and informal learning opportunities, and opportunities to broaden networks as benefits.
← 14. These could include increased support with interpretation of risk assessments and design of appropriate mitigation measures, escalation and de-escalation procedures and assignment of clear risk responsibility for each level of authority (see, for example, the practice from Ireland on assignment of risk responsibility for each level of authority https://www.oecd-ilibrary.org//sites/c20f6995-en/1/3/2/4/index.html?itemId=/content/publication/c20f6995-en&_csp_=791813851d5b851636d9ca5e2f8f6dac&itemIGO=oecd&itemContentType=book#section-d1e4730 .
← 15. In conjunction with other partners, the Netherlands has commissioned several studies including Risk Sharing in Practice, https://interagencystandingcommittee.org/system/files/2022-10/Risk%20Sharing_Case%20studies%20report_%20June%202022.pdf, a discussion paper https://here-geneva.org/consultancy-on-risk-sharing-discussion-paper-2/, and it has co-signed a statement on risk sharing in the humanitarian sector https://interagencystandingcommittee.org/system/files/2021-06/Statement%20on%20Risk-Sharing.pdf.
← 16. See “Special working methods” in Do what we do best: A Strategy for Foreign Trade and Development Cooperation, https://www.government.nl/documents/policy-notes/2022/10/10/policy-document-for-foreign-trade-and-development-cooperation-do-what-we-do-best, as well as Less Pretention, More Realism https://www.iob-evaluatie.nl/publicaties/evaluaties/2019/07/01/428-%E2%80%93-iob-%E2%80%93-an-evaluation-of-the-reconstruction-programme-2012-2015-the-strategic-partnerships-chronic-crises-programme-2014-2016-and-the-addressing-root-causes-tender-process-%E2%80%93-less-pretension-more-realism and Impact of Aid in Highly Fragile States, https://english.iob-evaluatie.nl/publications/sub-studies/2022/11/10/synthesis-of-systematic-reviews-in-afghanistan-mali-and-south-sudan
← 17. This analysis uses the methodology outlined in the States of Fragility 2022, https://doi.org/10.1787/c7fedf5e-en, where ODA to peace-related sectors is tracked using the CRS sector codes: 15110 15111 15112 15113 15130 15150 15152 15153 15160 15170 15180 15190 15210 15220 15230 15240 15250 15261.
← 18. Based on OECD CRS data, 2021.
← 19. See “The Netherlands to Host Second Yemen International Forum in 2023”, https://sanaacenter.org/publications/news/18957.
← 20. See outputs of the temporary INCAF-EvalNet Joint Task Team on Afghanistan, co-chaired by the Netherlands, as well as Less pretention more realism, https://www.iob-evaluatie.nl/publicaties/evaluaties/2019/07/01/428-%E2%80%93-iob-%E2%80%93-an-evaluation-of-the-reconstruction-programme-2012-2015-the-strategic-partnerships-chronic-crises-programme-2014-2016-and-the-addressing-root-causes-tender-process-%E2%80%93-less-pretension-more-realism, EU Development Cooperation in Sub-Saharan Africa, https://www.iob-evaluatie.nl/publicaties/rapporten/2020/05/25/euos2020), Impact of Aid in Highly Fragile States https://english.iob-evaluatie.nl/publications/sub-studies/2022/11/10/synthesis-of-systematic-reviews-in-afghanistan-mali-and-south-sudan) and Trust, Risk and Learn, https://english.iob-evaluatie.nl/results/humanitarian-assistance-policy).
← 21. The Netherlands co-chaired the DAC’s temporary INCAF-EvalNet Joint Task Team on Afghanistan in 2022. The International Network on Conflict and Fragility (INCAF) is taking this forward through a workstream on development co-operation in extremely fragile and politically constrained contexts, in collaboration with the DAC Network on Governance (GovNet) and its Anti-Corruption Task Team (ACTT) who are also working on issues of autocratisation and approaches to risk.
← 22. The Prospects partnership is a EUR 700 million initiative for 2019-2023 (with further funding earmarked for phase 2 in 2024-2028) to support reception in the region. It brings together UNHCR, UNICEF, ILO, IFC and the World Bank to leverage their respective comparative advantages in dealing with forced displacement across eight countries. For further information see the Netherlands’ results portal: https://www.nlontwikkelingssamenwerking.nl/en/#/results/themes/prospects-for-refugees-and-migration-cooperation/migration-shelter. ODA allocations for migration and refugee reception in the region represent close to 80% of the “Peace, Security and Stability” thematic budget.
← 23. Work is underway in several forums to explore these issues in more details, including through the current INCAF-DEV Centre workstream on forced displacement with the forthcoming OECD report on Forced Displacement in Climate Change Adaptation and UNHCR “Climate change and disaster displacement”, https://www.unhcr.org/climate-change-and-disasters.html.
← 24. The strategy commits to increasing focus on localisation in four African countries.
← 25. See for example, https://www.rijksoverheid.nl/onderwerpen/ontwikkelingssamenwerking/documenten/publicaties/2018/11/08/theory-of-change-ontwikkelingssamenwerking and the updated Theory of Change on Security and Rule of Law https://www.government.nl/ministries/ministry-of-foreign-affairs/documents/publications/2023/01/26/theory-of-change---security-and-rule-of-law.
← 26. For instance on climate change, in line with the Netherlands’ endorsement of principles for locally led adaptation agreed at COP26 in 2021, https://www.iied.org/principles-for-locally-led-adaptation. Principles include devolving decision making, addressing structural inequalities, providing patient and predictable funding, investing in local institutional capabilities, building understanding of climate risk and uncertainty, flexible programming and learning, transparency and accountability, collaborative action and investment.
← 27. A note issued by the DGIS working group on localisation referred almost exclusively to actions relative to civil society.
← 28. The Power of Voices framework for strengthening civil society https://www.government.nl/documents/policy-notes/2019/11/28/policy-framework-strengthening-civil-society and the Leading from the South https://www.leadingfromthesouth.org/ programme are notable for their prioritisation of locally led development.
← 29. For example, with the Civil Society Platform for Peacebuilding and Statebuilding (CSPPS) on “Unboxing Localisation”, https://www.kpsrl.org/event/unboxing-localisation-an-inclusive-dialogue-trajectory.
← 30. For example, see Guidelines on implementing Grand Bargain Commitments at country level https://interagencystandingcommittee.org/system/files/2023-02/Guidance%20-%20How%20to%20implement%20the%20Grand%20Bargain%20commitments%20at%20country-level_vf.pdf and NEAR Localisation Performance Measurement Framework https://ngocoordination.org/en/library/near-localisation-performance-measurement-framework.
← 31. In 2021, USAID committed to provide at least 25% of all funds directly to local partners by 2025 and that 50% of programming would be co-designed, implemented or evaluated by local communities. https://www.usaid.gov/news-information/speeches/nov-04-2021-administrator-samantha-power-new-vision-global-development
← 32. Examples include USAID’s Spectrum and checklist, https://usaidlearninglab.org/resources/locally-led-development-spectrum-and-checklist-tool, Peace Direct’s distinctions between locally implemented, locally managed, and locally led and owned peacebuilding initiatives https://www.peacedirect.org/wp-content/uploads/2022/10/PD-Localisation-and-Decolonisation-Report-v3.pdf and ODI’s different models and approaches to locally led development, https://cdn.odi.org/media/documents/ODI-SH-Localisation-Report-Oct21-Proof06.pdf
← 33. For example, Canada’s Fund for Local Initiatives focuses on reducing compliance barriers and minimising reporting procedures for local civil society organisations https://www.international.gc.ca/world-monde/funding-financement/cfli-fcil/index.aspx?lang=eng; New Zealand’s civil society funding mechanisms include a provision to support the overhead costs of local CSOs to strengthen institutional capacities https://doi.org/10.1787/10883ac5-en; Ireland requires all CSO partners to have a clear policy on locally led development.
← 34. The motion called on the government not to spend new money on general budget support and also to commit to a further limitation of the use of this instrument. https://www.eerstekamer.nl/behandeling/20121217/motie_agnes_mulder_over_de_inzet/document3/f=/vj69n4etbdzw.pdf
← 35. Bilateral ODA commitments for the period 2018-20, as compared to Australia, Canada, Denmark, Finland, Ireland, Norway, Sweden and the United Kingdom.
← 36. The number of ODA recipients classified as authoritarian regimes grew from 68 in 2010 to 75 in 2019 https://www.oecd-ilibrary.org/docserver/57ab4100-en.pdf?expires=1677232018&id=id&accname=guest&checksum=CA324623DFD2511F8AA6B182E7396E0A.
← 37. The Nordic Plus group is an informal partnership comprising Denmark, Finland, Ireland, The Netherlands, Norway, Sweden and the UK.
← 38. Through DRIVE, the Ministry of Foreign Affairs facilitates investments in infrastructural projects that contribute towards a good business climate and entrepreneurship in the priority sectors: water, climate, food security, and sexual and reproductive health and rights (SRHR). Public infrastructure projects that have a high development relevance in other sectors also can apply for DRIVE support https://english.rvo.nl/subsidies-programmes/development-related-infrastructure-investment-vehicle-drive. Develop2Build (D2B) is a Government-to-Government programme offering direct assistance in setting up infrastructural projects https://english.rvo.nl/subsidies-programmes/develop2build-d2b
← 39. In general, procurement for infrastructure projects is managed by the recipient government. Dutch programmes supporting infrastructure investments include Facility for Infrastructure Development (ORIO), DRIVE and Develop 2 Build.
← 40. Source: OECD-DAC Contract Awards database. Contracts reported by the Netherlands can be co-financed with other donors (e.g. the Asian Development Bank).
← 41. With the exception of one large contract awarded to a supplier from South Africa.
← 43. This could relate for instance to the Ministries of the Interior (migration and forced displacement), Defence (peace and security) and Education (development awareness in formal education).
← 45. The initiative Export Finance for the Future brings together seven countries, who agreed to a set of principles, available at: https://www.tresor.economie.gouv.fr/Articles/2021/04/14/seven-countries-launch-international-coalition-export-finance-for-future-e3f-to-align-export-finance-with-climate-objectives.
← 46. While the strategy does not include a specific target for adaptation funding, FMO is starting a dedicated workstream to step up funding for climate adaptation and resilience.
← 47. The evaluation acknowledged that 41% of the public disbursement for mobilising private capital was aimed at adaptation and 47% at low-income countries.
← 48. Of 34 project sponsors, 15 were local entrepreneurs, 9 from another developing country and 10 from a developed country.