Introduction
International development began after the World War II. Its main intention is reducing inequality through improving the prosperity of nations around the globe. Debates on the effectiveness of international development led to the concept formulation of capacity development (CD). This literature review will discuss the origin of CD from various sources, the CD definition, CD and aid effectiveness, CD framework, and the incremental change of CD. Those five topics are shaping the current understanding of CD and its relation to aid effectiveness.
The origin of capacity development
Capacity development aims to increase the effectiveness of international development on enhancing life quality of people around the globe. Industrial revolution and economic development has improved the average income of people globally. However, at the same time, the disparity of the average income per capita among nations has been rising and has expanded most during the last 100 years (Helpman 2004, p. 2). In 1990, mortality rate of under-five year old children per 1000 live birth was 11 in developed countries, yet in Sub Saharan Africa the number was more than 16 folds (United Nations 2008, p. 14).
The awareness of global welfare in reducing inequality through international development and development cooperation is not new. The public in U.S. and Britain were concerned about the devastated impact of World War II right after the war was over. They wondered how to bring development to the developing countries. That led to the establishment of international trustees, such as Food and Agriculture Organization (FAO), United Nations (UN), World Bank (WB), and International Monetary Fund (IMF) (Arndt 1987, pp. 43-45). Following the success of the Marshal Plan in the reconstruction of Europe which was in 1951, some developed countries established particular departments to administrate their development assistance. For example, the U.S. department was started since 1953 which later on established the United States Agency for International Development (USAID) in 1961 (USAID n.d.).
The international trustees and development assistance's organizations, hereafter called 'international development organizations' (IDOs), started their operations through technical assistance (TA) approach. They supplied foreign experts and provide some training to the 'recipient' countries. As the TA was being practised, the IDOs recognized that the TA did not help improve human and institutional capacity. That led WB to conduct 'a radical reappraisal' of TA in Africa and came up with the idea of 'capacity building' (CB) in 1991 (Edoho 1998, p. 233). The concern of CB emerged since the mid-1980s which evolved from 'institutional building' in the 1950s and the 1960s, 'institutional strengthening' in the 1960s and 1970s, and 'development management' and 'institutional development' in the 1980s (Trostle et al. 1997, p. 63).
The term ‘capacity building’ was slowly changed to ‘capacity development’ in the late 1990s and the early 2000s. The term ‘capacity development’ has been officially used since the 2005 Paris Declaration which mentions the term 14 times in its 21 page document (OECD 2005). There are several explanations of how to distinguish CB and CD. For example, CB means the capacity does not exist at all and therefore needs to be built. Capacity development, on the other hand, means strengthening the existing capacity (Grindle 1997, p. 6). ‘Capacity development’ connotes long term process and ensuring national ownership and sustainability (Brown 2002, p. 1).
Capacity development becomes a mainstream of many IDOs' business particularly after the 2005 'Paris Declaration on Aid Effectiveness'. The German technical cooperation (GTZ) declares that CD is their 'core competence' and 'the key to sustainable development' (GTZ n.d.). Asian Development Bank (ADB) adopts CD as 'a key development priority' to be integrated into its own operations and its partners' strategies (ADB 2009). UNDP positions CD as 'the organization's core contribution to development' (UNDP n.d.). Finally, the WB also admits the importance of CD to achieve the MDGs (Constantinou 2007, p. 1).
Definition of capacity development
After the 2005 Paris Declaration on Aid Effectiveness, some IDOs adopt CD definition from the Organization for Economic Co-operation and Development (OECD); that is 'the process whereby people, organisations and society as a whole unleash, strengthen, create, adapt and maintain capacity over time (OECD 2006, p. 12)'. 'Capacity' is understood as 'the ability of people, organisations and society as a whole to manage their affairs successfully' (OECD 2006, p. 12). IDOs that adopt these definitions include German Federal Ministry on Economic Cooperation and Development (BMZ) (BMZ 2008, p. 2) and ADB (Bolger 2008, p. 9). For others, such as CIDA and UNDP, CD definition has a similar meaning (CIDA 2000, p. 2; UNDP 2009, p. 5). The World Bank's definition emphasizes the importance of 'change agent' to manage the changes in CD process (Otoo et al. 2009, p. 3). Although UNDP has a similar definition with OECD, it asserts the importance of beneficiaries' empowerment. UNDP affirms that without change in the beneficiaries, any effort could not be said to have enhanced capacity, even if it has achieved the objectives (UNDP 2009, p. 5).
Concern about the importance of the change agent's role is central to CD. IDOs could push the development objective achievement without the role of the beneficiary, but this will not create ownership. Without ownership, beneficiaries will be dependent on aid (Riddell 2010, p. 224). This will not sustain the impact of the development achievement.
Aid effectiveness
Concern about aid effectiveness occurs because of some failure facts and concerns about scarce resources. It is hard to find evidence of where country with large inflow of aid and technical assistance succeeded in development. Many successful countries in East Asia and Africa received little aid as a percentage of GDP (Easterly 2007, p. 329). The series of global financial crisis, especially the Asian and the latest U.S. mortgage crisis, has been raising a concern about the future sustainability of aid resources. Development aid decreased during Asian crisis (Shanta 2008). In addition, some donor countries, particularly the U.S., have been devoting development aid far from their ability (Sachs 2005, p. 85). These call for a concern that aid resources are limited which led to the global commitment on aid effectiveness. There were 91 countries participating on the 2005 Paris Declaration on Aid Effectiveness (OECD 2005, p. 12).
The signatory countries of the Paris Declaration conceptualize aid effectiveness through five commitments, which are measured by 12 indicators. The commitments are ownership, alignment, harmonization, managing for results, and mutual accountability. The main idea of all the commitments is to have stronger roles of partner (beneficiary) countries and to emphasize the result based management. Ownership is about the partner's leadership over their development policies, and strategies and co-ordinate development actions. Alignment encourages donors to base their support on partners' strategies and procedures. Harmonization promotes harmonization, transparency and effective cooperation between partner and donor as well as among donors. Managing for results urges partners and donors to be results oriented on managing resources and doing decision making. Mutual accountability advocates accountability for both donors and partners (OECD 2005, pp. 3-8).
The signatory countries believe that aid effectiveness will be improved if the five commitments are implemented. While there is no doubt about the importance of the result based concern, the intention to rely more on partner's countries could hamper the development achievement if the partner is a corrupt country with ineffective government. However, ignoring the role of the partner will endanger the impact sustainability. Therefore, these commitments are the most plausible strategy, although the implementation will be not easy in partner with high corruption rate and the achievement process could be very slow in partner with ineffective government.
Capacity development is the key to aid effectiveness. As discussed earlier, CD is about changes at the individual, organization, society, and institutional level. There are cases where economic growth can be achieved mainly because of institutional change without development aid. History tells us that the change in political and economic institution is central to economic development (North 1991, p. 98). In Vietnam, for example, the significant increase of rice production was mainly because of institutional change (Kompas et al. 2009 p. 2).
Capacity development framework
In order to understand the CD concept, it is important to clarify the capacity framework. The framework elaborates the capacity dimensions, components, or elements. It is important to structure the CD need assessment and action plan appropriately. Without an appropriate need assessment, projects will not achieve their objectives (World Bank 2005, p. xv). Indeed, need assessment is the most challenging step in CD process (Kay & Renault 2004, p. 42). A proper CD action plan will guide CD measures effectively and efficiently.
UNDP's CD framework is covered by three dimensions. They are: (a) the three levels at which capacity is nurtured (enabling environment, organizations, and individuals), (b) the five functional capacities (capacity to engage stakeholders; capacity to assess a situation and define a vision; capacity to formulate policies and strategies; capacity to budget, manage and implement; and capacity to evaluate), and (c) the four core issues (institutional arrangements, leadership, knowledge, accountability) (UNDP 2009, pp. 11-45). This framework is the most comprehensive one compared to other IDOs. The level explains where the change should be targeted. The functional capacities concern on what capacity must be developed. The issues describe CD's topics that appeared in any CD measures.
Compared to UNDP, ADB's framework covers only the level of CD. That is organization, network, and institutional context (Bolger 2008, pp. 11-12)[1]. The individual level is not specifically mentioned although it is understood as a part of the organizational level (Bolger 2008, p. 96). ADB identifies 'network' as a particular dimension which is positioned between the organization and institutional context. While individuals alone will not change the functional performance, the individuals play important roles in CD process. The individual within the organization will change the organization. Individuals in the society play important roles in the change of institutional context. Therefore, it is important to specify individual in CD level. Specifying 'network' as a particular level in CD framework makes sense. Capacity development on a certain function of government's department will always need support from other departments (for example, from the finance department for a financial support improvement) and relevant stakeholders (for example, from financial institutions to support business development). Without an effective network support, CD measures will never succeed.
The World Bank conceptualizes its CD framework through three factors which contribute on the resource use effectiveness and efficiency. They are: conduciveness of the socio-political environment, efficiency of policy instruments, and effectiveness of organizational arrangements. For WB, CD means a process to change the three factors to enable the change agent's organization to use the resources effectively and efficiently (Otoo et al. 2009, pp. 4-10). The three factors are similar to the 'level' in UNDP's concept. In UNDP's perspective, the 'socio-political' could be included in the 'enabling environment'. The ‘policy instrument’ could be a part of the 'enabling environment' or the 'organization' depends on the basis of the CD measure.
GTZ's framework covers the three levels of CD. That is individual, organization, and system (GTZ 2003, p. 14). GTZ defines 'system' similar to UNDP's ‘enabling environment’. While UNDP elaborates the four core issues, GTZ mentions four pillars as the core topic of CD in public sectors. That is participatory governance, planning and budgeting, human resources management, and public finance management.
Incremental change
Capacity development is about the change process from individual up to institutional level. Scholars suggest that change must be set as an incremental rather than fundamental change. The scope and intensity of institutional change is not something totally free to define, 'yesterday institutional framework provides the opportunity set to today's organization and individual entrepreneurs' (North 1991, p. 109). This is even more relevant in public sector because public institutions embody important social ideals which lead the public sector leaders to conserve those institutions (Denhardt, pp. 198-199). The awareness to have a realistic objective (change target) is important for the success of CD measures.
Summary
"Capacity development" is the latest invention of the international development's approach which has been evolving after the World War II. It is now believed that CD will improve the development's effectiveness. Many IDOs adopt CD as the main approach of their service delivery. Definitions of CD do not differ from one IDO to another due to the common commitment on aid effectiveness through 2005 Paris Declaration. Aid effectiveness is conceptualized as more roles for partner countries and managing development by the result oriented way. Understanding the CD framework is important for CD need assessment and action planning. It is crucial to have an effective and efficient CD measure. UNDP's CD framework is the most comprehensive one. It seems that UNDP's model has influenced some IDOs (such as ADB, GTZ and WB). Scholars have found that institutional change, particularly in the public sector, must be expected as an incremental process rather than fundamental change. This awareness is important so as to have a realistic objective in CD measures.
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