Transparency will make aid work better

A global standard on sharing information is at the heart of democratising aid – for donors and for recipients

This month the US Agency for International Development said it expects to publish details of its aid programmes in a form accessible to people in developing countries and US taxpayers. The EU Foreign Affairs Council has also agreed that member states will publish details of their aid in an internationally comparable format.

And from next year, the donors who provide at least two-thirds of aid to less developed countries will publish detailed, up-to-date information about aid through the International Aid Transparency Initiative (IATI). The first part of this new global standard was agreed in July. The UK, which, with the UNDP, Sweden and the Netherlands, has played a leading role in this initiative, will have its first data online early next year.

Many other donors and international organisations, including the UNDP, the World Bank and the European Commission, will soon follow. The Foundation Center, which collects and publishes information about the activities of US foundations, also plans to bring its information formats into line with IATI, and a number of big international NGOs are considering how they can do the same.

The public has a right to see how their money is being spent. IATI promises to transform foreign aid: publishing aid data according to a common standard will make it possible for everyone to access the information they need, to share that knowledge and to contribute to it.

Imagine that your country received half its funding from foreign powers and you had no way to find out on what terms your government was accepting it, or how the money was being spent. What kind of democracy would you be living in? The essence of government is allocating resources and executing the budget. But most developing country governments and parliaments don't have the basic information they need to make informed choices about their national budgets.

Here in Ethiopia, the donors between them spend about the same amount as the government raises in taxes. The big difference is that while the government's budget is available to everyone in detail, there is no practical way for parliamentarians, the media or ordinary citizens to get a clear picture of what the donors are doing.

Go to the website of any aid agency and you'll find a cornucopia of information about the good work that it is doing. The problem is that it doesn't publish this information in a usable form. Visibility is not the same as transparency.

Members of the US Congress rightly complain that they cannot get a complete picture of US foreign assistance, which is delivered by 26 government agencies. As Congress has discovered, to get a complete picture of what the US is doing you need up-to-date, comprehensive data from each aid agency in a common format that enables it all to be added up, reconciled and compared. It is very welcome that the US government is putting a system in place to do this.

Now put yourself in the shoes of ministers or parliamentarians in a developing country. They face the same problem as members of Congress, writ large. Aid to their country is channelled through bilateral aid agencies, multilateral organisations and thousands of NGOs. Aid goes from one organisation to another – minus a "haircut" at each stage – before any services are provided to anyone. How can officials or MPs get useful, up-to-date, comprehensive information about all this spending and all these activities? Certainly not by trawling through thousands of separate donor websites.

Transparency of aid is at the heart of making aid work better. In every walk of life, complex systems need a feedback loop if they are to work properly, but that's missing in aid.

When citizens do have access to information, it can transform the way money is spent. World Bank researchers found that from 1991 to 1995 schools in Uganda received an average of only 13% of the central government's intended funding of non-wage expenditures for things like school buildings and books. The variation in grants received by schools was determined by politics rather than by considerations of efficiency or equity. As evidence on the degree of leakage became public knowledge, the Ugandan government enacted a number of changes.

It began publishing monthly transfers of public funds to the districts in newspapers, broadcasting them on radio and requiring schools to post information on inflow of funds. When the research was conducted again in 2003, after the information had been published, the same researchers found that the percentage of central government funding arriving in schools had increased from 13% to 82%.

The idea that public accountability is at the heart of making services work applies as much to developed countries as to developing states. David Cameron recently told British civil servants: "I do not want you and your colleagues to think your role is to guarantee the outcomes we want to see in our public services – or to directly intervene in organisations to try and improve their performance. It's our job – we as politicians, you as civil servants – to create the conditions in which performance will improve, by making sure professionals answer to the public."

Transparency does not, by itself, make aid more accountable or services better. But it is a necessary condition for every part of the internationally agreed agenda for aid effectiveness. All the evidence suggests that aid is effective only when it is used to support the country's own priorities, and that donors should do more to co-ordinate with one another and to use the country's own systems where possible.

It is clear that aid will work better when there is more accountability to the citizens of developing countries. There is no way to tackle any of this without accurate and comprehensive information about what donors are spending.

The shift to a global information standard for aid sounds a rather dull and technocratic change, but a common standard for sharing information unlocks a world of possibility. It will enable the information from multiple aid agencies to be easily used by governments, parliaments and citizens in donor and developing nations.

It democratises aid, removing the monopoly of information and power from governments and aid professionals. It inspires innovation and informs learning. It reduces bureaucracy. It also makes it possible for communities to collaborate, for citizens to hold governments to account and for the beneficiaries of aid to speak for themselves. With a new global standard for sharing information, aid in the information age will look very different from the past.