ABSTRACT

This was the conclusion of an intensive policy dialogue between Dutch NGOs and the Netherlands Ministry of Foreign Affairs regarding the future support to international NGOs. Such a critical stance towards tendering is widely shared in academic circles. Many leading authors on the topic criticized what Cooley and Ron call ‘the marketization of aid’ (Kuhn 2005; Bebbington 2004; Cooley and Ron 2002; Fowler 2000; Wallace 2000; Edwards and Hulme 1997). This chapter attempts to provide an answer to the question how back

donors affect the country allocations of ‘their’ NGOs, in particular their concentration. While several studies explain that increased governmental funding influences international NGOs operations (Brooks 2000; Frumkin 1998; Sogge et al. 1996; Wang 2006), little empirical research addresses the impact of diversity in co-financing systems. Chapters 2 and 3 showed that back donor preferences were an important determinant for the geographic choices of NGOs. This chapter moves beyond that general finding and draws attention to two potential specific mechanisms through which back donors have an effect on the geographic choices of the NGOs in their home country: the marketization hypothesis and the slipstream hypothesis. Particular attention is given to the effects of back donor behaviour on the geographic concentration of NGO efforts. The marketization hypothesis postulates that back donors affect the choi-

ces of NGOs through the level of competition that they impose on them. Marketization, above referred to as the ‘tendency to tender everything’, is

markets their ‘contracting agencies’, the higher the level of marketization. When back donors increase the level of marketization this reduces risk-taking behaviour of NGOs, according to the critics of the marketization. This reduced level of risk-taking manifests itself in a focus on ‘easy’ countries; countries that are not extremely poor and fragile, andwhere already many other actors are active. This is relevant since an increasing number of donors – such as the European Commission and the Dutch government – started to issue short-term, renewable contracts for discrete aid projects on the basis of competitive tendering (Schulpen and Hoebink 2001, p. 173). The second hypothesis is that the geographic choices of NGOs are not

related to the type of contracts that NGOs have with their back donors, but on the relative size of the contracts. NGOs tend to replicate the geographic choices of their back donor in this view and even more so if they are heavily financially dependent on them. Some initial evidence that supports this hypothesis was already found in Chapter 2 and 3 of this research, but this chapter studies this question in more depth, by making use of, among other things, financial dependence rates of NGOs. Three donor countries that provide a significant amount of funding to

international NGOs, yet are markedly different otherwise – Germany, Norway and the United States – were selected. The three cases vary substantially with respect to the degree of marketization and their back-donor dependence and hence provide excellent material to test the hypotheses. German organizations are generally financially heavily dependent on their back donor, yet operate in an uncompetitive environment (Sadoun 2006). Norwegian organizations are rather financially dependent, and operate in a somewhat more competitive environment (Ebrahim 2003a). American organizations are less financially dependent on their back donor, but do face competitive pressures (McCleary and Barro 2006). The remainder of this chapter includes the following components. The

analytical part of this chapter explains the ‘Multiple-Layered Principal Actor’ framework, which informs the two hypotheses. The analytical framework continues by expounding the two hypotheses. Hereafter, the research methodology will be outlined. The chapter continues by showing the results with respect to the hypotheses and subsequently discusses them at length.