Cost Benefit Analysis: A Framework

In response to a request from the IATI Steering Committee, Development Initiatives undertook an initial cost-benefit analysis of greater aid transparency in the autumn of 2009, with preliminary findings presented to the IATI Conference in October. On the basis of comments received, Development Initiatives were asked to revise the analytical framework for the proposed cost-benefit analysis and an updated version of the paper was presented to the April meeting of the Steering Committee. This paper provides a tool for assessing the costs and benefits of increased aid transparency, with particular reference to the potential costs and benefits of implementing the emerging proposals of the International Aid Transparency Initiative.It attempts to quantify the administrative cost to each donor of implementing IATI, the potential efficiency savings for both donors and recipient countries, and the resulting gains in aid effectiveness.

The paper concludes that while there will be variations between donors, the efficiency savings of implementing IATI are likely to pay for the transitional cost within a year or two. While the effectiveness gains are more uncertain, the paper concludes that even on the most conservative estimates, the benefits of greater aid transparency vastly outweigh the estimated costs. The Steering Committee endorsed the proposed framework at its April meeting and confirmed that no further work is required by the Secretariat, since the paper provides sufficient information and analytical framework for individual donors to conduct their own cost-benefit appraisals should they wish to do so.