been evaluated. According to an Australian official, the sectorwide
approach will cover about 25 percent of all of Australia's assistance to
Papua New Guinea by 2002. Australia is also considering sector-based
approaches for education in Kiribati and, eventually, for health care in the
Solomon Islands.

Donors' Experiences
Can Help Guide U.S.
Approaches to Future
Assistance

Our review of the lessons learned from the major donors' experiences in
the Pacific could provide some guidance to the United States as it
negotiates further economic assistance to the FSM and the RMI. These
lessons deserve attention because the current U.S. assistance to the two
countries and the proposed approach for future assistance through the
Compact of Free Association often contrast with the other major donors'
experiences, as discussed in the following points:
* Assistance Strategies May Involve Trade-offs in Expectations of Aid
Effectiveness If the Main Motivation for Assistance Is Not Development.
Donor strategies demonstrate that the effectiveness of the assistance in
achieving the development objectives can depend on the principal
motivation for providing the assistance. Often, donors have multiple
motivations for providing assistance, such as historical links, which could
have different standards for effectiveness and accountability. For example,
the U.S. priority on maintaining friendly relations with the FSM and the
RMI during the early years of the Compact, in order to protect strategic
interests in the region, contributed to limited accountability requirements
for the financial assistance and the degree of oversight.
* Assistance Strategies Involve Trade-offs Between Cost, Effectiveness, and
Accountability.
In general, choosing a strategy involves balancing donor interests in aid
effectiveness and accountability with the higher administrative costs of
donor involvement. When donors try to control their assistance to ensure
effectiveness and accountability, their costs of administering the
assistance increase. In the current Compact, the United States chose a low
administrative cost strategy of providing relatively unrestricted cash
transfers, which led to problems with the effectiveness of and
accountability for the assistance. The proposal for new Compact
assistance, according to a report prepared by an official in State's Office of

GAO-01-808 Pacific Development Assistance Strategies

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