Development Assistance Committee Reaches Agreement on Untying Aid to the Least Developed Countries

14/05/2001 - The OECD's Development Assistance Committee (DAC) has formally adopted a Recommendation to untie aid to the Least Developed Countries (1). The Recommendation was agreed at the DAC's High Level Meeting (25-26 April) ad referendum at that time in order to permit Members to secure political endorsement. Click here to dwonload the text of the Recommendation.

The Recommendation is a concrete signal of donors' commitment to reforming aid practices to strengthen its impact and effectiveness. The agreement comes at a particularly opportune time in light of the Third United Nations Conference on the Least Developed Countries, which opens in Brussels today.

Under the Recommendation, aid loans and grants covering a wide range of financial and project support (such as capital equipment, sector assistance and import support) will be open to international competition and no longer reserved to suppliers in the donor country. Total bilateral aid to the Least Developed Countries stands at around $8 billion (some 17% of total bilateral aid). The Recommendation means that about $5 billion of that will now be provided as untied aid. DAC Members are invited to continue to provide untied ODA in areas not covered by the Recommendation when they already do so, and to study the possibilities of extending untied aid in other areas and to other developing countries.

This agreement will improve the effectiveness of aid in various ways. It will realise better value for money (for taxpayers in donor countries, and for recipient countries). Tied aid is estimated to cost on average between 20-25% more than if the goods or services in question were procured through international competition. It will give recipient countries greater ownership of their development process and create the possibility to shape more efficient and rational public procurement capacities. In the context of the Recommendation there are provisions to promote and assess progress towards balanced effort-sharing among donors.

In both developing and developed countries, the Recommendation opens up important markets to international competition that were previously closed and provides a level playing field for access to procurement markets by publicly advertising the aid offers covered by the Recommendation.

The Recommendation is focussed at the Least Developed Countries -- the world's poorest countries -- because of their relatively greater reliance on aid to support growth and development objectives. Untying aid to these countries will contribute to broader efforts by DAC Members in helping these countries to meet the international development goals (including that of halving the proportion of people living in extreme poverty by 2015).

For further information, please contact Helen Fisher , OECD Media Relations Division (tel. 33 1 45 24 80 97).

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(1) The Members of the Development Assistance Committee are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, the United States and the European Commission.