How will aid fare with the financial crisis… are we also
heading for an aid crisis? Are we prepared to balance this major challenge
with other continuing hurdles, such as conflict and fragility, or promoting growth for
the poor while protecting natural resources? Do partner countries have the
capacity they need?
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OECD countries have pledged to abstain from trade protectionism as part of a concerted drive to shore up the world economy and combat recession. They also have reaffirmed their commitments on aid to developing countries.
On November 24, at a meeting of the OECD’s Executive Committee in Special Session, OECD countries agreed to sustain recent commitments regarding open trade in support of developing nations, promising, “Within the next twelve months… [to] refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.” They also committed to making efforts to close the Doha trade negotiations, reaching agreements that would lead to “an ambitious and balanced outcome.”
In parallel, DAC donors responded positively to a call from OECD Secretary-General Angel Gurría and DAC Chair Eckhard Deutscher for adherence to an Aid Pledge designed to maintain development assistance commitments to developing countries: “DAC Members reaffirm their exising aid commitments and agree to maintain aid flows at levels consistent with those commitments.” The performance of DAC donors against this pledge will be monitored by the OECD.
Welcoming both commitments, Mr. Gurría commented, “We need to keep
markets open while giving help and support to those worst hit by the
financial and economic crisis. These twin agreements represent a significant
commitment on the part of governments in the face of an economic slowdown that
will lead to sharply higher unemployment in developed countries."
Highlights from Doha Conference
The Doha Declaration fully recognises the OECD’s key role in tracking aid flows and helping improve aid effectiveness. Discussions during the Conference outlined the need to strengthen aid delivery practices and build the use of local capacity to improve the effectiveness of aid. The Accra Agenda for Action (AAA) was referred to throughout as a key reference on aid management principles and practices.
The DAC organized a side event in Doha to examine Longer Term Financing Scenarios for Developing Countries. Moderated by Mr. Gurría, the event was divided into two sessions – on Predictability of Aid, and Domestic Revenue Mobilization. The high-level panel inlcuded Mr. Gurría; Eckhard Deutscher, Chair of the OECD Development Assistance Committee; Richard Carey, Director of the OECD Development Co-operation Directorate; Trevor Manuel, Minister of Finance, South Africa; Bob McMullan, Parliamentary Secretary for International Development Assistance, Australia; Antoinette Sayeh, Director, Africa Department, IMF; and Brett House, Policy Advisor, UNDP.
In the session on aid predictability, the panellists highlighted the importance of the OECD-led Aid Pledge. They agreed that there is no excuse – neither technical nor political – for failing to meet aid commitments and fill in funding gaps. The importance of communicating the importance of predictable aid to donor constituencies was also emphasized. Eckhard Deutscher noted that aid commitments and incentives would be raised during the Senior Level Meeting at the OECD, where donors would be asked to give clear indications of what they would be delivering vis a vis their aid commitments, and when.
Panellists in the session on Mobilizing Domestic Resource Revenues stressed the need to be equitable as well as efficient in raising revenues if developing countries are to bolster their legitimacy in the eyes of their own people. They noted that aid should be increasingly channelled to improving domestic revenue, and that the political price of failing to do so could be high.
At another side event exploring the linkages between the Accra High Level Forum on Aid Effectiveness in Accra and the Doha meeting - From Aid Effectiveness to Better Financing for Development (organised by Reality of Aid) the positive outcomes from Accra in a number of key areas – e.g. transparency, use of country systems, the inclusion of CSOs, global funds, and the focus on mutual accountability – were noted. The panellists noted, however, that challenges remained in areas such as conditionality, tied aid and technical assistance.
It was recognized that while aid is only one aspect of development, for countries to graduate from aid dependency the aid effectiveness agenda is crucial. The AAA contributes by broadening the agenda to other stakeholders, including CSOs, and to their demands for broader development effectiveness. In this context, it is particularly important to ensure that the links between Accra and Doha – between the quality and quantity of financing for development – are maintained.
The subject of financing for gender equality was also on the agenda at Doha. Eckhard Deutscher reminded participants to a special side event of the importance of mobilising women’s potential for economic growth and development. Citing positive undertakings by several countries in response to the Danish Government’s call to action on MDG-3, Deutscher announced that in 2010 OECD will produce a special report which will assess progress made in the levels of aid focused on achieving gender equality and women’s empowerment.
Official development assistance (ODA) provided through international organisations (often referred to as multilateral aid, in comparison to bilateral aid, most of which is supplied by one country to another) amounted to some USD 28 billion in 2006. This figure represents around a quarter of the total gross ODA provided by DAC member countries (USD 117 billion). An additional USD 11 billion is channelled through multilateral organisations in the form of grants to trust funds and other earmarked contributions. In total, this puts the multilateral system at over a third of gross ODA, reflecting bilateral donors’ view of multilateral organisations as knowledgeable, neutral and generally effective development actors.
In recent years, however, the multilateral aid system has become increasingly complex, with a growing number of agencies and instruments in operation. Some 263 international organisations are now eligible to receive ODA, while in 1940, only 15 of these organisations existed. This growing complexity has brought multilateral aid allocation processes and performance – as well as their ability to adjust to this century’s development challenges – under scrutiny.
In response, OECD’s Development Co-operation Directorate (DCD) has produced the 2008 Report on Multilateral Aid (available in early 2009). This report maps out the current landscape of multilateral aid – mainly from DAC member countries – including their financial flows and multilateral aid strategies and policies. It also touches upon issues such as fragmentation, multilateral effectiveness, reform processes and partner country views. The Report aims to fill existing gaps in knowledge on the multilateral system, guiding future policy discussions and informing dialogue about the role the bilateral donors want the multilateral system to play.
Gross disbursements (in constant USD million)
Source: DAC Aggregate Statistics.
Some of the key lessons emerging from the Report include:
· The overarching aim of multilateral engagement is poverty reduction and achievement of the MDGs.
· Among DAC member countries there is room for rationalisation of the number of multilateral partners and a more focused approach to interacting with them.
· For countries’ overall multilateral aid strategies to be useful in allocation processes, they need to be followed up by implementation reviews.
· Promoting greater coherence among the ministries responsible for different aspects of multilateral aid remains a challenge for DAC member countries.
· Just 5 of the 263 ODA-eligible agencies account for two-thirds of all multilateral funding, while over 100 agencies account for only 2% of the total.
· There is duplication of effort in DAC donors’ multilateral assessment approaches, although work is underway to increase joint efforts; relying more on multilaterals’ own reporting systems and improving mutual accountability can help.
Reforming the multilateral system is high on DAC
member countries’ agendas, and will be for some years ahead.
In Bolivia, after months of strife and deadlock, a new constitution is set to go to the people on 25 January 2009. If passed, it could signal progress for the peoples of this stunningly beautiful landlocked country. Since coming to power in 2005, Bolivian President Evo Morales – of Aymara descent – has changed the balance of power in the country in favour of the indigenous people (60% of the population). The Morales government, however, has also clashed with the country’s eastern region over economic policy and regional autonomy questions. In addition, widespread production of coca remains a contentious issue for Bolivia and the international community. The leaves of this tree have been chewed for centuries in the Andes to stave off hunger and are also popular as a tea. Yet because they are also used to produce cocaine, exports of the leaves beyond the region have been banned since 1961 by a UN anti-drug convention.
With this mix of tensions – over the constitution, regional issues, ethnic relations and coca leaf production – a well functioning and disciplined security system is essential to provide law and order, fair representation and justice for all citizens. It is encouraging to note that Bolivia has made progress in recent years in developing its security system, in making its army, police and justice systems more accountable and representative, and in ensuring better oversight and representation in parliament, civil society and academia.
To bolster the capacity of the security system, the Bolivian Minister of the President, Dr. Juan Ramón Quintana Taborga, requested that the OECD DAC conduct a capacity building consultation in security system reform (SSR), involving relevant government ministries, civil society and donors. Thanks to support from the Netherlands and the UK, the consultation took place in La Paz in October 2008. In a recent letter to the Bolivian Minister of the Presidency, DAC Chair Eckhard Deutscher noted: “The aim of the consultation was to build SSR capacity at the country level amongst donors and government so as to ensure that the OECD SSR norm-setting agenda is properly transferred from headquarters to the country level.”
Based on the consultation, key strategic SSR recommendations have been shared with the Bolivian government; these include the need to develop a Bolivian vision of security, a revised SSR action plan (based on the Bolivian national development plan), and more effective donor engagement, including an effective SSR donor-government co-ordination mechanism. Issues relating to human resources needs, legislative priorities and the role of the media were also addressed.
The Bolivia exercise was the fourth such consultation in the OECD SSR norm-setting process. Similar consultations have been carried out in Burundi (December 2007), the Central African Republic (January 2008) and Guinea Bissau (March 2008), actively supported by DAC members and firmly grounded in DAC guidance: Security System Reform and Governance (2005) and Handbook on Security System Reform: Supporting Security and Justice (2007).
Natural resources have huge potential to help lift people out of poverty and enhance progress toward the achievement of the Millennium Development Goals (MDGs). Despite the current global slowdown associated with the financial crisis, demand for natural resources is expected to rise over the long term as emerging economies such as China and India drive a long-lasting increase in demand for oil, minerals, metals, timber and agricultural products.
This trend offers prospects of increased revenues for countries rich in natural resources, in particular the low-income countries, where natural capital constitutes one-quarter of the wealth. These nations will turn to natural resources as a potential source of economic growth, employment and fiscal revenues. Mining, for example, already accounts for 43% of government revenues in Peru and for 22% in Chile.
Natural resources, however, have features that can make sound management particularly difficult and undermine good governance. For example, if these are de facto “open access” resources, like grazing lands, fishing grounds or state-owned forests, users may have no incentives to manage them in a sustainable way and invest in their maintenance. Poor people, whose livelihoods depend disproportionately on common pool resources, will be most affected by the resulting degradation. Governments must, therefore, put in place regimes that attribute appropriate access and user rights in order to help sustain natural resources over the long term.
In many resource-abundant countries, highly valuable resources like diamonds and oil tend to fuel corruption, as they can be easily controlled and monopolised by factions or elitist groups. In these cases the benefits accrue only to a small group, without contributing to the country’s growth, let alone helping to lift people out of poverty.
Competition over natural resources has also contributed to social tension and violent conflict in many countries; a recent example is the conflict that recently flared up in the Democratic Republic of Congo, where warring parties compete for control over gold, coltan and casserite. The situation was aggravated by dramatic rises in the price of casserite, which is used for consumer disposables such as tin cans, driven by increasing demand from industries in Europe, North America and China. Conflicts also tend to arise if indigenous populations whose livelihoods depend natural resources, for example forests and fishing grounds, are driven out by concessionaires who have been granted exploitation rights by the government.
For these reasons, governments pursuing broad-based economic and social development need to secure poor people’s access and user rights over natural resources on which their sustenance and incomes depend. Giving poor people a voice, shifting control over natural resources to local communities, and helping them to develop capacity for sustainable natural resource management are key approaches.
The OECD will
soon release Natural Resources
and Pro-Poor Growth: The Economics and Politics; this
publication highlights the way in which smart economic policies and good
governance practices can help to overcome the special challenges associated
with natural resources management. It can help decision makers in developing
countries to recognise the contribution that natural resources can make to
growth that benefits the poor, as well as the importance of policies that
nurture sustainable management of these resources. The report also provides
recommendations for donors on how to support sustainable natural resource
management that will benefit the poor in partner countries.
Norway: An exemplary donor
Norway committed USD 3.7 billion to development assistance in 2007, a substantial increase over the previous year. It now gives the world’s highest level of official development assistance as a percentage of gross national income (0.95%). The DAC commends Norway for budgeting to reach its 1% ODA/GNI target in 2009 in a climate of global financial crisis. Norway is also consistently at the forefront of donor efforts to improve the international aid system, as well as its own development policies and programmes. It supports aid effectiveness and its flexible approach to development assistance enables quick reaction to changing situations and new opportunities. Read more when the full report is released Dec. 15.
Moving forward post-Accra: The DAC Working Party on Aid Effectiveness
At the first Working Party meeting since the Accra High Level Forum, almost 70 delegations of members and observers exchanged comments on moving forward post-Accra, focusing on two key areas: the work plan for the coming years, and on the renewal of the structure of the Working Party.
With regards to the work plan, the Working Party agreed that:
· Implementation of the Paris Declaration and the Accra Agenda for Action at the country level is the priority.
· Further work is needed by the Working Party on a number of topics, most of which can be clustered into four main areas: ownership and accountability, use of country systems, transparent and responsible aid (including predictability and division of labour), and monitoring and evaluation of the progress made.
· For each cluster, one or several members were identified to set up a team and define concrete outputs and deliverables with deadlines. The structure of these clusters will be simple and loose, and will be adapted to the already existing working groups.
· Additional initiatives, such as the proposed partner country Alliance on Capacity Development (see Feature Article) or work on emerging South-South co-operation, are also welcome.
On the renewal of the structure, it was agreed that:
· Membership will be extended to make the Working Party more inclusive and diverse. In addition to the three existing categories (donors, recipients and multilaterals), two new ones will be added: countries that both receive and provide foreign assistance; and institutions representing civil society organisations, local governments, private foundations and parliamentary associations. The donor category will also be extended beyond DAC members.
· The Working Party must, however, be kept manageable: total membership must not be much greater than at present. A smaller executive committee will be set up to do the groundwork on decisions by the larger group and to co-ordinate the work of the clusters.
· The partner countries will organise themselves in a fashion similar to the organization of the bilateral donors through the DAC; new initiatives will be needed to make this operational.
The OECD convened a meeting on Financing and Pricing Water in the context of the recent Global Forum on Sustainable Development (1-2 December 2008) to look at the roles of government, the private sector and civil society in managing this key resource for human and economic development. Participants in the meeting discussed the policy conclusions and recommendations emerging from a two-year OECD Horizontal Water Programme with a view to preparing it to be launched at the 5th World Water Forum, which will be held in Istanbul, 16-22 March 2009.
Two DAC-STAT products were presented at the meeting:
Measuring Aid to Water Supply and Sanitation: This note contains statistics on Official Development Assistance (ODA) for water supply and sanitation. It presents the key findings of the publication CRS Aid Activities in Support of Water Supply and Sanitation, 2001-2006 which was produced by the DAC Secretariat in collaboration with the World Water Council.
Donor Profiles on Aid to Water Supply and Sanitation: This report contains individual donor profiles covering both statistical and policy aspects of DAC members’ aid to the water supply and sanitation sector. It is an extract from the above-mentioned publication. For more information about DAC statistical work on aid for water supply and sanitation see www.oecd.org/dac/stats/water.
According to the press release for the event: “Though the Millennium Development Goals (MDGs) call for the proportion of people without access to safe water and basic sanitation to be halved by 2015, many countries, especially in sub-Saharan Africa, are not on track to meet these goals. OECD analysis shows that aid to the water sector has risen since 2001, after a decline in the late 1990s, and now accounts for about 9% of donor aid. But much of this aid flows to countries that are already developing well, while the share of aid to the water sector in sub-Saharan Africa has declined from 22 to 17% during 2001-2006.”
A new focus on conflict and fragility
A third of the world’s poor live in countries where the state lacks either the will or the capacity to engage productively with their citizens to ensure security, prevent conflict, safeguard human rights and provide the basic functions for development. The spill-over effects from these situations are felt in countries across the globe.
The DAC’s engagement in fragile situations has just been stepped up with the launch of a new International Network on Conflict and Fragility (INCAF), bringing together the former Network on Conflict, Peace and Development Cooperation (CPDC) and the Fragile States Group (FSG). The new network will focus on ‘real-time’ challenges in developing policy to help improve donor responses to the most demanding development settings and circumstances, and to chart results.
INCAF will complement the Working Party on Aid Effectiveness, moving beyond aid management concerns to examine policy issues of armed violence, security, peace building and state building. In line with the spirit of the Accra Agenda for Action, INCAF will take an inclusive approach to its work by engaging with other key actors, such as NATO, and with southern partners. Two specific commitments are envisaged with partner countries:
Five developing countries – Afghanistan, the Central African Republic, DR Congo, Sierra Leone and Timor Leste – will work intensively between now and the next High Level Forum on Aid Effectiveness to benchmark the quality of international assistance, as well as their own responsibilities, through the lens of the DAC Principles for Good International Engagement in Fragile States and Situations.
Under the co-leadership of the DR Congo and France, the five countries named above will be joined by Chad, Haiti, Ivory Coast, Nepal, South Sudan, Sudan, Togo and their development partners in an international, providing a platform for partner and donor countries to articulate and discuss priority peace and state building concerns.
INTRODUCING QWIDS! Unlocking the Mysteries of Aid Statistics
1. It is intuitive, so even a novice user can navigate the system, make queries and extract data.
2. The system is “intelligent” and knows where to extract the most relevant data.
3. The data and metadata are pulled out from OECD.Stat, the repository of International Development Statistics (IDS) data.
QWIDS is designed to respond to most queries on development statistics, offering a simplified access to the DAC and CRS datasets. The complete datasets remain available through OECD.Stat.
NEW! Better Aid series
The DAC is pleased to announce the new “Better Aid” series of publications, which brings together key thinking, guidance and experience in implementing the Paris Declaration. Preview upcoming titles here. The first in the series, the 2008 Survey on Monitoring the Paris Declaration, is just out. It assesses progress in 54 developing countries and helps us understand the challenges in making development aid more effective. Download a copy here or order a formal copy from the online bookshop.
This publication demonstrates that natural resources can contribute to growth, employment, exports and fiscal revenues. It highlights the importance of policies encouraging the sustainable management of these resources.
Not only can taxation help to promote capable administrations; it can also be a key means to sustain accountability. In this publication donors are encouraged to take more proactive steps to support revenue raising activities in partner countries as a way of strengthening their capacity and phasing out external assistance in the medium term.
Aid continued to increase in 2007 (if exceptional debt relief is excluded from the figures). But the increase was only 2% on 2006. This is much too slow if donors are to meet their commitments to increase aid by 2010. In particular, most G8 countries will need to rapidly expand their aid if they are to meet the commitments they undertook at the Gleneagles summit in 2005.
Development Co-operation Report 2008 Statistical Annex
Pending the release of the Development Co-operation Report 2008 early next year, its statistical annex has been made available on-line. These tables cover resource flows, aid performance by DAC members, financial flows, multilateral aid, sectoral allocation of ODA, and much more.
Gender Equality Issues Briefs
The DAC Network on Gender Equality is preparing a series of Issues Briefs examining the connections between gender equality, women’s empowerment and the Paris Declaration on Aid Effectiveness. Three of them can be viewed here. They complement and expand on the entry points identified in the “Guiding Principles for Gender Equality, Women’s Empowerment and Aid Effectiveness” (forthcoming).
Evaluating Development Co-operation: Summary of Key Norms and Standards
The DAC Network on Development Evaluation brings together evaluation managers and specialists from development co-operation agencies in OECD member countries and multilateral development institutions. It has compiled a glossary of key norms and standards for development evaluation, with a view to contributing to harmonised approaches in line with the commitments of the Paris Declaration on Aid Effectiveness.
new one-pagers on key policy topics were tabled at Doha: Aid for Trade,
Taxation, Monitoring the Paris Declaration and Future Aid Flows.
DAC job opportunities
· Policy Analyst, to work for OECD’s programme on aid for trade which aims to help low-income countries maximize the benefits of trade for economic development and poverty reduction – ref. 2979, closing date for applications is 4 January 2009.
For more information on this vacancy and how to apply, please go to OECD job vacancies.