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Trade can promote economic growth and development. When developing countries are able to take full advantage of multilateral trade liberalisation, preferential market access arrangement, regional free trade agreements, and expanding South-South trade their economies grow, poverty is reduced and reliance on aid flows weakens.
The Aid-for-Trade Initiative was launched at the 2005 Hong Kong WTO Ministerial Conference, it aims to support developing countries’ - in particular least-developed countries' - access to markets by helping countries to articulate, communicate and mainstream their trade-related objectives and for donors to align with these. The OECD and WTO have established an aid-for-trade monitoring framework to track progress in implementing the Aid-for-Trade Initiative and enhance its credibility. The monitoring and evaluation exercise surveys how trade costs affect developing countries' competitiveness and ability to connect to regional and global value chains, what is being done to address this issue, and how aid for trade can help reduce trade costs and the associated impacts to deliver inclusive, sustainable growth.
Blended finance is the strategic use of development finance for the mobilisation of additional finance towards sustainable development in developing countries.
Climate change effects - such as drought, severe weather and sea-level rise - are having a disproportionate impact on developing countries. For this reason, climate change adaptation and mitigation need to be integrated at all levels of development decision making and adequate resources need to be chanelled towards mitigating these impacts whilst supporting development activities.
Finance that targets climate change adaptation or mitigation has substantially increased over recent years. OECD-DAC statistics capture an integrated picture of both bilateral and multilateral climate-related external development finance flows.
In order to manage and make the right decisions on allocating resources, recipients and donors need a clear picture on what resources are available in a particular country.
Country programmable aid (CPA) is the portion of aid that donors programme for individual countries, and over which the recipient country has a significant say. Developed in 2007, CPA is much closer to capturing the flows of aid that go to the partner countries than official development assistance (ODA). CPA provides a good approximation of the overall flows expected to appear in countries' aid management systems. CPA helps aid transparency and predictability as it is a consistent measure of past and future aid flows.
The Creditor Reporting System is a database of individual bilateral aid activities that provides easy access to basic data sets on where aid goes, what purposes it serves and what policies it implements.
This information is collected for all DAC members and enables comparison across members.
The verified, comparable individual profiles provide detailed statistics and analysis for the aid programmes of 82 providers, including 24 private foundations.
Data and statistics on aid flows helps to produce a detailed picture of the development landscape which can help both donors and recipients to understand, allocate and manage resources for development to ensure that these have the maximum impact and results.
The OECD DAC collects data on official development assistance (ODA) and other resource flows to developing countries. It collects comprehensive data on the volume, origin and types of aid and other resource flows, as well as detailed information on individual aid activities (such as sectors, countries, project descriptions, tying status, etc.).
Officially supported export credits come in the form of government-backed loans, guarantees and insurance to corporations working internationally. Export credits can mitigate risks for investors and enable large infrastructure or energy projects. These flows play an important role in accessing capital in developing countries.
In recognition of the important role these sources of external financing play. The DAC Working Party of Development Finance Statistics has been looking at streamlining OECD databases on export credits in order to report on export credits in greater detail.
An extending agency is a government entity that finances activities from its own budget and at its own risk and responsibility. Extending agencies are the budget holders, controlling the activity on its own account. Development finance official extending agencies include government institutions (central, state or local government agencies or departments), official aid agencies, bilateral development banks and development finance institutions (DFIs), international financial institutions (IFIs), and other multilateral agencies.
The post-2015 sustainable development agenda will require the mobilisation of a wide array of domestic and international resources from both public and private actors. While official development assistance (ODA) will remain a crucial part of international development co-operation, particularly for countries most in need, a much stronger role for finance beyond ODA, including private capital, is also needed.
The OECD DAC is modernising its statistical measurement framework to promote incentives for mobilising and catalysing development finance and to reflect the broader range of funding options now available to developing countries. Most importantly, a modernised system will also facilitate greater transparency and accountability.
Private international investment can play a positive role in supporting long-term sustainable development: it can create jobs, develop technology and new productive capacity and help local firms access new international markets. Foreign direct investment (FDI) now represents one of the biggest sources of developing countries' external financing. It is frequently a stable source of investment which builds long-term relationships and has a positive impact on sustainable development.
Given the important role of FDI in supporting sustainable development, the OECD DAC has been working to recognise the contribution of FDI by developing a broader statistical framework (TOSSD) which recognises private finance flows that target development objectives.
Understanding donors' future spending plans is essential to the effectiveness of aid. For recipients, forward spending information allows better programming and allocatation of resources and helps to ensure the sustainability of development efforts. Between donors, this information supports better co-ordination and collaboration.
The forward spending survey gathers data on bilateral and multilateral donors' spending plans on an annual basis.
Ensuring gender equality and women's empowerment is a core component of sustainable development. Aid that specifically targets these objectives is essential.
The OECD DAC compiles data on its members’ activities targeting gender equality and women’s empowerment, this data is compiled with the help of the gender equality marker in the Creditor Reporting System (CRS). Every aid activity reported to the CRS should be screened and marked as either (i) targeting gender equality as a “principal objective” or a “significant objective”, or (ii) not targeting the objective.
The OECD will launch a new Global Outlook on Financing for Sustainable Development to strengthen OECD coherence and effectiveness across Addis Ababa action areas (e.g. Investment, Taxation, Trade, Environment, Science, Technology and Innovation, and others).
The OECD DAC collects development finance flows at activity level based on a standard methodology and agreed definitions. Development finance to health is covered by two main sectors: i) Development finance to health - general and basic health and ii) Population policies/programmes and reproductive health - including HIV/AIDS
In 2017, the DAC agreed to clarify the reporting directives for assessing what may be included or not in ODA – and provide its members with a blueprint to use when accounting for the costs of assisting refugees in donor countries.
Infrastructure—such as water and sanitation, transport, energy and communications—is fundamental for economic growth, poverty reduction and human development. This is all the more relevant as production systems are increasing across continents, which requires scaling up infrastructure to connect developing countries with global value chains that could spur their economic growth. However, with developing country populations expected to keep growing in the decades ahead — and with high rates of urbanisation — there is wide recognition that current resources are insufficient to fill the infrastructure investment gaps of these countries.
Development partners are mobilising private finance for infrastructure in three ways. First, they help host governments improve the enabling environment, both for the general investment climate and in the specific infrastructure sectors. Second, development finance institutions provide equity, loans, guarantees and technical assistance to the private sector to invest in infrastructure. Third, development partners support various initiatives such as Project Preparation Facilities, Project Facilitation Platforms and Blended Finance mechanisms.
Innovative financing refers to initiatives that aim to raise new funds for development, or optimise the use of traditional funding sources. Over recent years development actors have been looking at new ways to scale up aid flows in order to meet their development targets. This has led to the emergence of new actors and sources of funds for development. The first innovative financing mechanisms were created to combine public and private contributions to meet major health challenges for example the GAVI Alliance and the Global Fund which take advantage of the upsurge in private philanthropy for development to create public-private partnerships. Other mechanisms exist such as guarantees, blended financing and mechanisms such as air travel levies or taxing financial transactions.
Private sector investment for development boosts economic growth and contributes to human development. It has gained prominence in recent development discussions, including at the Financing for Development conference in Addis Ababa in 2015 and the UN Summit on the Sustainable Development Goals. In order to attract the private sector, however, a good investment climate is necessary. In this context, the OECD has developed a Policy Framework for Investment (PFI), a checklist that informs investment climate reforms in developing countries. At the OECD Ministerial Council Meeting of June 2015, a Recommendation was adopted to encourage the use of the PFI as a reference for donors to use in helping developing countries.
Currently, a methodology is being developed to measure donor efforts to help developing countries use the PFI, as well as exploring specific themes such as activities to foster small medium sized enterprises or responsible business conduct. A joint Investment Policy Review with the Investment Committee Secretariat to examine a country case study, such as Cambodia, is also being planned.
The OECD-UNDP Impact Standards for Financing Sustainable Development (IS-FSD) are a best-practice guide and self-assessment tool for public and private investors seeking to optimise their positive contribution to the sustainable development goals (SDGs).
Funds given from bilateral donors to multilateral agencies such as the United Nations, the European Union, and the World Bank and around 200 other organisations account for over one third of total ODA. Multilateral organisations are politically neutral conveners of global partnerships, vehicles for upstream pooling of resources, facilitators for multistakeholder cross-border operations and setters of global standards and norms. Multilateral organisations therefore play a key role in ensuring that development resources bring about the intended results.
The OECD collects and analyses the largest available source of data on multilateral organisations to develop recommendations designed to guide both multilateral and bilateral donors optimise their relationship and ways of working.
With the changing development landscape over recent years, the question of how to generate enough financing to ensure that development targets are met has been high on the agenda. Sources of finance for development - beyond ODA - have become increasingly important and mobilising and managing these will be critical to ensure the success of the Sustainable Development Goals.
The OECD DAC is working to improve the quality and policy-relevance of its statistics on resource flows to developing countries beyond ODA.
The term “aid” usually refers to official development assistance (ODA).
ODA is defined as flows to countries and territories on the DAC List of ODA Recipients and to multilateral institutions which are provided by official agencies, including state and local governments, or by their executive agencies. In addition, each transaction must be administered with the promotion of the economic development and welfare of developing countries as its main objective; and be concessional in character and conveys a grant element of at least 25% (calculated at a rate of discount of 10%).
Official development finance is measured in relation to the receipts of developing countries. It is a broad measure of developing countries’ official receipts for developmental purposes, and is defined as the sum of bilateral ODA and bilateral other official flows (e.g. non-concessional developmental loans) except grants and loans for commercial purposes, and all grants and loans by multilateral development institutions.
To help efforts toward greater predictability and better assess the prospects in aid delivery ahead of time, the OECD conducts the Survey on Donors’ Forward Spending Plans, a unique instrument that brings together most bilateral and multilateral aid spending plans – and the only regular, global process of its kind.
Private philanthropy is reshaping the development landscape like never before. In order to better understand philanthropy’s contributions to development finance OECD carried out a data survey aimed at better understanding who the main philanthropic actors active in development are.
The private sector is becoming an increasingly important development actor. Private resources such as foreign direct investment, venture capital and securities have increased over recent years. This has created new opportunities to leverage the enormous sums that are needed to finance the post-2015 development agenda.
The OECD DAC supports work to establish an international standard for measuring the volume of private investment mobilised by official interventions. Notably, it carries out two surveys on guarantees and leveraging instruments to estimate the volume of private flows that are mobilised by guarantees, syndicated loans and collective investment vehicles.
Emerging providers of development finance and other countries that are not members of the Development Assistance Committee (DAC) have an important role in financing development co-operation.
The OECD DAC collects and publishes statistics on those countries and makes estimates on the development co-operation programmes of several countries beyond the DAC that are not reporting: Brazil, Chile, China, Colombia, India, Indonesia, Mexico, Qatar and South Africa.
The “provider perspective” presents resource flows emanating from provider countries. DAC statistics track resources extended by provider countries to developing countries and multilateral development institutions, which are categorised as bilateral and multilateral contributions respectively.
The “recipient perspective” presents developing countries’ resource inflows (also referred to as developing countries’ resource receipts). These consist of bilateral flows from provider countries and outflows from multilateral development organisations. Data on the latter is collected directly from the multilateral organisations, with details on the recipients (country or region), purpose and the financial instruments used (concessional and non-concessional). The data collection is limited to core (unearmarked) resources to avoid double counting.
Funds sent by people living and working abroad to their home countries have increased rapidly over recent years, and today represent the largest source of external finance for many developing countries. In some countries, remittances can account for up to half of GDP.
The OECD analyses data on remittances.
Tracking finance flows towards environmental objectives is key to holding countries to account on their commitments to mbilise 100bn USD per year by 2020 to support climate change mitigation and adaptation in developing countries.
External development finance targeting environmental objectives is monitored through the DAC’s creditor reporting system (CRS) using “policy markers”. Donors are requested to indicate if each development co-operation activity they report to the OECD targets environmental objectives. Five statistical policy markers exist to monitor external development finance for environmental purposes within the OECD DAC, these are: “environment” (1992); “Biodiversity” (1998); climate change adaptation (2010); climate change mitigation (1998); and desertification (1998). The Rio markers are applicable to official development assistance (ODA) and recently also to other official flows (OOF) (non-concessional developmental flows, excluding export credits) starting from 2010.
Because ODA is a scarce resource for financing development, it is important to ensure it reaches the countries and people that need it most. The OECD provides statistical data and policy analysis on concessional finance to Small Islands Developing States (SIDS) to enhance access to and quality of development finance to countries most in need and support the development of financial instruments and approaches that are tailored to SIDS’ specific circumstances and needs.
Social impact investment is an innovative approach to further drive economic development and achieving social outcomes. Social impact investing provides finance to organizations addressing social and/or environmental needs with the explicit expectation of a measurable social, as well as financial, return.
As part of the Sustainable Ocean Initiative, the OECD Data Platform on Development Finance for the Sustainable Ocean Economy presents data on official development assistance and private finance mobilised for ocean-related activities in an interactive manner. Data can be accessed and downloaded at both an aggregate and a granular level.
Official development assistance (ODA) is a financial resource provided by the members of the OECD Development Assistance Committee (DAC) that seeks to promote the economic development and welfare of developing countries. DAC members often request exemptions from indirect taxes (e.g. customs duties, Value Added Taxes) or income taxes (e.g. Personal Income Tax and Corporate Income Tax) for the ODA-financed goods and services they provide to their partner countries. It has, however, not always been clear which ODA-financed goods and services are exempt from taxation, or in some cases the precise legal basis by which such exemptions are granted. Greater transparency is a priority for all actors involved. Tax Treatment of Official Development Assistance Hub is the first public resource of its kind to improve the transparency around the taxation of development aid.
Total Official Support for Sustainable Development (TOSSD) is a new international standard for measuring the full array of resources in support of the 2030 Agenda. It is designed to monitor all official resources flowing into developing countries for their sustainable development, but also private resources mobilised through official means. It also measures contributions to International Public Goods – up to now “invisible” in development finance statistics – that help countries reach their Sustainable Development Goals.
Work on ‘Transition finance’ aims to better understand financing challenges and opportunities faced by countries as they move along the development continuum. It includes an analysis of dynamics affecting domestic and external flows as countries transition, including official development finance, remittances, philanthropy and private investment, with the ultimate objective of defining the right policy and financing mixes that will ensure long-term effects and resilience of support, as well as maximise the contribution of development finance to the SDGs. It combines methodological papers, tools for transitioning countries and their partners, and country pilots.
Transparency has been pushed to the top of the global agenda since the 4th High-Level Forum on Aid Effectiveness that took place in Busan, Korea, in 2011. As part of its mandate to monitor, assess, report and promote the provision of resources that support sustainable development, the Development Assistance Committee of the OECD contributes to the global Transparency agenda, including by providing comparable and qualitative information on Development finance through its International Development Statistics (IDS) online databases that cover bilateral and multilateral aid (ODA) as well as other resource flows to developing countries.
In November-December 2016, the international community gathered in Nairobi, as part of the 2nd High-Level Meeting of the Global Partnership for Effective Development Co-operation, to assess progress on Transparency commitments since the Busan High-Level Forum. The OECD DAC supported this major milestone by providing key technical assessments and analysis that allowed progress to be measured.
"Tying” aid means that ODA is offered on the condition that it be used to procure goods or services from a specific country or region. Tying aid can increase the costs of a development project by as much as 15-30%. In addition, the administration of tied aid requires larger bureaucracies in both the donor and recipient countries. Untied aid avoids these unnecessary costs by giving recipient countries the freedom to use their aid to procure goods and services from virtually any country. Annual reviews monitor progress of member governments' untying efforts with respect to the Untying Recommendation and other international agreements.
The OECD DAC collects development finance flows at activity level based on a standard methodology and agreed definitions. The development finance to water supply and sanitation sector is broken down into eleven sub-sectors including policy, sanitation, supply, rivers and waste.