A Farewell to ODA? The Future of Development Finance

A Farewell to ODA?
The Future of Development Finance
Hedwig Riegler, Chair
DAC Working Party on Development Finance Statistics
Input to Panel Discussion organised by OeFSE
24 October 2013
OVERVIEW
1. What are the issues?
2. What is being discussed and by whom?
3. Why a new measure – what is wrong
with the current ODA measure?
4. What reform ideas are around?
What are the issues?
 A new development paradigm with new (quantified) goals
to follow MDGs developed by international community
 A financing strategy to underpin the new goals
 A new measure to monitor the implementation / progress
towards set goals and quantitative targets
 New developments requiring this change:
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New sources of financing, financial instruments, new actors
New priorities of financing (global public goods like climate finance)
Stronger role by South-South Cooperation and non-DAC actors
ODA under pressure (volumes and concept of counting ODA)
Statistical measure to track development finance have not kept
pace with emerging new financing schemes
What is being discussed by whom? (1)
UNITED NATIONS
 UN High Level Panel (of Eminent Persons on the Post-2015 Development
Agenda) – report (June 2013) outlining visions for eradicating
extreme poverty and creating a new development paradigm
based on inclusive, sustainable growth
 UN Intergovernmental Committee of Experts – a financing
strategy to underpin post-2015 development agenda
 UN decision process:
– Over 2014: preparation of post-2015 development agenda,
collection of inputs, counting on strong support from UN system
– Beginning of 69th UNGA session (Sept. 2014): synthesis of full range
of inputs available until then
– Finalisation in 2015 culminating in adoption of post-2015
development agenda in a Summit at SG level (Sept 2015)
What is being discussed by whom? (2)
OECD/DAC and its role
 Operationalisation of framework decisions coming from UN, inputs to
UN decision process
 Analytical work to guide policy discussions at DAC level and give inputs
to UN process ; prepare for implementation
 Prepare for modernisation of statistical systems and new measure(s)
 Implement DAC High Level Meeting (HLM) mandate to
– Elaborate proposal for new measure of total official support for development
– Explore ways of representing both „donor effort“ & „recipient benefit“ of DF
– Investigate whether any resulting new measures of external DF suggest need to
modernise the ODA concept
Supporting implementation of HLM mandate:
DAC Expert Reference Group (ERG) – international experts (ensuring
outreach to all stakeholders) to guide analytical work and DAC decisions
WP-STAT – technical analytical work and preparations, as steered by
ERG and DAC
OECD and Post-2015 Reflections Website: http://www.oecd.org/dac/post-2015.htm
What is being discussed by whom? (3)
Other Fora
 Research Collaborative on Tracking Private Climate Finance
(donor-initiated forum hosted by the OECD) – analytical/research
work on private climate finance
 Forum of South-South Cooperation partners: RIS (Research
and Information System for Developing Countries), an Indiabased autonomous think-tank, coordinates the SSC partner
dialogue on how SSC could be incorporated in the emerging
post-2105 global measure of development finance
 Tidewater Meetings: “Club of big donors” discussing
development finance issues and the future of ODA to
develop positions (June 2013 hosted by Germany, 2014
hosted by Switzerland)
Why a new measure – what is wrong?
 New paradigm with new (quantified) goals requires new
measure(s) (re-defining purpose of measurement may be required)
 Main criticisms of current measure (only one headline figure –
net ODA flows - has contributed significantly to the flaws criticised)
 TOO BROAD: Overestimates actual transfers; is a mixture of actual
transfers and in-donor-country expenditure (no cross-border flow);
some components inflate figures and lead to unfair donor effort
comparison: debt relief, loans, refugee costs, study place costs etc.)
 TOO NARROW: Fails to capture all relevant financing, discourages use
of market-like instruments & innovative new finance mechanisms
(e.g. guarantees for development, front-loading meachanisms etc.)
 WRONG FOCUS: Focus on „donor effort/resource inputs“ but not
ensuring fair donor comparison. Focus should shift from input
measurement to results/impact measurement
What reform ideas are around? (1)
International level
Wide range from radical to modest suggestions for reform
 At radical end: Move from ODA (current “0.7% measure”) to
total net country effort
 At modest end: Keep basic ODA concept and 0.7% indicator,
make some minor adjustments to statistical recording rules
 Range of “in-between” proposals with different orientation:
(1) “Purifying ODA” from components leading to
overestimation (differing opinions on maintenance or redefinition of 0.7% ODA target)
Different proposals for exclusion of elements
(2) Expanding ODA definition (e.g. include full refugee
costs, imputed students costs to include secondary level)
What reform ideas are around? (2)
DAC level
Reform discussion in DAC fora on 3 main questions (how to
reform the 3 key dimensions of the current ODA definition):
 O (Official), i.e. resources provided by official sector:
Include elements (e.g. tax exemption) excluded so far?
 D (Development), i.e. resources provided for development purposes:
(1) Motivation/purpose: Change definition from “developmentmotivation” to “development relevance” or other basis (e.g. impact)?
(2) Eligible recipients (developing countries): Revise list of countries
eligible to receive ODA – e.g. to exclude Middle Income Countries?
 A (Assistance ), i.e. resources provided at concessional terms:
Contentious interpretation of existing definition of concessionality &
HLM mandate to elaborate an improved (quantitative) definition by 2015
(Current definition: ODA needs to “be concessional in character and bear a grant element of
at least 25% calculated at a fixed discount rate of 10%”)
Concessionality definition affects not only loans but also equity,
reimbursable grants, other new financing mechanisms