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The UNDCF needs to meet ambition with resources

Added 26 Jun 2014
The forthcoming meeting of the United Nations Development Cooperation Forum (UNDCF) represents an opportunity for the UN to advance work on ensuring effective development cooperation. For the UNDCF to play a relevant role in the future of development finance member states will have to agree on how to increase its resources and mandate. The two day event features an ambitious programme and several side events structured around “bringing the future of development cooperation to post-2015.” It will address issues related to the role of ODA and ensuring quality of development effectiveness to discussing a renewed partnership for development. 

This meeting occurs at a critical moment where the post 2015 development goals and discussions around Financing for Development (FfD) will need to be accompanied with a clear monitoring and accountability framework. It will be important for the UNDCF to move beyond being another development talk shop and to encourage commitments from UN member states to develop an accountability framework with clear targets and indicators for the future development landscape. This will prove quite challenging as the DCF has no mandate to negotiate political outcomes and is currently limited to coordination and consensus building.

Competing interests

The forum will need to address linkages between the UNDCF and the Global Partnership for Effective Development Cooperation (GPEDC) in order to ensure that the two forums are complementary and do not duplicate and draw resources from each other’s work. At the recent high level ministerial meeting of the GPEDC in Mexico many partner countries expressed concerns regarding its legitimacy as it is viewed as a donor driven process that is not as inclusive as it claims to be. These concerns were demonstrated by the absence of China and India and non-committal engagement by Brazil. The UNDCF is seen as a more legitimate forum by UN member states for discussing development effectiveness and cooperation but compared to the GPEDC has significantly less resources and is less inclusive of non-state actors such as civil society. Both the UNDCF and the GPEDC are searching for a role in the post 2015 agenda and there is a risk that they may be competing for the same space.

Trends and progress

The meeting of the UNDCF is accompanied by a report from the UN Secretary-General assessing trends and progress in international development cooperation. While this report signifies the beginning rather than the end of a discussion it offers some important food for thought relevant not just to the UNDCF but other development related processes as well. The report covers a wide range of topics from ODA to other sources of finance to South South Cooperation (SSC). The report manages to cover many of the current trends in development. 

In the context of ODA the report notes that, on the whole, donors are still quite far from achieving their .7% GNI commitment. While ODA volumes rose for the first time in 2013 since the financial crises, most if it is targeted to middle income countries and resources for Sub Saharan Africa are declining. What is not mentioned is that the largest percentage increase in ODA spending is in the form of non-grant resources such as equity and debt based instruments. This trend is quite worrying as these forms of development assistance are primarily channeled to middle income countries and have clear implications for future ODA allocation

The report emphasizes the role ODA can play in leveraging other resources such as Foreign Direct Investment (FDI) and creating an enabling environment for institutional investors such as pension funds and insurance companies. This emphasis is of some some concern as these forms of finance should be approached with a degree of skepticism. FDI flows are overstated as they include a variety of activities that do not provide real additionality and repatriated profits equal 90% of inflows. FDI is also targeted to few partner countries and mostly focused on extractives and exports. Mobilising resources from institutional investors should also be carefully assessed to ensure it does not come primarily in the form of portfolio flows which tend to be highly volatile. 

The report features a balanced assessment on the risks and opportunities of leveraging public finance, a hot topic in many discussions concerning development. While stating it has the potential to generate additional resources it also notes several drawbacks that CSO groups such as Eurodad have highlighted. These drawbacks include “lack of clarity about additionality and purpose; limited influence of donors and recipients on investment design and implementation; diminished transparency and accountability; risk of misalignment of private sector and country priorities; danger of increased debt burden; inattention to small- and medium-sized enterprises; the opportunity cost incurred when use of public money to mobilize private resources does not have the same or a larger development impact than if it had been devoted directly to a developmental purpose; and the risks of misappropriation.”

Recommendations

The UNDCF has the potential to play a crucial role in the future development landscape and clearly has the ambition to do so. However this ambition needs to be supported with resources, clarity of purpose and additionally if it is to be achieved. To this effect the forum should address the following issues:
  • Member states should enhance the UNDCFs mandate to negotiate political outcomes and commitments and provide it with additional resources and capacity to adequately reflect its ambitions.  
  • The DCF needs to clarify its relationship to the GPEDC to ensure complementarity and prevent duplication of efforts. 
  • The member states should commit to developing a global accountability and effectiveness framework to complement the post-2015 and FfD discussions. 
  • The DCF should enhance cooperation between all providers of development cooperation and establish common but differentiated objectives that reflect the abilities of the different groups. 
  • The DCF should carefully assess the development effectiveness of other flows such as FDI in order to determine challenges in developing a monitoring framework.