Financing for Development: current issues for international development cooperation.

Added 15 Nov 2017

This is a background paper authored by Jesse Griffiths, Director of Eurodad, on the occasion of the UNCTAD intergovernmental expert group meeting in October 2017.

After demonstrating that international development cooperation plays a role in filling public financing gaps in developing countries, this paper examines three key current issues:

  • International development cooperation resources: state of play. Official Development Assistance (ODA) has been the primary quantitative measure of international development cooperation since 1969,i with a target for developed countries to provide 0.7 percent of their income as ODA established in 1970.ii However, only a small number of countries have ever reached the target, and in 2016, ODA represented only 0.32 percent of donors’ gross national income (GNI), despite consistent increases in real terms over the past 20 years. Figures for south-south cooperation are also being developed, showing it to be a smaller but important resource. The usefulness of the ODA figures as a measure of international development cooperation resources available to developing countries, is weakened by the inclusion of several categories of in-donor costs, particularly refugee costs. Finally, additional commitments to debt relief, and to provide US$100 billion annually in climate finance, are not reliably measured due to double counting, with the same resources also being counted as ODA.

  • International development cooperation and private investment: key issues. In broad terms, international development cooperation has three main impacts on private investment: through its spending power to procure goods and services; through the impacts on economic growth of investments in public goods; and through subsidies to businesses. Though the first two are arguably the most important, this paper finds that it is the third that is dominating discussion, with the Organisation for Economic Co-operation and Development (OECD) proposing the introduction of a new range of Private Sector Instruments. These would open the door for a major increase in the use of ODA to subsidise private investment, despite concerns about current practices, including weak evidence of development impact.

  • Measuring other related flows. There are attempts to broaden current discussions of international development cooperation, in order to examine the developmental impact of a wider range of financial flows. This would be welcome, if basic principles were followed to ensure that such information could benefit developing country decision-makers, and increase accountability and transparency. Unfortunately the main proposal in this area, the OECD’s Total Official Support for Sustainable Development (TOSSD) currently has a number of major weaknesses.

    The paper then concludes with a short set of recommendations related to the above issues.