The OECD DAC High Level Meeting: major risks defused, but will the long game deliver for the poorest?

Added 02 Nov 2017

This blog was co-authored by Polly Meeks (Senior Policy and Advocacy Officer at Eurodad) and Julie Seghers (Advocacy Advisor at Oxfam)

The stakes couldn’t have been higher going into this week’s High Level Meeting of the Organisation for Economic Cooperation and Development’s Development Assistance Committee (OECD DAC).

Globally, hunger is on the rise for the first time this century, and this year, the world is on the brink of four famines. An unprecedented 65 million people are on the move – and refugee numbers are at their highest since World War II. With hundreds of millions of people still living in extreme poverty, often compounded by other forms of inequality, the core challenges of poverty eradication and human rights-based sustainable development remain a matter of urgency.

The DAC also faced challenges closer to home. A number of thorny issues – including the rules on support for private sector actors in the global south through private sector instruments (PSI), and the treatment of emergency spending in countries that have recently graduated from Official Development Assistance (ODA) – had prompted some members to issue drastic ultimatums, and the UK had even suggested it could leave the DAC if certain decisions didn’t go its way.

Alarmed by these threats, a coalition of almost 40 CSOs from the global south and global north wrote to the DAC ahead of the meeting with our vision for the DAC’s contribution to an equal and poverty-free world. Did the Meeting deliver? While the DAC managed to avert some of the most immediate threats, major issues are still outstanding, and will require CSOs’ continued and careful scrutiny in the coming year.

Let’s start with the good news.

Threats defused

Aid watchers across the world breathed a collective sigh of relief on Tuesday afternoon when we heard that the meeting concluded with a full complement of 30 members: nobody had walked out.

Nor have DAC members rushed into some of the most problematic proposals that were on the table. They rejected an alarming last-minute change in the proposed rules on support to private sector companies in the global south through private sector instruments such as loans and guarantees. They also refused to give carte blanche for certain high income countries to receive Official Development Assistance in emergency situations, until further research has been done.

Turning the dial on CSO participation

The Meeting also showed encouraging early signs of a shift in the way that the DAC engages with civil society. This year, for only the second time in more than 40 years, civil society organisations were invited to the Meeting as observers. In addition the DAC’s Vision, agreed at the Meeting, includes a welcome aspiration to make “the Committee more visible, inclusive, and open for dialogue with external stakeholders including developing countries” and to “expand access to its documents”.

This ambition is crucial: if the DAC is to challenge the power imbalances that hamper development progress, it’s essential it lives by the same principles of transparency and inclusivity that it preaches.

Now we hope to see the DAC follow through. We call for full consultation – both with CSOs and with governments from the global south - ahead of all major decisions, so that the concerns of those on the sharp end of ODA can be meaningfully heard and addressed.

A nod to effective development cooperation and leaving no-one behind

The Communiqué reaffirmed DAC members’ commitment to the UN targets of 0.7 per cent of Gross National Income (GNI) as ODA to developing countries and 0.15-0.20 per cent of GNI as ODA towards Least Developed Countries. We were pleased to see recognition, in both the Meeting Communiqué, and in the renewed DAC mandate, of the importance of effective development co-operation and development impact. We also welcomed the documents’ explicit reference to the ‘’leave no-one behind’’ principle. As our civil society statement emphasised, these principles are vital if the DAC is to live up to its vision of being a ‘’champion for the 2030 Agenda’’.

However, these commitments will only have meaning if they are applied coherently across all aspects of the DAC’s work, and if they are the point of reference for all the DAC’s decisions on safeguarding ODA.

That brings us to the bad news.

To put things in perspective: it could have been worse. It’s not as if the DAC members agreed on a raft of new, damaging changes to the rules on ODA – and the strength of some members in resisting certain more extreme proposals on the table is to be applauded.

Yet the Communiqué also leaves unanswered some of the most important questions on the future of ODA – questions on which the Communiqué’s very ambivalence risks entrenching harmful donor practices and leaving the DAC hamstrung in its safeguarding role.

The private sector: putting the cart before the horse

The use of ODA to “mobilise” resources from the private sector, through blended finance, is a dominant theme in the Communiqué.

Eurodad and Oxfam recognise that the private sector can make important contributions to poverty reduction and sustainable development – but only if we partner with the private sector on terms that work for the poorest, through equitable business models structured to serve local workers and entrepreneurs. We have repeatedly cautioned that blended finance may have perverse effects that could undermine the achievement of the 2030 Agenda:

  • diverting precious Official Development Assistance (ODA) from other uses that those ‘furthest behind’ value most ;
  • taking power away from governments and citizens in the global south and placing it in the hands of opaque and poorly accountable development finance institutions ;
  • increasing tied aid ; and
  • opening up new risks of social and environmental abuses, harmful tax practices, and unsustainable debt burdens.

These risks are all very real unless accompanied by very rigorous safeguards. Yet the High Level Meeting missed the opportunity to put such safeguards in place – not just once, but twice.

First, and most worrying, is the Communiqué’s language on counting private sector instruments as ODA. The wording is very ambiguous – but it appears to leave it open to DAC members to report more PSI as ODA than was previously the case, before agreeing how to ensure this doesn’t have adverse consequences for aid quality.

Second, the new Policy Principles on Blended Finance for Sustainable Development, agreed at the Meeting, risk further encouraging the use of blended finance without fully considering its downsides. In principle, we agree that establishing an overarching and common normative framework to guide donors engaging in blended finance could be a welcome starting point. The principles could have been an opportunity to look critically and in depth at the benefits, risks, and opportunity costs of blended finance. Unfortunately, the principles are too general, not prescriptive enough, and they do little justice to many of the biggest threats – such as ODA diversion and tied aid.

In addition, while the Meeting included much fanfare about opportunities to mobilise private sector investment in Agenda 2030, far less was said about the potential to mobilise public sector resources – additional aid in line with donors’ long-standing UN commitments to give 0.7% of Gross National Income as ODA; and additional domestic resources, raised through progressive taxation, which ultimately have the potential to put aid out of a job altogether.

In-donor refugee costs: a missed chance to safeguard ODA

The Meeting also saw the approval of clarified rules on the reporting of the costs for hosting refugees in donor countries. This new clarity is welcome, and should improve transparency. Yet while DAC members focussed on the small print, the Committee ducked the biggest question of all – whether in-donor refugee costs belong in ODA in the first place.

We have consistently argued that – while welcoming refugees is a human rights obligation and an essential commitment under the Refugee Convention– it doesn’t meet the definition of ODA, as there is no flow of resources to developing countries, and no direct link to the core purpose of ODA - promoting the economic development and welfare of developing countries. Including in-donor refugee costs within ODA has alarming perverse effects: in 2016 the amount of aid spent by DAC donors on hosting refugees at home ($15.4 billion) was higher than that spent on humanitarian assistance ($14.6 billion) and was equivalent to more than half of the aid going to the poorest 48 countries (LDCs) ($24 billion).

Far from tackling this, the new rules, which include a more elaborate rationale for why in-donor refugee costs are included within ODA, risk entrenching these trends even further – and potentially diluting the very credibility of ODA itself.

An open question on aid to rich countries

We are relieved that DAC members chose not to rush into any new rules on the use of ODA to support high-income countries experiencing humanitarian emergencies. We particularly welcome the commitment that any such rule should not divert resources from existing ODA recipients. However, an open question remains over how this commitment would be defined and monitored, and we will be scrutinising future developments closely.

So – while we welcome the principled efforts of the Secretariat and some members to stave off some of the most immediate threats that loomed at the start of the High Level Meeting – the coming months promise to be more testing still. This makes it more important than ever that the DAC builds on the openness to civil society shown at this Meeting, by putting into practice its commitments on more systematic inclusion of voices from the global south. Only when the DAC speaks with people living in poverty, not just to them, can the Committee hope to navigate the politics of issues such as blended finance and in-donor refugee costs in a way that really works for the poorest, and leaves no-one behind.