The failure of the OECD’s Development Assistance Committee’s to agree tough new rules governing aid invested in the private sector - private sector instruments - was criticised by Oxfam and the European Network on Debt and Development (Eurodad) today. After four years of discussion the Committee has only been able to agree a stop-gap arrangement that won’t ensure these investments benefit poor communities.
Polly Meeks, Senior Policy and Advocacy Officer at Eurodad said: “Donors have an obligation to make sure that every single Euro spent on development aid achieves maximum impact in the fight against poverty and inequality. Scarce aid funds must not be diverted into private schemes, and away from where they are needed most.
“There is a real risk that private sector instruments will become a back-door subsidy for companies in donor countries. It is already commonplace for donors to ‘tie’ their aid to companies in their own countries and the Committee’s weak stop gap arrangement is likely to make matters worse. Until basic concerns are answered, donor governments should stop investing aid in the private sector.”
Julie Seghers, OECD Policy and Advocacy Advisor at Oxfam said:
“The lack of transparency on how aid money is spent, and the lack of accountability to the country on the receiving end, means there is a real risk aid won’t get to the communities who need it most. There is also no guarantee that aid will only be invested in companies that fully respect human rights
and environmental standards and pay their fair share of taxes.”
“The effective use of aid money is too important to let slide. Donor countries must get back to the negotiating table and work with developing countries and civil society to put strongest possible safeguards in place.”
Julia Ravenscroft, Communications Manager at Eurodad, on firstname.lastname@example.org /
Polly Meeks, Senior Policy and Advocacy Officer at Eurodad on email@example.com / +32 2 894 46
Julie Seghers, OECD Policy and Advocacy Advisor at Oxfam, on firstname.lastname@example.org / +33 7 88
00 43 95
Notes to editors
Private Sector Instruments (PSIs) are financial support offered by donors to private sector actors operating in the global south. PSIs can involve offering loans, buying shares, or agreeing to act as a guarantor (i.e. covering costs if projects fail). A recent position paper on PSI endorsed by 19 civil society organisations from the global south and global north is here: https://eurodad.org/position-paper-PSIs
The stop-gap arrangement gives basic rules for how private sector instruments will count towards donors’ aid spending targets. It also includes some limited recommendations on added transparency and safeguards - however these are only voluntary.
Recent Eurodad research on tied aid is here: https://eurodad.org/Entries/view/1546950/2018/09/20/Development-Untied-Unleashing-the-catalytic-power-of-Official-Development-Assistance-through-renewed-action-on-untying