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: –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 69 th 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:

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 India- based 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 re- definition 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 “development- motivation” 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