Donors unlikely to meet 0.7 percent aid target — but does it matter?

As the 2015 deadline for the 0.7 percent aid target approaches, pressure to reach the goal seems to mount for certain governments — but not for all donors. Decades after it was recognized and reaffirmed at several international conferences, the 0.7 percent target still has its fair share of skeptics. While the Organization for Economic Cooperation and Development has stated that all members of the Development Assistance Committee except the United States and Switzerland have “generally accepted” the target as a long-term objective, only European Union member states actually committed to the 2015 deadline in 2005. A closer look at the 0.7 percent aid target’s history shows that the figure evolved from the 1 percent recommended by the World Council of Churches in 1958. From 1 percent, the target was further refined to 0.75 percent — a goal proposed by Dutch economist Jan Tinbergen, who became the chairman of the U.N. Committee on Development Planning in 1964. The Pearson Commission set the final 0.7 percent target, which was officially recognized in a U.N. General Assembly resolution in October 1970. But the apparent arbitrariness of the goal has sparked some debate about the usefulness of the target. A 2005 working paper by Center for Global Development fellows, which was later published in the International Journal of Development Issues, had a blunt assessment of the aid goal: The 0.7 percent mark, the authors argued, was “based on a series of outdated assumptions going into a dubious model and measured against the wrong metric.” A careful evaluation of recipient countries’ needs, they proposed, would serve as a more appropriate benchmark for an aid target, if such a target could even be set. The 0.7 percent target, they further argued, was originally designed to pressure richer countries — the United States, in particular — to devote a greater share of their resources to development assistance. Given that the United States had reservations about adhering to such specific targets and timetables, this shouldn’t be surprising. Despite being among the largest donors in terms of disbursements, the United States historically has had a low ratio of official development assistance to gross national income, which was 0.19 percent in both 2012 and 2013. This seems unlikely to change even as the 2015 deadline draws near. “As far as I can tell, the 0.7 percent target has zero traction in Washington,” Michael Clemens, co-author of the paper and senior fellow at CGD, told Devex. “I've never heard any serious discussion of having the U.S. meeting the target.” The 0.7 percent goal’s political purpose seems to have worked for European donors, which started inching toward the target in the 1970s. But not all European countries that reached the 0.7 percent goal — Sweden, the Netherlands, Norway, Denmark, Finland and Luxembourg — have had a perfect record. The Netherlands, which met the target in 1975, has reached the target every year since. But in 2013, it recorded a ratio that was just slightly below the goal, at 0.67 percent. Finland only met the target once — in 1991. Last year, it recorded a 0.55 percent ODA-to-GNI ratio. There have also been some doubts about whether setting certain aid amounts is helpful to the goal of focusing on the quality of aid. But Max Lawson, head of global campaigns and public policy at Oxfam, pointed out that there is a “false choice” between ensuring that high quality aid is delivered and increasing the amount of aid provided — a view that Clemens disagrees with. “By definition, setting an amount of money that needs to be spent reduces the incentive to spend it effectively. The focus and the political incentives become related to how much money is being pushed through the pipeline,” Clemens said. “Observing how much money is flowing is very easy. Determining the true impact of aid is extremely difficult. So once the focus becomes how much is being spent, the impact comes a very distant second.” While the relevance of the target continues to be debated, some donors have set their sights on similarly specific, but smaller, goals. South Korea has committed to achieve a 0.25 percent ODA-to-GNI ratio in 2015, while the previous Australian government sought to reach a 0.5 percent ODA-to-GNI ratio in 2017-2018. In 2013, two countries quietly reached the 0.7 percent goal. The first G-7 country to meet the target, the United Kingdom hit the 0.7 percent mark for the first time last year. The United Arab Emirates, which only became an OECD-DAC this year, even went beyond the 0.7 percent line and became the only non-European donor to achieve the seemingly elusive 0.7 percent goal. Still, the likelihood of all DAC members reaching the 0.7 percent target next year seems low. Last year, the ODA-to-GNI ratio across DAC members was a mere 0.3 percent — down from the 0.32 percent peak the group achieved in 2010. Below, we take a closer look at the donors that have either consistently reached the target or have hit the mark for the first time in 2013 — even when they never explicitly expressed commitment to the goal, such as the case of the United Arab Emirates. United Arab Emirates Posting the highest ODA-to-GNI ratio, the UAE is also the only donor outside the DAC to have hit — and even exceeded — the 0.7 percent target last year. With a 375 percent increase, its stark surge in aid was largely driven by the assistance it provided to Egypt, which it plans to continue supporting. General program assistance, mining and infrastructure were the main sectors of UAE foreign assistance. While at least 90 percent of the more than $5 billion in ODA was given by the UAE government, the rest was provided by the Abu Dhabi Fund for Development. Norway Norway first reached the 0.7 percent target in 1976 — and has met, and sometimes even eclipsed it, every year since. Last year, the bulk of Norwegian aid was concentrated in Africa, particularly Malawi, Tanzania and South Sudan. Environment and energy, good governance and economic development and trade were Norway’s key priority sectors. Multilateral institutions were the main channel for delivering Norwegian aid, but the public sector in Norway’s recipient countries and, to a slightly lesser extent, the public sector in Norway itself, also played a significant role in aid distribution. Sweden In 1974, Sweden became the first country to meet the 0.7 percent goal. While revised gross national product data postponed the achievement to 1976, Sweden seems to have been committed to fulfill and even transcend the target every year since. Like Norway, Sweden channeled much of its nearly $6 billion ODA through multilateral organizations in 2013. Humanitarian assistance, and support for democracy, human rights and gender equality were the main focus areas of Swedish aid. While the Swedish International Development Agency phased out operations in Namibia, India, East Timor and China last December, its more targeted geographical focus could result in greater emphasis on these priority sectors. Luxembourg Compared with Norway and Sweden, Luxembourg was a latecomer to the 0.7 percent club when it reached the aid target in 2000. With $431 million in ODA last year, little Luxembourg seems to be a modest donor. Even so, development assistance in 2013 — and in 2012 — comprised 1 percent of Luxembourg’s GNI. Multilateral institutions have also been the preferred channel for Luxembourg’s assistance, which is directed mainly to countries in sub-Saharan Africa. An OECD review of its development cooperation also called the country a “model player in multilateral aid.” Denmark Denmark became the third country to reach the 0.7 percent target when it achieved the ODA goal in 1978. Employing what it calls a human rights-based approach in its development assistance, Denmark prioritizes democracy, green growth, social progress and social stability in its programs. Unlike Norway, Sweden and Luxembourg, it has historically channeled as much as 70 percent of its aid — an amount that approached $3 billion last year — bilaterally. But there has been a push for the Danish donor to direct more of its assistance toward multilateral institutions like the United Nations, European Union and World Bank. United Kingdom While it has been one of the most generous donors when disbursements are considered, the United Kingdom only reached the 0.7 percent target for the first time in 2013 — the deadline set in a 2009 white paper from the Department for International Development. Final ODA figures for the U.K. will only be published in October, but a DfID annual report shows the agency comprised 88 percent of the nearly $18 billion U.K. ODA in 2013. Economic development, improvement of the lives of women and girls and humanitarian assistance were among DfID’s policy priorities. Check out more insights and analysis provided to hundreds of Executive Members worldwide, and subscribe to the Development Insider to receive the latest news, trends and policies that influence your organization.