What's at stake during this week's OECD DAC meetings?

A view of the OECD Conference Centre in Paris, France. Photo: Michael Dean / OECD

PARIS — Delegations from the 30 richest donor countries will meet Monday and Tuesday at the Organisation for Economic Co-operation and Development’s headquarters in Paris to discuss potential changes to the rules governing overseas aid.

The Development Assistance Committee of the OECD holds its high-level meeting every two years, but this year’s gathering will tackle a number of heated debates in the aid arena around how to maintain a poverty reduction mandate in a shifting development landscape.

Amid an ongoing displacement crisis, delegates will grapple with the possibility of increasing the amount of official development assistance donors can spend in-country to support refugee resettlement and bolster support systems. They will also sharpen the guidance around how donors count and measure ODA spent through blended finance mechanisms; and they’ll reconsider how much ODA should count toward multilateral peacekeeping efforts in conflict-affected countries.

The Sustainable Development Goals should also take center stage, as delegates check in on DAC reforms launched in 2012 with the aim of keeping the work of the committee relevant and effective, in an era when traditional modes of development are struggling to keep pace with need.

Devex takes a look at what’s on the agenda.

Private sector instruments

DAC must do a lot of checking this year as reforms enter full swing, including its new framework, Total Official Support for Sustainable Development, or TOSSD; new provisions around transparency; and updates around concessional financing and development finance institutions.

The most contentious issue this year will likely be a move to establish more clarity around the use of private sector instruments in aid. There are currently many grey areas in how donors approach PSIs. DAC is cognizant that some of these provisions must fall under ODA, and the proposal to be presented attempts to focus the discussion on tangible strategies for measuring impact, according to Julie Seghers, policy and advocacy advisor at Oxfam. But Seghers, who is part of the civil society organizations delegation, added that discussions around whether and how to incentivize private investment over traditional grants have been heating up over the past two years, and the committee is unlikely to come to a consensus on the proposal this year.

“We feel what they’ve put on the table at the moment is way too generous in rewarding and crediting ODA to private sector instruments,” she said. She added that the proposal lacks adequate social and environmental safeguards, and could incentivize aid tools that Oxfam and others feel have not yet proven their merits in poverty reduction.

“So far in the research we’ve done, there’s very little evidence that partnering with the private sector has any really positive impact on poverty reduction — and at the same time we feel that donors are rushing into this new kind of doing aid and see it as the silver bullet for reaching the SDGs,” she said.

However, Seghers acknowledged that the committee is closing in on a consensus and it could offer a proposal on principles around blended finance, or the use of ODA to de-risk investments in developing countries by companies and individuals. France, Germany, and Japan are the only members who remain against the proposal, hoping to hold out for even more generous terms for counting ODA toward PSIs.

“We’re not happy with the proposal that has been discussed at the DAC, so we would caution against agreement on the PSI rules if they don’t address these concerns. But at the same time we worry because it’s been so difficult to come to an agreement; it’s been two years developing this proposal,” Seghers said.

In-donor refugee costs

The highest-profile debate will likely be around the use of aid for in-donor refugee costs. As the rules stand, donor countries can count funds spent domestically on refugee resettlement as ODA for up to one year of the refugee’s new life in the host country. But the rules lack specificity on when that year starts — for example, does it start when the refugee arrives, when they are registered, or when their asylum application is approved? Some DAC members will argue for extending the one-year period for refugee support to three years.

Such moves have been controversial among NGOs for diverting funds away from overseas aid.

“This has been a really tricky discussion for us to engage in,” said Seghers. “For Oxfam, as well as most CSOs, fundamentally we don’t think these [expenditures] should be counted as ODA at all, because they’re not resources provided to developing countries, so they’re not linked to the core purpose of ODA, which is poverty reduction in developing countries. We feel like it’s just an accounting trick for DAC donors to fill in gaps in their domestic budgets,” she said.

At the same time, Seghers said “we’re pretty confident what will be put on the table will be much clearer, much more detailed than the existing rules.” She hopes that new guidelines will lead to better reporting and more granular information, so that “we as civil society, parliaments, the public, or anyone interested” can scrutinize spending.

But she added that clearer rules could also mean more confidence among donors in reporting in-house costs as ODA.

CSOs have put forward proposals to exclude certain costs that are seen as less ODA-oriented, such as border security and detention centers.

Many donors and aid stakeholders also believe that DAC should introduce a cap on refugee-related ODA spending, to prevent donors raiding their aid budgets to cope with refugee arrivals. Last year, some OECD donors spent more than one-third of ODA on in-house refugee costs.

The ‘unofficial’ agenda

DAC members will likely return to the topic of using ODA for peace and security-related expenditure, a subject that got a lot of traction at the last high-level meeting. Donors including France and the U.K. hope to see another increase in the amount of ODA that can count toward contributions to U.N. peacekeeping, which was capped last year at 15 percent. This could cause some friction on the committee, as chair of the DAC Charlotte Petri Gorniztka has insisted that the earliest this figure should be revisited is 2019.

On the fringes, members of civil society hope this issue will spark discussions around how to tackle sexual abuse perpetrated by U.N. peacekeepers. The U.K. Secretary of State for International Development Priti Patel, who will be attending the meeting, recently announced that one-third of U.K. contributions to the U.N. will be contingent on the multilateral putting a stop to abuse. Supporters of the move hope it could be picked up by other donors.

Patel has also raised another concern that doesn’t appear on the official agenda. After Hurricane Irma devastated the British overseas territories of Barbados and Anguilla last month — islands that are both ineligible for ODA due to their income levels — she pledged to change the rules to allow for spending ODA on small island nations vulnerable to climate-related disasters, regardless of their gross domestic product.

“I think we must recognize that the commonwealth countries are subject to the same resilience and climate change issues that we are speaking about,” Patel said in an evidence session in the U.K. parliament last week. “You’ll find amongst the DAC, there are other members raising these concerns as well,” she said, adding “the DAC is the right forum to surface these concerns and have these discussions.”

U.K. Minister for International Development Alistair Burt also told Devex: “We think this would be a good change. It wouldn’t disrupt the concept of ODA for the most vulnerable, but provides a little bit of flexibility in our assistance.”

While the item won’t appear on the official agenda, Patel could push for a vote at one of the other DAC events.

DAC reform

Discussions about the ongoing reform of the DAC, initiated in 2012, will also continue this year, as well as its work to improve aid flow transparency.

The committee will also check in on its new statistical reporting framework for counting ODA — the Total Official Support for Sustainable Development.

This year’s meeting will be only the second time representatives from civil society organizations such as Oxfam are allowed a seat at the table. Other key aid stakeholders, including the Bill & Melinda Gates Foundation and several U.N. agencies, plan to join the fray.

The DAC is in the midst of huge reforms under its new head, Petri Gornitzka, who hopes to recast it in the image of the SDGs, and distance the committee from the OECD’s “rich country club” image. In addition to opening up the DAC to civil society voices, she aims to prevent larger donor members from dominating the agenda.

Seghers told Devex that Oxfam sees “a huge difference” in how the DAC is engaging with CSOs. “The past few months, there has been a real willingness to open up the space for CSOs, so we’re organizing ourselves as well. We’ve set up a CSO network so the DAC can see us as an organized community.”

Building on past changes

The DAC was founded in 1961 to work toward a common vision for the purpose and nature of overseas aid. Aid officials attend the meeting to discuss and debate proposed updates to the rules, which are typically tweaked every two to three years.

The meeting itself often concludes months or even years of discussions around proposals for amendments to the ODA rules. During the meetings, members will cast their final votes on proposals, and the vote must be unanimous for the rules changes to go into effect. For CSOs, this requirement for unanimous agreement on rules changes can act as a way of protecting aid’s poverty mandate if it comes under threat from proposed changes from some members.

While the high-level meeting takes place every two years, the committee can meet, take new decisions, and issue communiques year-round.

At the last high-level meeting, the DAC adjusted the ODA rules to allow greater flexibility in using aid for peace and security expenditure, including some military costs, in fragile and conflict-affected states. This came with caveats that the outcome should be development-focused, and should come from ODA only as a last resort.

A meeting last year also saw a few dramatic changes in how donors should count aid invested in development finance institutions. The U.K. government was a driving force behind these changes, which now allow for the entire capital investment in a DFI to count as ODA. In order to protect the core function of aid, the DAC also put in place several checks on DFIs’ development mandates, and required that DFIs demonstrate “additionality” in their investments. Debates about how additionality is measured are likely to pick up again at this year’s meeting.

In 2016, the DAC also developed a system for comparing “ODA-ability” of concessional loans versus traditional grant financing. This means that while concessional loans count less overall toward ODA, the system now offers incentives for donors to increase the concessionality of loans in exchange for greater ODA credit, as well as incentives to invest in least developed countries.

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About the author

  • Molly Anders

    Molly Anders is a former U.K. correspondent for Devex. Based in London, she reports on development finance trends with a focus on British and European institutions. She is especially interested in evidence-based development and women’s economic empowerment, as well as innovative financing for the protection of migrants and refugees. Molly is a former Fulbright Scholar and studied Arabic in Syria, Jordan, Egypt and Morocco.