CSO recommendations on the Development Assistance Committee’s approach to incorporating Private Sector Instruments in ODA

The TUDCN has contributed to a joint submission of CSOs to the OECD’s Development Assistance Committee (DAC). The submission provides the DAC with recommendations on its approach to incorporating Private Sector Instruments.

There are two underlying warnings that are highlighted within these recommendations. The first relates to the re-qualifying of what counts as Official Development Assistance (ODA). The risk here is that broadening the definition of ODA will simply rebrand existing funding which is not specifically directed towards development. The push by the OECD countries to reach ODA totaling 0.7% of Gross National Income is laudable but risks being rendered meaningless by this lowering of standards. The current move is clearly donor-driven and has little to no impact on ameliorating living conditions for inhabitants of developing countries.

Currently, certain loans provided to Least Developed Countries (LDCs) by donor countries are included in the calculation of the ODA of donor countries. However, there are strict requirements for the types of loans that can qualify. They must have preferential conditions that give the LDCs better borrowing conditions than those available under regular market borrowing conditions. This type of loan is known as concessional finance. The proposal to include non-concessional loans, i.e. loans that impost regular market conditions on LDCs, as ODA is worrying and the TUDCN joins its voice to civil society’s condemnation of it.

The second underlying problem that civil society is warning the OECD of concerns the role of the private sector in development. While recognition is given to the fact that the private sector must be engaged to play a greater role in development, critical doubts as to the proposed form of this engagement remain unanswered. In particular, the inclusion of private sector financing instruments (PSI) causes concern. Further to re-labelling existing resources as ODA, this will have the effect of encouraging the diversion of ODA from existing priorities to PSI. In recent research entitled The development effectiveness of supporting the private sector with ODA funds, the TUDCN found that PSI encourage questionable practices and is an ineffective use of resources for development.

The Recommendations on the Development Assistance Committee’s approach to incorporating Private Sector Instruments in ODA are available here.