Development Assistance in a Changing World

In his introductory remarks, Michael Gaffey, Director General of Irish Aid, welcomed Carsten Staur, Chair of the OECD Development Assistance Committee (DAC). He noted that today’s world is in a state of multiple overlapping crises, which have shifted the debate from whether OECD’s Official Development Assistance (ODA) is even needed towards how to use it. While acknowledging ODA will not solve all our problems, he defined it as a significant resource of Voted Government Expenditure overseen by the DAC. 

ODA a Success Story but Geopolitics a Challenge for the Achievement of the SDGs

Mr Staur then delivered a speech on Development Assistance in a Changing World. He said that the OECD and ODA can, in general, be characterised as a success story. In 2022, the OECD recorded the highest-ever ODA, reaching $204 billion, $18 billion higher than the previous year. Equally, he complimented DAC’s work in data production and analysis and the creation of peer-learning environments for Member States. However, ODA is also facing various challenges connected to pressure from humanitarian assistance, mainly Gaza, Ukraine, refugee costs, COVID-19 vaccine donations, etc. Said crises, especially COVID-19, have severely affected countries’ economic circumstances. As a result, only 12% of the SDGs (Sustainable Development Goals) are currently on track, causing the discussion to centre around how close to the SDG we can get instead of fully achieving them by 2030. He also highlighted climate change as a pressure requiring assistance from ODA on mitigation, adaptation, and protection.

Competing Models of Cooperation Emerging

At the same time, he acknowledged that other competing cooperation models are emerging. China is not a big provider of ODA but is a big provider of finance, which has been of huge importance to Africa in recent years. Furthermore, the Chinese Belt and Road Initiative and the Global Development Initiative are seen as alternatives to the traditional donor role of the West, which Mr Staur disapproved of. While he believes there are options for cooperation, he sees China’s models as competitors. He stated that we will have to deal with tensions in the future. Although we will not return to a Cold War situation of two opposing systems, we will certainly get to a situation where some areas will allow for cooperation, and others will cause friction. 

Protectionism a Threat to Open and Free Trade

Mr Staur also defined trade as an ODA pressure point. In the 1990s, globalisation was a key driver of ODA, and the OECD called for developing countries to join the global economy, grow through integration in international trade, and have export-led economic growth. This was dependent on free and open trade. However, we are now in a period of change with a new focus on homeshoring, nearshoring, friend shoring, strategic autonomy, and shortening supply chains, all of which will require us to take a new look at our markets and way of trading. Finally, he acknowledged the recent criticism of ODA. 90% of ODA grants are easy to account for, but a part of it is related to loans and debt forgiveness, which have caused debate.

Possible Solutions to the Challenges of an Effective ODA

He continued by enumerating some ways to face the above challenges. Firstly, he called for an increase in ODA, believing that the current numbers are insufficient, especially if the OECD wants to continue providing additional assistance to Ukraine. Here, he warned that we must avoid a repetition of last year’s narrative that Africa paid for Ukraine due to the 7% fall in bilateral assistance to Africa. Hence, an overall increased ODA and assistance to Africa is crucial, as well as avoiding a situation where countries are forced to choose between military expenditures and ODA.  

Second, he pointed to the allocation of ODA. There is currently a lot of pressure to provide money for middle-income countries to mitigate their debt, climate change, and other political and economic issues. Mr Staur believes defending low-income countries is vital in this respect, as ODA is much more economically important for them than for middle-income countries. By comparison, up to 10% of low-income countries’ GNI emanates from ODA, while it is less than 1% for middle-income countries. Thus, he believes the OECD must listen to and engage more with poorer countries, build more on locally-led development, adapt better to their changing political and economic situations, and, in short, “be less paternalistic in the way we do business”. 

ODA as a Driver for Change – Mobilising Finance for Development

He also described ODA as a driver for change, helping countries achieve the reforms they need. Hence, investing more in domestic resource mobilisation and tax systems, and creating revenues in countries that could then invest in their health, education, and social protection is key. He also hoped ODA could be used to generate more private investment in development. While surpassing $200 billion was record-breaking, Mr Staur stated that this figure only represents 5% of the total financial needs in developing countries, especially when it comes to the trillions needed for mitigating climate change. Thus, it is crucial for financing development that countries mobilise themselves, especially in the private sector. 

In conclusion, Mr Staur pointed to the upcoming Conference on Financing for Development 2025, which will address some of the issues mentioned in his speech. He emphasised that questions on ODA’s role, its targets, and which countries should receive it will have to be dealt with before the conference so that donors and the DAC are aligned and can discuss and coordinate their views in 2025.

Adapting ODA to a Changing World Requires Responsibility, Integrity and Accountability

This led Mr Staur to his final point on integrity. He described ODA as a concept that adopted the 0.7% ODA/GNI Target in 1970, creating an international standard for how developed countries should support developing ones. At the same time, it was left to the DAC to define development assistance, which it has been continuously adapting as the world changes. In Mr Staur’s view, this shows a vote of trust in the DAC from the international community. He emphasised the importance of maintaining awareness of the responsibility and accountability nations have entrusted the DAC with, while gradually adapting ODA to the ever-evolving global changes without losing its original spirit and integrity. 

Disclaimer: The views expressed in this blog are the responsibility of its author and do not reflect the policy of Irish Aid.