Overview by the DAC Chair
This chapter focuses on four key challenges facing those involved in aid delivery, reflects on the lessons learned from our collective failure to achieve the gender equality in schools target in 2005 and presents an update on key development dimensions discussed in previous Development Co-operation Reports.
Promoting Pro-poor Growth
Progress towards the MDG poverty goal needs to be accelerated to meet the target. Faster and more sustainable economic growth is needed to support poverty reduction, but growth also has to be more pro-poor in terms of a pace and pattern that enhances the ability of the poor to participate, contribute and benefit from growth. This chapter sets out the main policy dimensions of the pro-poor growth agenda, and how donors can assist partner countries in implementing that agenda. A pro-poor growth lens on areas such as the private sector, trade, agriculture and infrastructure reveals a need to rethink donor support strategies, policies and modalities. It is not a "business as usual" agenda and "more of the same" will not do.
On 2 March 2005 over one hundred donors and developing countries agreed in Paris to undertake some landmark reforms in the way they do business together. These reforms, enshrined in the Paris Declaration on Aid Effectiveness, are critical if aid commitments made during 2005 are to help partner countries meet the Millennium Development Goals by 2015. Some would argue that the Paris Declaration is nothing but good intentions and unlikely to make a difference. This chapter argues there are at least three good reasons to be confident that the Paris Declaration significantly increases the impact of aid.
Policies and Efforts of Bilateral Donors
The trend in DAC member countries’ aid volumes is generally upward, reflecting moves to fulfill commitments made at and since the Conference on Financing for Development in Monterrey in 2002. Much of the increase in 2004 was in aid for long-term development rather than debt relief and emergency aid. DAC members also reported on measures to improve aid effectiveness through increased alignment and harmonisation, as well as steps to support local ownership of development strategies. In the context of policy coherence for development, more donors were taking action to institutionalise the process of integrating the interests of developing countries into all facets of national policy making, including trade, migration, investment and environment. In 2005, five countries were peer reviewed by the DAC: Belgium, Germany, New Zealand, Sweden, and Switzerland.
In 2004, Australia’s total net ODA amounted to USD 1.46 billion, an increase of 2% in real terms, representing 0.25% of its GNI, the same as in 2003. Commitment to MDGs. While engaged in the development of a White Paper on its aid programme, Australia is supporting progress to achieve the MDGs through the co-ordinated application of policies and actions across government to promote the conditions necessary for development and poverty reduction in the Asia-Pacific region. Australia is strengthening its regional programming, with a new Pacific Regional Approach focusing on fragile states and increased funding to humanitarian action, and provided a major response to the tsunami disaster.
In 2004, Austria’s net ODA increased by 19.6% in real terms, reaching USD 678 million, mainly due to debt relief grants. The ODA/GNI ratio rose from 0.20% to 0.23%. Commitment to MDGs. The Federal Act on Development Co-operation 2002 (amended 2003) established poverty reduction as one of the three main objectives of Austrian development co-operation. A new three-year programme for 2005-08 re-emphasises the commitment to the MDGs, while policy directives are currently being developed to facilitate a more strategic implementation and operationalisation of this commitment. Austria accords priority to the poorest countries, especially needy regions and disadvantaged target groups.
In 2004, Belgium’s net ODA of USD 1.46 billion saw a 29.8% decrease in real terms compared to 2003, and its ODA/GNI ratio dropped from 0.60% to 0.41%. Belgium’s ODA in 2003 was exceptionally high due to the Paris Club’s debt forgiveness operations with the Democratic Republic of Congo. Belgium is committed to reaching the UN 0.7% target by 2010.
In 2004, Canada’s net ODA increased by 14.9% in real terms to reach USD 2.6 billion. Its ODA/GNI ratio rose from 0.24% to 0.27%. This was mainly due to declining loan repayments compared to 2003 when India repaid its Canadian aid loans.
In 2004, Denmark’s net ODA amounted to USD 2.04 billion representing an increase in real terms over 2003 of 4.1%. The ODA/GNI ratio of 0.85% was the second highest of all DAC countries. Commitment to MDGs. Poverty reduction is the overarching goal of Danish assistance with its programming focus on sectors with particular relevance to the poor, as well as strong recognition of gender issues. Denmark supports country-led poverty reduction strategies, in collaboration with other donors and sees the MDGs as a means to focus attention on poverty reduction impact, supporting local joint efforts to measure them.
In 2004, the EC’s net ODA volume was USD 8.7 billion, an increase in real terms over 2003 of 8.3%, continuing a trend for more timely disbursement of resources.
Commitment to MDGs. Poverty reduction remains the core objective of European Community development co-operation which is managed by the EC. A set of ten key indicators is being used by the Commission to track progress towards the MDGs in partner countries and to assess the impact of its development co-operation.
In 2004, Finland’s net ODA volume was USD 655 million, an increase of 5.9% in real terms over 2003. The ODA/GNI ratio was 0.35%, the same as in 2003. Finland was unable to meet its DAC statistical reporting obligations for flows in 2004, and therefore the data for total ODA are preliminary figures submitted in April 2005, whereas the geographical and sectoral data for 2004 are estimated by applying the 2003 distribution of Finland’s ODA pro rata.
In 2004, France’s net ODA increased 4.3% in real terms, reaching USD 8.5 billion. However, the ODA/GNI ratio of 0.41% remained unchanged compared to 2003. France is committed to reaching the UN target of 0.7% by 2012 with an interim target of 0.5% in 2007.
In 2004, Germany’s net ODA was USD 7.5 billion. It remained practically unchanged compared to 2003 (up 0.1% in real terms).
Commitment to MDGs. Germany sees its development policy as part of the joint global task of realising the goals of the Millennium Declaration, as set out in its Programme of Action 2015. Poverty reduction, peace building and achieving justice in globalisation are the three pillars of German development policy.
In 2004, Greece’s net ODA increased to reach USD 465 million, 13.3% higher in real terms than in 2003 due mainly to emergency aid and technical co-operation. Expressed as share of GNI, Greece’s ODA was 0.23% compared to 0.21% in 2003.
In 2004, Ireland’s net ODA expanded to USD 607 million, a 6% increase in real terms over 2003. ODA as a share of GNI remained at 0.39% in 2004. Commitment to MDGs. Ireland’s development co-operation programmes have for a number of years been planned and delivered in the context of the MDGs. Approximately half of its bilateral assistance goes to LDCs, and Ireland is committed to reaching the UN ODA target of 0.7% by 2012, three years ahead of the European Union target date. To further intensify and sharpen Ireland’s development aid a White Paper on development co-operation is being prepared and will be published in 2006.
In 2004, Italy’s net ODA volume was USD 2.5 billion, a 10.5% decrease in real terms from the previous year, mainly due to reduced debt forgiveness grants (down by about USD 400 million). The ODA/GNI ratio also decreased from 0.17% in 2003 to 0.15%. Italy is committed to an ODA target level of 0.33% by 2006.
In 2004, Japan’s net ODA decreased by 4.3% in real terms to USD 8.9 billion. The ODA/GNI ratio also dropped to 0.19% in 2004 from 0.20% in 2003. However, in gross terms Japan’s ODA rose by 18.9% to USD 16.2 billion. This was mainly due to increased debt relief to HIPC countries and aid for reconstruction in Iraq
In 2004, Luxembourg’s net ODA increased 8.2% in real terms to reach USD 236 million due to increased contributions to regional development banks. ODA as a share of GNI also rose from 0.81% to 0.83%. Luxembourg is committed to reach an ODA/GNI ratio of 1% by 2009.
In 2004, Netherlands’ net ODA volume in constant terms fell by 4.5% to USD 4.2 billion as India repaid its outstanding Dutch aid loans. This reduced its ODA/GNI ratio to 0.73% compared to 0.80% in 2003. The Netherlands nevertheless intends to maintain its target of 0.8% of GNI, on average, over the period 2004-07.
In 2004, New Zealand’s net ODA increased 9.1% in real terms over 2003, amounting to USD 212 million due mainly to a significant increase in grants to the South Pacific agencies. The ODA/GNI ratio remained 0.23%.
In 2004, Norway’s ODA fell slightly by 3% in real terms to USD 2.2 billion. This represented an ODA/GNI ratio of 0.87% compared to 0.92% in 2003.
In 2004, Portugal’s ODA volume surged 188.3% in real terms as a result of exceptional debt relief for Angola. The ODA/GNI ratio increased from 0.22% in 2003 to 0.63% in 2004. Portugal is committed to devoting 0.33% of its GNI to ODA in 2006.
In 2004, Spain’s net ODA increased by 9.6% in real terms to reach USD 2.4 billion due to the timing of contributions to international organisations. This represents an ODA/GNI ratio of 0.24%, compared to 0.23% in 2003. Spain is committed to attain 0.33% in 2006, 0.5% in 2008 and 0.7% in 2012.
In 2004, Sweden’s net ODA volume increased by 2.1% in real terms to USD 2.7 billion, representing 0.78% of its GNI, slightly lower than the 0.79% in 2003. Sweden has announced its goal to reach an ODA/GNI ratio of 1% by 2006.
In 2004, Swiss net ODA increased by 8.7% in real terms over 2003, reaching USD 1.5 billion. The ODA/GNI ratio also rose from 0.39% to 0.41% as Switzerland began reporting initial costs of asylum seekers from developing countries.
In 2004, the UK’s ODA increased by 9.5% in real terms to reach USD 7.9 billion due to higher project and programme aid expenditures and debt relief. The ODA/GNI ratio rose from 0.34% to 0.36%. The UK has set itself to attain an ODA/GNI ratio of 0.47% by 2007/08 and 0.7% by 2013.
In 2004, US net ODA volume increased by 18.3% in real terms to USD 19.7 billion. Most of the increase was due to a USD 1.8 billion contribution to IDA. Aid to Afghanistan and Iraq also rose substantially. Although the US continues to be the largest DAC donor, and has increased its ODA by 87% in real terms since 2000, it has the second lowest ODA/GNI ratio in 2004 at 0.17%.
Notes on non-DAC Donors
Non-DAC OECD Members
Technical co-operation (TC) has always played a central role in aid programmes. It is, however, controversial. In fact, TC programmes have come under repeated criticism for being too costly, inappropriate to recipients’ needs, or fostering dependency. In the past, donors have broadly assumed that they will promote capacity development, but reality has proved much more complex. This chapter explores the extent to which statistics – particularly DAC statistics on aid flows – can throw light on these controversies. It also flags recent proposals for improving the impact of TC, and outlines current DAC work to improve the data.
The DAC at Work
The OECD’s Development Assistance Committee (DAC) is the key forum in which the major bilateral donors work together to co-ordinate development co-operation and to increase the effectiveness of their efforts to support sustainable development. Within the OECD, the DAC is one of the main committees. The DAC, however, has three distinctive features. First, it meets more frequently than other OECD committees (about 15 times a year) and the Chair is based at OECD headquarters. Second, the DAC has the power to make binding recommendations in matters within its competence directly to countries on the Committee as well as to the Council (e.g. Recommendation on Untying Aid to Least Developed Countries, 2001). Third, the Chair issues an annual report on the efforts and policies of DAC members. This report has become a standard reference in the field of development co-operation.
Glossary of Key Terms and Concepts (Cross-references are given in CAPITALS) AID: The words "aid" and "assistance" in this publication refer only to flows which qualify as OFFICIAL DEVELOPMENT ASSISTANCE (ODA) or OFFICIAL AID (OA).
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