This chapter examines three fundamental and linked aspects of ODA: overall aid volume, major trends in aid allocation and more effective aid delivery. It goes on to consider how donors can do more to encourage greater domestic accountability for public expenditure, including expenditure financed by aid, in developing countries. And it reports on some key measures of progress in the development assistance field.

Aid for Trade is not a new concept but concerted efforts are needed to ensure that multilateral trade liberalisation has an effective impact on pro-poor growth. For too many WTO members, market access improvement – without support to strengthen trade capacity – brings little benefit. Money, however, is not the central issue. The problem seems to lie in the poor value for money of Aid for Trade programmes, as highlighted by most Aid for Trade evaluations. In fact, the Paris Declaration on Aid Effectiveness is far from being systematically applied in these programmes, particularly in regards to country ownership and results-based management. The key value added the WTO can bring to Aid for Trade is a step change in its effectiveness. Consequently, based on its coherence mandate, the WTO should play a key role in providing the necessary political incentives to increase effectiveness. It should strengthen the scrutiny, monitoring and surveillance at a global level and thus encourage better local accountability mechanisms. The DAC has an important contribution to make to these mechanisms.

The Paris Declaration on Aid Effectiveness is an ambitious attempt to increase the impact of aid on development by promoting more mature partnerships between donors and partner countries. It also seeks to enhance the ability of partner countries to manage all development resources more effectively, and to enable their citizens and parliaments to hold governments accountable for the use of these resources. This chapter presents some preliminary and tentative findings from the 2006 survey on monitoring implementation of the Paris Declaration in 31 countries. The final report will be released in March 2007.

In 2005 DAC members demonstrated continued strong support for poverty reduction. For many, this is a primary goal of their foreign policy and, in particular, of their development assistance programmes. Contributions to the achievement of the Millennium Development Goals (MDGs) were made in the fields of basic education, basic health, empowerment of women and environmental sustainability. In addition, DAC members also made fighting corruption a core objective of their governance agendas. Several enhanced their programmes supporting security sector reform and included security as a driver for development interventions. While work is underway to further policy coherence for development, it appears that much is still to be achieved in this area, especially in relation to policies and to structures for achieving coherence. Members seem to be paying more attention to monitoring and evaluation, with the accent on results orientation. In 2006 five countries were peer reviewed by the DAC: Greece, the Netherlands, Portugal, the United Kingdom and the United States.

In 2005 Australia’s total net ODA amounted to USD 1.68 billion, an increase of 6.7% in real terms, representing 0.25% of its GNI, the same percentage as in 2004. Commitment to the MDGs. Australia fully and actively supports the Millennium Development Goals (MDGs) with strategies and programmes to reduce poverty and promote development, largely in the Asia- Pacific region. The new White Paper for Australia’s aid programme, launched in April 2006, foreshadows scaled-up investments in health, education and infrastructure, underpinned by efforts to strengthen those areas most conducive to the long-term elimination of poverty: economic growth, governance, anticorruption and security. In 2005, Australia published a progress report entitled A Global Partnership for Development which provides details on Australia’s approach and contribution to achieving the MDGs.

In 2005 Austria’s net ODA increased by 127.1% in real terms, reaching USD 1 573 million, mainly due to debt relief grants. The ODA/GNI ratio rose from 0.23% to 0.52%. Commitment to the MDGs. Austria identified poverty reduction as one of the three main objectives of Austrian development co-operation through the Federal Act on Development Co-operation 2002 (amended in 2003). Commitment to the MDGs has been reiterated in the three-year programme for 2005-07. A new three-year programme for 2006-08 is in the process of being elaborated and should include policy directives for a more strategic implementation and operationalisation of this commitment.

In 2005 Belgium’s net ODA increased 31.5% in real terms to reach USD 1 963 million. This represents an increase in the ODA/GNI ratio from 0.41% in 2004 to 0.53% in 2005. Commitment to the MDGs. In order to ensure recipient country ownership of the MDGs, these have to be incorporated in the development plans of the recipient countries. These plans provide the reference framework for Belgian country strategies. Measures to combat poverty and prevent conflicts are seen as vital to promote sustainable human development, which is the overarching objective of Belgian co-operation.

In 2005 Canada’s net ODA increased by 31.2% in real terms to reach USD 3.8 billion. Its ODA/ GNI ratio rose from 0.27% to 0.34%. Commitment to the MDGs. Canada continued to intensify its support for the MDGs, building on current initiatives, increasing aid volumes and concentrating efforts where they can make the greatest difference:, health (including HIV/AIDS), basic education, private sector development, gender equality, environmental sustainability as well as the promotion of democratic governance.

In 2005 Denmark’s net ODA amounted to USD 2.11 billion, representing an increase in real terms of 1.9%. However, the ODA/GNI ratio decreased from 0.85% in 2004 to 0.81% in 2005. Commitment to the MDGs. Poverty reduction is the overarching goal of Danish assistance. Its programmes focus on sectors with particular relevance to the poor and contain a clear acknowledgement of gender issues. Denmark supports country-led poverty reduction strategies, in collaboration with other donors, sees the MDGs as a means to focus attention on poverty reduction impact and supports local joint efforts to measure them.

In 2005 the EC’s net ODA volume was USD 9.4 billion, an increase of 6% in real terms over 2004. Commitment to the MDGs. Since 2000 the core objective of the European Community’s development co-operation policy has been poverty reduction. The European Consensus on Development, the development policy statement agreed by the EU in December 2005, clearly states that the overarching objective of poverty eradication includes the pursuit of the MDGs. To measure progress towards the MDGs in its partner countries the European Commission has identified a “core set” of ten key indicators.

In 2005 Finland’s net ODA volume was USD 902 million, an increase of 29.9% in real terms over 2004. The ODA/GNI ratio also increased from 0.37% in 2004 to 0.46% in 2005. Commitment to the MDGs. In Finland’s 2004 Government Resolution on Development Policy the main principle of development policy was the commitment to the values and goals of the UN Millennium Declaration and the MDGs. The Resolution also focused on improving policy coherence in all policy areas, the advancement of a rights-based approach and sustainable development. The MDGs underpin and are specifically referred to in government strategies and guidelines. They also provide the basis for all forms of implementation. Crosscutting themes which receive particular attention are: women’s and girls’ rights, gender and social equality; rights and equal participation of easily marginalised groups; and environmental issues.

In 2005 France’s net ODA increased 16.8% in real terms, reaching USD 10 billion. The ODA/GNI ratio also increased from 0.41% in 2004 to 0.47% in 2005. Commitment to the MDGs. France is committed to achieving the MDGs. French aid is largely directed towards Africa and nearly a third of subsidies granted to poor countries are spent on education and health projects. Its efforts go hand-in-hand with initiatives to protect the global commons, “global public goods” (the three priorities being: combating emerging transmittable diseases, combating climate change and conserving biodiversity). Along with five other European countries, in 2006 France launched the International Finance Facility for Immunisation (IFFIm) in order to broaden immunisation programmes in Africa and also introduced a solidarity tax on airline tickets. This innovative method of financing will raise financial resources which will be used for development programmes in the field of health. Managed by the international drug purchase facility, UNITAID and IFFIm, these funds will serve in particular to fight HIV/AIDS, tuberculosis and malaria and will be additional to France’s commitments to the Global Fund to fight the three pandemic diseases.

In 2005 Germany’s net ODA was USD 10.1 billion, an increase of 32.9% in real terms over 2004. The ODA/GNI ratio increased from 0.28% in 2004 to 0.36% in 2005. Commitment to the MDGs. Germany views its development policy as part of the global ambition to realise the goals of the Millennium Declaration. The main goals of German development policy are to reduce poverty, build peace, promote democracy and equitable forms of globalisation and protect the environment. The aim of improving general international conditions and national structures, both in partner countries and in Germany, is linked to the goal of sustainable development. This comprises economic efficiency, social justice, ecological sustainability and political stability. In line with the commitment for new partnerships, Germany advocates greater participation by developing countries in multilateral decision-making processes, for instance, by reforming the way voting rights are allocated within multilateral institutions.

In 2005 Greece’s net ODA increased to reach USD 384 million, 15.9% higher in real terms than in 2004. Expressed as a share of GNI, Greece’s ODA was 0.17% compared to 0.16% in 2004. Commitment to the MDGs. Hellenic Aid seeks, on the one hand, to align Greek development co-operation goals with the MDGs and, on the other, to ensure that national targets conform to both EU objectives and national foreign policy priorities. Thus, poverty reduction, basic health, basic education, water and sanitation, empowerment of women and economic development are some of the key sectors identified by Greece in its efforts to achieve the MDGs in a limited number of priority countries. At the same time, the Greek programme is expanding its focus to LDCs and sub-Saharan African countries.

In 2005 Ireland’s net ODA reached USD 719 million, a 15.7% increase in real terms over 2004. The ODA/GNI ratio also increased from 0.39% to 0.42%. Commitment to the MDGs. Ireland’s development co-operation programmes have, for a number of years, been planned and delivered in the context of the MDGs. Approximately two-thirds of its bilateral assistance goes to LDCs and Ireland is committed to reaching the UN ODA target of 0.7% by 2012, well ahead of the EU target date. The Government of Ireland launched its first White Paper on Development Co-operation on 18 September 2006, which reaffirmed its commitment to the 0.7% target and re-enforced its focus on poverty reduction, alleviation from hunger, conflict resolution and peace building, HIV/AIDs and other communicable diseases.

In 2005 Italy’s net ODA volume reached USD 5.1 billion, a 101.4% increase in real terms over 2004. The ODA/GNI ratio rose from 0.15% in 2004 to 0.29% in 2005. Commitment to the MDGs. Since the adoption of its official guidelines in 1999, poverty reduction has been one of the chief objectives of Italian development co-operation. However, Italy has yet to establish a coherent approach to mainstreaming this focus throughout its aid portfolio. Neither has it yet developed an operational strategy on its contribution to the achievement of the MDGs.

In 2005 Japan’s net ODA rose to USD 13.1 billion, an increase of 51.7% in real terms over 2004. This represents an increase in the ODA/GNI ratio from 0.19% in 2004 to 0.28% in 2005. Commitment to the MDGs. Japan’s 2003 Official Development Assistance Charter adopted a “human security” perspective to help achieve the MDGs. At the 2005 Gleneagles summit it announced it would increase its ODA volume by USD 10 billion in aggregate by the end of 2009. Earlier that year at the Asian-African Summit it announced that it would double its ODA to Africa in three years, i.e. by the end of 2007 (relative to net ODA disbursements in 2003). In 2005 Japan committed USD 5 billion to be spent on the “Health and Development Initiative” by March 2010.

In 2005 Luxembourg’s net ODA increased by 5.4% in real terms to reach USD 256 million. However ODA as a share of GNI decreased from 0.83% to 0.82%. Luxembourg is committed to reach an ODA/GNI ratio of 1% by 2009. Commitment to MDGs. The MDGs are at the forefront of Luxembourg’s development co-operation policy and poverty reduction and sustainable development are key objectives. Furthermore, most of its programmes place particular emphasis on primary education, basic health care, HIV/AIDS, water and sanitation. ODA goes mainly to least-developed and low-income countries.

In 2005 the Netherlands’ net ODA volume in constant terms increased by 19.8% to reach USD 5.1 billion, representing 0.82% of its GNI. This significant increase reflects a rebound from 2004 when net ODA was depressed by India’s repayment of its loans from the Netherlands. The Netherlands’ target for ODA is 0.8%. Commitment to the MDGs. Poverty reduction is the dominant overarching objective of Dutch foreign policy as a whole and development co-operation in particular. The PRSP framework is seen as a primary mechanism which guides Dutch strategy, assists in implementing programmes, provides a basis for monitoring and evaluation and serves as an essential forum for policy dialogue. In relation to its contribution to specific MDG targets, the Netherlands focuses on those relating to education, HIV/ AIDS, reproductive health and rights, the environment and water.

New Zealand’s net ODA reached USD 274 million in 2005, representing an increase of 18.5% in real terms and an improvement in the ODA/GNI ratio from 0.23% in 2004 to 0.27% in 2005. Commitment to the MDGs. In its strategies to address poverty, New Zealand pays particular attention to the rights of the poorest communities within partner countries. Considerable efforts are made to help communities fulfil basic needs, expand opportunities and reduce vulnerability to poverty. In a drive to better contribute to the fulfilment of the MDGs and support global commitments, New Zealand’s health and education policies have been re-targeted. New Zealand provides substantial assistance in the areas of governance, economic development and the environment, focusing on the long-term elimination of poverty.

In 2005 Norway’s net ODA increased 13.5% in real terms to reach USD 2.8 billion. This represented an ODA/GNI ratio of 0.94% compared to 0.87% in 2004. Commitment to the MDGs. Norway’s development programme focuses on sectors that are crucial to achieving the MDGs. The 2004 White Paper, “Fighting Poverty Together”, called for a reform of the international framework conditions, notably those governing trade and debt; improved governance in developing countries; more ODA and better harmonised development co-operation efforts; and the mobilisation of the private sector and civil society organisations. Norway actively participates in international fora in which it seeks to promote awareness of the MDGs, review progress made and identify ways to overcome obstacles to their achievement. In 2005, 39% of Norwegian bilateral ODA was allocated to LDCs.

In 2005 Portugal’s net ODA came to USD 377 million. This represents a decrease in real terms over 2004 of 64.1% due to the exceptional debt relief for Angola that year. The ODA/GNI ratio also fell from 0.63% to 0.21%. Commitment to the MDGs. Portugal’s ODA focuses on the five Portuguese-speaking African countries and Timor-Leste, all of which are LDCs. In November 2005 the Council of Ministers approved a new strategy for development co-operation which makes commitment to the MDGs one of its five guiding principles. Specific steps and a calendar to reinforce the integration of poverty reduction throughout Portugal’s development co-operation programme have since been adopted.

In 2005 Spain’s net ODA increased 19.5% in real terms to reach USD 3.0 billion. This represents 0.27% of its GNI compared to 0.24% in 2004. Commitment to the MDGs. Spain launched its second Master Plan for International Co-operation (2005-08) which is closely linked to the MDGs. Under its new planning and programming process, the Spanish Government is about to finalise five sectoral strategies in support of the MDGs. They focus on indigenous people, health, education, gender and culture and development. Strategies on governance, food security, humanitarian action, conflict, security and peace and the environment were due to be completed by the end of 2006.

In 2005 Sweden’s net ODA represented USD 3.4 billion, an increase of 24.1% in real terms over 2004. The ODA/GNI ratio reached 0.94% compared to 0.78% in 2004. Commitment to the MDGs. As specified in “Sweden’s Policy for Global Development” the MDGs are a special objective of Swedish national policy. The 2004 report “Making it Happen” inventories an array of actions already taken, including the launching of a major MDG public awareness campaign. Sweden supports international donor MDG reporting and is one of the few industrialised countries to fulfil its MDG reporting requirements to the UN. The results of Swedish development co-operation will be included as part of MDG-8 reporting, as well as periodic collaborative assessments of the impact of aid on poverty.

In 2005 Switzerland’s net ODA increased by 13.7% in real terms over 2004 to reach USD 1.8 billion. This represents an increase in the ODA/GNI ratio from 0.41% in 2004 to 0.44% in 2005. Commitment to the MDGs. Switzerland has made poverty reduction one of the five strategic goals of its foreign policy and considers the MDGs and the Millennium Declaration as development policy milestones. Both the Swiss Agency for Development Co-operation (SDC) and the State Secretariat for Economic Affairs (seco) have made poverty reduction a main objective of their respective strategies and address poverty with different, yet complementary, approaches and tools. Switzerland’s commitment in favour of the MDGs was reiterated by the Federal Council (government) in its report “Millennium Development Goals: Progress Report of Switzerland 2005” and at the September 2005 “High level Plenary Meeting of the General Assembly” (M + 5 Summit).

In 2005 the United Kingdom’s net ODA reached USD 10.8 billion, representing an increase in real terms of 35% over 2004. The ODA/GNI ratio rose from 0.36% in 2004 to 0.47% in 2005. Commitment to the MDGs. With respect to international development, the United Kingdom’s aim is to eliminate extreme poverty by 2015, as prescribed by the MDGs. Progress towards the MDGs is tracked by way of the Department for International Development’s (DFID) Public Service Agreement. DFID concentrates its resources on the poorest countries, particularly in sub-Saharan African and South Asia and is increasing its assistance to fragile and under-aided states.

In 2005 US net ODA volume increased by 36.5% in real terms to USD 27.6 billion. The ODA/GNI ratio also rose from 0.17% to 0.22%, its highest level since 1986. Commitment to the MDGs. The United States subscribes to the Millennium Development challenge of halving extreme poverty by 2015. USAID strategic objectives (economic growth, agriculture and trade; global health; democracy, conflict prevention and humanitarian assistance) are seen as essential to sustainable poverty reduction and meeting the MDGs, although the MDG targets are not used operationally in the programming system of either USAID or the Millennium Challenge Corporation (MCC). MCC considers economic growth to be of vital importance in the fight to achieve poverty reduction, whereas the United States on the whole considers private sector-led growth to be capital.

The DAC brings together the major OECD aid donors. But other donors, both within and outside the OECD, are playing an increasing role in development co-operation. MDG-8 calls for a global partnership for development. At the same time, there is limited information on non-DAC donorship and often a lack of co-ordination with the traditional donor community. Over 2006 the DAC has undertaken to address this shortcoming by expanding its dialogue with non-DAC donors as partners in development co-operation.

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. The DAC holds an annual High Level Meeting in which participants are ministers or heads of aid agencies. Once a year, a Senior Level Meeting is also convened at the OECD to review the Committee’s work on current policy issues. Ordinary DAC meetings are attended by Paris-based delegates of DAC members and by officials from member capitals.