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The new OECD framework on financing for sustainable development

The new OECD framework on financing for sustainable development. By José Antonio Alonso. ODA: definition. Official flows provided by donors to countries and territories on DAC list of recipients and multilateral development institutions:

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The new OECD framework on financing for sustainable development

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  1. The new OECD frameworkonfinancingforsustainabledevelopment By José Antonio Alonso

  2. ODA: definition Official flows provided by donors to countries and territories on DAC list of recipients and multilateral development institutions: • Administered with the promotion of economic development and welfare of developing countries as its main objective • Concessional in character (the threshold was traditionally defined in 25% with a discount rate of 10%)

  3. Recentchanges 1 • Fromfacevaluesto “grantequivalent” • Thresholds of concessionality and discountratehaveadaptedtorecipientcountries´ levels of income • For bilateral loans to the official sector this implies a grant element of at least: • 45 % - LDCs and other LICs (d.r. 9 %) • 15 % - LMICs (d.r. 7 %) • 10 % - UMICs (d.r. 6 %)

  4. Recentchanges 2 • 2.- The 2016 HLM, OECD/DAC agreedtomodernizethe ODA reportingdirectivesonpeace and secutityexpenditures • 3.- DAC reviewedcriteriaforregisteringinternalexpendituresrelatedtothesettlement of refugees (duringtheirfirstyear)

  5. Recentchanges 3 • 4.- Instruments forprivate sector: the 2016 HLM OECD/DAC decidedthattheconcessionalofficialsupport in providingprivate sector instruments (PSIs) shouldbecounted as ODA, whiletheflowsthemselvesshouldbecounted as TOSSD. • Theretwomainagreements: • Twoapproaches are admitted: a) institutional-specific; b) instruments-specific • Tobecounted as ODA, PSIsneedtohavedevelopment of recipientcountries as primaryobjective and toprovidefinancethatisadditionaltoexistingflows • Thereis a debate aroundthecriteriaforregistering PSI: i) Whattomeasure (facial flowsorgrantequivalent); ii) howshouldthegrantequivalentbecalculated?; iii) should a threshold of concesionalityberequired? • Equityinvestment: Exanteorexpostgrantequivalent? • Exportcredits: Shouldbecounted as ODA? • Guarantees: Shouldbecounted as ODA? How?

  6. Tworemarks • Theprocessseemstobepromotedbythedonorsattempttoexpandtheperimeter of ODA (particularly in the case of themeasures in support of theprivate sector) sometimes at thecosts of looseningconstitutivecriteria of ODA • Thereis a significantdeficit of transparency in theprocess, whichmakesdifficultforrecipientcountriesor civil societytoparticipate in thediscussion

  7. TOSSD WORKING DEFINITION Total Official Support for Sustainable Development includes all officially supported resource flows to promote sustainable development at developing country, regional and global levels with the majority of benefits destined for developing countries, including those resources that support development enablers or address global challenges.

  8. TOSSD: A largerpurpose Largerpurpose All providers of development finance Broader motivations

  9. Twoperspectiveformeasuring • Providersperspective: allresources, including in donorexpenditures and resourcesforsupportingdevelopmentenablers and global challenges (thatprobably are nottransferedtodevelopingcountries) • Recipientsperspective: onlythoseresourcesthat are effectivelytransferedtodevelopingcountries • Thesetwoperspectives are notequivalent

  10. Otherdifferencesbetween ODA and TOSSD Framework for monitoring the MoI of the 2030 Agenda Largervolumes Flows vs. Grant Equivalent

  11. Regardingprivatefunds • TOSSD tries toregisterthemobilizationeffect (directly and indirectly) of officialinterventions (privateresourcesmobilizedbyofficialsupport) • Thisis in line withthepurpose of usingofficialfunds as a mean formobilizing (orleveraging) privateresources • Itisdifficulttounderstandwhyprivateresourcesshouldbecounted in a categorythatisnamed Total OfficialSupport

  12. Twoadditionalproblems • Transparency and participation: thelevel of participation of recipientcountries, new providers and NGOs in theprocess of defining TOSSD has beenlow • Governance: ifallproviders are tobeconsidered, thegovernanceplattformshouldbe moved fromthe OECD to a more inclusive forum (ECOSOC)

  13. Nextsteps • An Informal TaskForceisgoingtobeestablished in March 2017 • In 2018 a firstdrafton TOSSD reportingprocedureswillbeproduced and presented at the UN StatisticalCommission • At theend of 2018 a seconddrafton TOSSD reportingprocedureswillbepresented • In 2019 data on TOSSD willbecollected and presented at the HLPF

  14. Someremarks • Eveniftheprocess of reviewingtheframework of develpmentfinancingisjustified, theproposal of TOSSD isdeceptive: • Ifitwantstobringtogetherallproviders, importantactorshavenotbeeninvolved in theprocess • Ifitwantstoimprovetransparency of developmentcooperationproviders, mergingsources in a single concept isnotthebestsolution • Ifitwantstofacilitatedevelopingcontriestoclearlyknowtheirsources of financing, thedistinctionbetweenprovider and recipientperspectives (counting in-donorexpenditures) isquestionable

  15. CDP in 2016 • Threeelementswereincorporated in ourreport • 1:- Allresourcescounted as DC shouldbeorientedtopromotethe 2030 Agenda and in accordancewithcountries´ priorities • 2.- Onlycross-borderstransfersshouldbecounted (not in-donorsexpenditures) • 3.- Private and publicresourcesshouldbecountedseparadly

  16. CDP in 2017 • Shouldthe CDP expressthedesiretobeinvolved in theprocess? • The CDP shouldremindthatthemainpurpose of theprocessisnottoaplytheprinciple of “the more thebetter” in terms of resourcescounted, buttoincreasethelevel of transparency and accountability of theproviders, and tofacilitatedevolpingcountries a more clearvisionabouttheirdevelopmentfinancingsources. In thatsensewecould: • Defendthatonlyoneapproach (therecipientperspective) shouldbemaintained • Declare thatevenifunderstandablethatdonorswanttoknowtheircontributionto global challenges (and in-donorcosts), thisshouldberegisterseparately • In thesame line, evenifunderstandablethatdonorswanttoknowprivateresourcesmobilizedbyofficialfunds, thisshouldbecountedseparately. • Confirm thatit is not clear why this approach should lead us to a new measure of development cooperation rather than a clarification and better measurement of the different areas of development finance (beyond ODA) separately considered • Reiterate that ECOC should be involved in the process (perhaps with the technical contribution by the OECD)

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