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AidWatch methodology. Sofia - 18 June 2012. The inflated aid methodology until today. AidWatch recognise so called „ genuine aid “ which is firmly focused on the eradication of poverty and improving the lives of poor people in the developing countries.
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AidWatch methodology Sofia - 18 June 2012
The inflated aid methodology until today • AidWatchrecognise so called „genuine aid“ which is firmly focused on the eradication of poverty and improving the lives of poor people in the developing countries. • „Inflated aid“ is aid that does not amount to a real transfer of resources to partner countries and is difficult to link to clear development results. • EU donors inflate their reported aid figures with debt cancellation as well as student and refugee costsin donor countries Sofia - 18 June 2012
Imputed Student costs • BACKGROUND - Donors may include in their figures pubic resources they spend on students from developing countries studying in their own country. However there is no guarantee that students supported will return to their countries and contribute to the country’s development process. In addition, there is limited transparency how they calculate and report on these figures. • Method - DAC OECD recognises two categories: scholarships and imputed student costs. AidWatch discounts only student costs. Sofia - 18 June 2012
Refugee costs BACKGROUND - Resources spent in the donor country on supporting refugees from developing countries during their first twelve moths of their stay. Reporting varies widely across donors. As a result of these practices differences in the costs per refugees differ widely across DAC donors – from USD 337 in Japan to USD 32,596 for Belgium. METHOD - AidWatch discounts all refugee costs. Sofia - 18 June 2012
Debt Relief BACKGROUND- We recognise that debt relief is important to developing countries. However we do not consider it as genuine aid for number of reasons: Does not free up resources in countries budget to spend on development; Donors can report relief of debts that did not have a development purpose; Donors have committed in Monterrey (2002) to ensure that debt relief will be provided additional to aid. METHOD- AidWatch discounts all debt relief. Sofia - 18 June 2012
Time to update the inflated aid methodology? • Financial and Economic crises • Threat to ODA definition: Whole of the country approach, Development Related finances • But AidWatch Report has kept old methodology; raise questions about other issues but have not researched systematically or put data to them; limited attention • It is time for AidWatch to catch up and present methodology that is leading the debate Sofia - 18 June 2012
Main challenges • Is there a case for categorising as inflated strong; is there consensus in AidWatch? • Is there a strong methodology for analysing its contribution to inflated aid? Is sufficient data available? • Might need more disaggregated data which is published later? We are not an academic institution, we want to have political impact so we need data on time • Is it relevant / possible to address for both EU-15 and EU-12? • Are the (national and EU) politics right to add this issue? Sofia - 18 June 2012
Proposals to update the current methodology • Discounting loans • Discounting tied aid • Discounting technical cooperation • Taking into account additionality requirement of climate finance • Discounting securitized aid • Discounting aid to Upper Middle Income Countries (UMICs) • Discounting administrative costs Sofia - 18 June 2012
Not all proposals were equally feasible • The ones we will include in our updated methodology: • Interest on loans • Tied aid • Other elements we will take forward in the narrative of our analysis: • Technical cooperation • Taking into account additionality requirement of climate finance • Securitized aid Sofia - 18 June 2012
Tied aid BACKGROUND – tied aid is when donor requires to spend aid on goods and services from the donor country or a specific groups of countries, mainly to promote the business activities of their own companies. Tied aid limits the ability of developing counties to procure the goods and services that best meet their needs and makes them 15% to 40% more expensive. METHOD EU15 - Use OECD DCR data on “fully tied” and “partially tied” aid; fully tied discounted by 30%, partially tied by 15%. EU12 - not reporting tied aid and their aid is considered as tied aid and will be discounted by 30% unless they follow the below rules: The donor has made necessary changes in institutional and legislative establishment to allow foreign entities (also outside of the EU) to apply for ODA financing (either in form of grants or tenders). Tenders and grants are open to entities in partner countries and accessible in these countries (e.g. via internet). Documents and other information related to tenders and grants are available in English are accessible (e.g. via internet pages). Sofia - 18 June 2012
Interest on loans • BACKGROUND– loans are discounted from gross ODA to calculate the net ODA. However, interest payments by developing countries are not discounted even thou they reduce the level of resources available to developing countries. • METHOD – Fully discount interest paid on loans Sofia - 18 June 2012
Genuine Aid equation Genuine aid = Net ODA – refugees costs – students costs - debt relief - interest on loans - tied aid Sofia - 18 June 2012
Results of Genuine Aid Methodology on 2011 ODA levels Total EU aid: € 53 billion Genuine aid: € 45,65 billion Inflated aid: € 7,35 billion - debt relief € 2,43 billion - Refugee costs € 1,82 billion - Imputed student costs € 1,61 billion - Tied aid € 0,98 billion - Interest on loans € 0,51 billion Sofia - 18 June 2012
Results of Genuine Aid Methodology II Sofia - 18 June 2012
Results of Genuine Aid Methodology V Sofia - 18 June 2012
Results of Genuine Aid Methodology III Sofia - 18 June 2012
Results of Genuine Aid Methodology IV Sofia - 18 June 2012
Thank you for your attention Sofia - 18 June 2012
