Development challenge

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Aid is rising and major reforms are under way. But there is much more to be done, in particular to reach the Millennium Development Goals, as participants at this year’s High-Level Meeting of DAC* agreed. 

One of the oft-overlooked facts about the OECD is that its member countries handle over 90% of global bilateral development aid. The lion’s share of foreign direct investment also comes from the OECD area.

Add to this the fact that OECD members’ trade, agriculture, intellectual property and environment policies, to name but a few, have huge impacts on people all over the world. Add as well the fact that, for over 40 years, aid ministers and heads of aid agencies have gathered under the auspices of the Development Assistance Committee (DAC), the principal body through which the OECD deals with development assistance, and a picture of the organisation as an important player in global development begins to emerge.

Development is one of those vital policy areas, like trade and the environment, where action is fundamental, yet difficult to achieve on the ground. But daunting as our challenges are, there are signs of progress being made. We drew several significant conclusions at our High-Level Meeting, which took place this April.

The consensus reached and pledges made by most of our governments in Monterrey at the UN Financing for Development Summit in 2002 to boost our aid effort, remain the basis for decisions on aid budgets. We committed ourselves to honouring these pledges, while recognising that in spite of aid growth in 2002 and 2003, much more will be needed to tackle the Millennium Development Goals (MDGs) set for 2015 including reducing the percentage of people in poverty by half, cutting child and maternal mortality, and enrolling all girls and boys in school.

The increase in aid volume in 2003 was quite modest, although the rise of 11% in total over the last two years, after a decade of decline, takes total aid to a record level. While participants noted this increase, we underlined that much more will be needed to achieve the MDGs for 2015. Existing pledges imply a further rise in Official Development Assistance (ODA) of some 25% by 2006. Encouraging as this is, there is no room for complacency.

Standing by the Monterrey pledges might seem the least to expect in view of the development goals, but it is nonetheless a significant achievement at a time of budget strain in many member countries. It will be important for parliaments and the public to understand and support major rises in allocations for aid. The high-level leadership demonstrated at Monterrey must continue. We also agreed to make greater efforts to ensure the public is better informed about the development objectives for which their taxes are being sought, the progress being made and the stakes involved.

Historically high economic growth has lifted hundreds of millions out of poverty, particularly in Asia. Although growth rates of 5% per capita a year are occurring in some countries outside Asia, most have yet to generate the sustained growth needed to reduce poverty decisively.

Assistance to countries to support broadbased economic growth, as a basis for poverty reduction, can be improved. We examined the role of poverty reduction strategies and of aid in helping to boost growth rates. Trade is clearly important, and we stressed the need for progress on the Doha Development Round. We also recognised that aid for agriculture and infrastructure has been falling, yet most of the poor live in rural areas and poverty reduction requires a major increase in their productivity. Development agencies are rethinking their programmes in this light. The role of reforms to help markets work, facilitate use of information technology and to advance social conditions, and particularly empowering women and girls, all form part of this rethinking process.

Delivering more aid requires significant aid reforms, both to increase value for money and to allow development to take hold. We gave a further push to the concerted donor effort launched in Rome in 2003 on country ownership, donor alignment with country strategies, and harmonisation to reduce transaction costs. Bilateral and multilateral agencies, including the World Bank, the Regional Development Banks and the UN system, together with 14 developing countries, are working closely with the DAC to turn the agreed reform principles into practice. We agreed that a further phase of reform should be proposed for adoption at a Paris forum early in 2005.

These efforts can work. The way forward is shown by a recent effort in Bangladesh where 13 donors had 27 projects for primary education, disbursed through 33 special budget accounts. In 2003, donors forged a single sector-wide approach, aligned with the government’s poverty reduction strategy, with common financial arrangements, joint missions and only three budget accounts.

Stepping up to the challenge of security

Conflict kills the prospects for broad-based growth. Without security, in its broadest sense, the MDGs will not be attainable for millions of the poor. Development efforts, including many billions of dollars, can be wiped out by war or instability. Our governments now see security as a major challenge, and a prerequisite of development. The April High-Level Meeting launched a new phase in donor approaches to close the linkages. We endorsed a policy statement and good practices on Security System Reform to help developing countries address their public security systems overall, including the functioning of police and justice systems, civilian control of the armed forces, and protection of human rights. We recognised that helping to reform security systems has to be part of a coherent agenda shared across all relevant parts of our governments. This includes notably the military and foreign policy-makers, as well as development agencies.

We agreed that the credibility of the definition of ODA and the role of the DAC as its guardian must be maintained. ODA reporting guidelines relating to preventing the recruitment of child soldiers, enhancing civil society’s role in the security system, and civilian oversight and democratic control of the management of security expenditure were adjusted and clarified. And, with regard to aid provided by members to finance projects under the Clean Development Mechanism, we defined a new rule requiring that the value of any carbon credits acquired by donors should be deducted from ODA. This would ensure consistent reporting in ODA statistics. This will help us not only to define aid more clearly, but to improve its efficacy as well.

*Development Assistance Committee High-Level Meeting, 15-16 April 2004. For more information, including a full communiqué, please click here

©OECD Observer No 243, May 2004

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