Setting the Record Straight on ODA

By Doug Frantz, Deputy Secretary-General, OECD 

Doug FrantzThere will never be enough development aid to solve all the problems in the poorest countries. If we are to lift the last 800 million people out of extreme poverty we will need to find new ways to mobilize resources beyond the traditional assistance from wealthy governments in the form of loans, grants and other concessions.

Government assistance remains vital. The billions of dollars donor countries pour into developing countries every year are critical both in terms of actual aid and as a catalyst for mobilizing private sector funds and underpinning the efforts of developing country governments and civil society. Yet there is a consensus that the role of development aid must adapt to changes in the geography of poverty and to the new lens of the Sustainable Development Goals.

Change is hard for many people – and organizations – to accept. This is particularly true when the waters are muddied by misunderstandings, even among well-meaning people, and when the stakes are so high. So it is essential to set the record straight on the changes taking place around development aid and the reasons for them.

The global standard for measuring the financial help provided by donor countries to support development is Official Development Assistance. ODA, as it is called in development circles, has provided both an essential measure of the volume of assistance and a means for civil society and others to assess performance.

For more than 50 years, the task of keeping track of ODA and making it effective has been the province of the Organization for Economic Cooperation and Development, an intergovernmental agency comprised of 34 developed countries. Within the OECD, the work has been conducted by the organization’s Development Assistance Committee.

In February, development and finance ministers from the countries that belong to this committee took a series of long overdue steps to improve the consistency of reporting on aid and strengthen development effectiveness. They addressed difficult issues such as the need to define more clearly the limited use of ODA for military expenditure and human rights, including the need to prevent sexual violence in fragile and conflict situations. And they took steps to clarify how ODA can be used to help refugees within the borders of donor nations.

Some non-governmental organizations deeply committed to development were alarmed. They worried that this would open up the use of ODA to pay the soaring costs of the millions of refugees who have made their way to Europe, or to finance military activity.

In sum, a handful of well-intended organizations feared these changes would mean less money for the most vulnerable and marginalized people around the world. The concerns are misplaced. If they are allowed to persist and expand, the misinformation could undermine support for development aid at a time when public backing is needed desperately.

The most-debated change by the OECD committee involved the use of ODA to support certain peace and security operations. The rationale for the decisions made was straightforward: in limited circumstances, the military has a role to play, for instance by training partner military members to curb abuses, such as violence against women, or by improving the speed and effectiveness of responses to humanitarian crises. The change was driven by the recognition that failing to address these issues can make development harder – or impossible.

The new directive also spelled out that certain, very limited activities intended to prevent violent extremism, like education and research and building judicial capacity and rule of law, could also qualify as ODA.

Equally important to understanding the new rules is recognizing what did not change. Long-standing prohibitions against using development assistance to finance military equipment or promote the donor’s security interests remain in place. Financing activities combatting terrorism is generally excluded from official assistance.

And there was no change to the rule that prevents the cost of hosting and processing refugees being counted as ODA beyond the first year of a refugee’s stay. The committee understood the pressure that millions of refugees have placed on governments, but it stood firm against allowing aid to be used to pay the costs for longer than a year.

Aid spent on refugees in host countries more than doubled in 2015 to $12 billion out of net ODA of $131.6 billion. Yet even with these refugee costs subtracted, ODA rose 1.7% in real terms from 2014.

The outcome of the conflicts driving migration and destabilizing economies will not be decided on the battlefield. The outcome will be determined in classrooms, workplaces, government offices and in the perceptions and beliefs of individual people.

Government assistance won’t solve all of these problems. But delivered smartly, development assistance has a vital role to play in building a safer, more stable world. In order to fulfil that role, development assistance must evolve to turn today’s challenges into tomorrow’s opportunities.

Doug Frantz is OECD Deputy Secretary-General overseeing development and communications

This article first appeared in The Huffington Post on 16 June , 2016:

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