By Jorge Moreira da Silva, Director, OECD Development Co-operation Directorate and Lamia Kamal-Chaoui, Director, Centre for Entrepreneurship, SMEs, Regions and Cities (CFE)
All too often international aid is viewed through the traditional lens of nation states. A rich-poor relationship of a developed country providing a one-way flow of financial assistance to a developing country to address crucial development issues, whether they are societal, economic or environmental in nature. However, the impact of these problems is acutely felt at the local level and requires global collaborative responses at the subnational level. Decentralised development co-operation (DDC) – the exchange of resources between subnational governments in developed and developing countries – offers a pragmatic and effective approach to addressing the most critical issues and to achieving the sustainable development goals.
Following the onset of the Syrian crisis, Lebanon has had to provide adequate housing and basic services to over one million refugees, or nearly 20% of the world’s total Syrian refugee population. At the forefront of this daunting task are municipalities, which in most instances critically lack the resources and funding to deliver.
Lebanese municipalities are not alone. The OECD estimates that at least 100 of the 169 Sustainable Development Goal (SDG) targets can only be achieved globally through involvement of subnational governments. Cities and regions across developing countries face such tremendous financing and expertise constraints that it seems an almost impossible task. What is more, fast population growth, decentralisation, urbanisation and new trade patterns are further widening the gaps between their responsibilities in delivering public services and their very limited financial and technical resources. The municipal financing gap in Africa alone is estimated at USD 25 billion per year.
And yet, international aid, a crucial source of financing in many developing countries, remains overwhelmingly channelled through central governments. Only USD 1.87 billion or 1.3% of total bilateral official development assistance (ODA) is provided in support of cities and regions in developing countries. How can governments ensure that support is reaching the cities and regions that need it most?
One potential form of partnership, that can help deliver the SDGs at a local level, is gaining traction: decentralised development co-operation.
Cities and regions in OECD countries have great, largely untapped potential to support the achievement of the SDGs globally. Among OECD countries, subnational governments are responsible for 57% of all public investments. These are mostly related to infrastructure for basic services, for which cities and regions have core competences, such as education, health, social infrastructure, drinking water, sanitation, solid waste management, transport, and housing. Beyond social and economic areas, subnational governments are increasingly in charge of environmental and climate-related public spending (55%) and public investment (64%). The state of California is the world’s 5th largest economy and increasingly conducts international relations to help combat climate change. The transition to a low-carbon economy is one typical area where developed and developing countries alike share common challenges.
These experiences and resources could be used for development co-operation. Already 70% of cities worldwide engage in peer-to-peer exchanges, including cross-border partnerships and technical exchanges. This critical transfer of knowledge and experience can profoundly help cities in the developing world apply tried and tested policy solutions to the problems they are facing without having to reinvent the policy wheel.
While decentralised development co-operation (DDC) can deliver local solutions to local problems, it is no magic bullet. Longstanding challenges related to transparency and accountability threaten the legitimacy of the approach.
How to unlock DDC’s potential? Overcoming DDC’s past failures requires a renewed effort to deliver development that is value-added, impact-driven and aligned to local priorities. The OECD has identified three key steps to make the most of DDC as a driver for implementing the SDGs:
- Address the data challenge. With fewer than half of the OECD Development Assistance Committee (DAC) members reporting on aid provided by cities and regions, a serious knowledge gap persists. To address this and raise awareness on Official development assistance (ODA) reporting among subnational governments, OECD DAC members such as Germany, Spain, Belgium and France are building efforts to share best practices and strategies. Several members have begun incorporating subnational reporting in OECD DAC statistical peer reviews.
- Promote better adapted subnational capacity and resource exchange. Subnational partnerships are often co-financed by the national government, yet they are not always aligned with local needs. How can national governments help to promote demand-driven and mutually beneficial partnerships? One solution, hosted by the EU Committee of Regions, is a “stock exchange” initiative that acts as a matchmaker, pooling and exporting subnational resources, where needs are greatest. This includes South-South and triangular co-operation. A structured assessment of the kinds of technical assistance exchanged and the incentives for engaging in partnerships could build on findings from city networks such as United Cities and Local Governments (UCLG), Platforma, C40 or the Council of European Municipalities and Regions (CEMR) that have long sought to improve the co-ordination of technical assistance exchange at subnational levels.
- Co-ordinate across levels of government. To ensure that subnational action does not reverse national progress or vice versa, multi-level and multi-stakeholder engagement is necessary. The Voluntary National Review (VNR) process serves as an important tool to engage sub-national governments in the reporting of DDC activities contributing to the SDGs. To improve the effectiveness of ODA, national and sub-national governments should work together on SDG progress reviews.
Unless solutions are identified to fill the growing local financing needs of cities and regions in developing countries, the international community will fall short of its 2030 Agenda commitments. Our efforts to unlock the potential of cities and regions continued today at the Second Roundtable of Cities and Regions for Sustainable Development in Bonn, but it certainly does not end here.
Read more about the three steps to unlocking the potential of Decentralised Development Co-operation in the OECD’s report:
- OECD (2019), Decentralised Development Co-operation: unlocking the potential of cities and regions, OECD Publishing, Paris https://doi.org/10.1787/e9703003-en
- OECD (2018), Reshaping Decentralised Development Co-operation: The Key Role of Cities and Regions for the 2030 Agenda, OECD Publishing, Paris, https://doi.org/10.1787/9789264302914-en.