TWN Briefings for WSSD No.8

Comments on the ODA Issue in the WSSD Draft Plan

By Goh Chien Yen

The draft Implementation Plan being discussed in Johannesburg contains important paragraphs (75-79) on financing and on ODA.  This is a comment on the paragraphs.

Comment on Para 76

Para 76 deals with ODA, containing 3 alternatives.

In terms of substantive content there are marginal differences between the formulations to para 76. The debate is over the intensity of the language on the commitments to make good the pledges made at Monterrey to increase ODA and morally holding the developed countries to the formal and political target of 0.7%.

The main controversy to para 76 is over the increase in ODA pledged by the US government at the Monterrey Summit. The US delegation objects to any reference in the Plan of Action to their pledge. The US has tried to argue during the Bali PrepCom that they have never linked their ODA increase with the International Conference on Financing for Development. Moreover, the plan to increase US’s ODA has to be approved by their Congress before it can be referred to by the WSSD text.

The first point is simply counter-factual. The pledge to increase US ODA was announced at the UN Conference on Financing for Development by President Bush when he presented his official statement there on 22 March 2002. Similarly, Alan P. Larson, US Under Secretary of State for Economic, Business and Agricultural Affairs held a press conference for this very purpose during the FfD Conference. The announcement is made by the Head of State, who has the apparent authority to make such an international commitment. The United States is therefore bound by the representation to act in good faith to make available the pledge made. Whether this succeeds or fails within their own domestic process is a separate question. The President of the US has the ostensible authority and has made a prima facie commitment on behalf of his country. Furthermore, he was neither contradicted by any member of his administration nor the Congress after he made his announcement both in the US and Mexico. Furthermore, if the executive arm of a government takes decisions on international policy and without due considerations to the laws and processes at the national level, it will leave multilateralism a hollow and futile exercise.

This should not distract us from the more fundamental problems concerning ODA. First, despite the announced increases, aid remains woefully inadequate. The UN and World Bank have estimated that aid has to be approximately increased by an additional US$40-60 billion per year in order to achieve the Millennium Development Goals (MDGs) by the internationally agreed deadline of 2015. The total increase in aid promised by the EU and US would only add up to US$12 billion, starting only from the year 2007. Even then, it is unclear that the financial resources would be forthcoming. Already at this early stage the US is refusing to internationally commit itself to live up to the pledge made at Monterrey. With a handful of exceptions, the developed countries have also consistently failed to deliver on their obligations of 0.7%.

Second, while ODA has declined steadily over the last 20 years reaching its lowest this year, the number of conditions attached to the aid has grown exponentially. More worrying, there is the growing convergence among the donors to impose structural adjustment type conditionality on the recipient countries. Take for example, the additional US ODA, which is to be tied to the policy conditions of deepening market liberalization and expanding the role of the private sector. This contradicts the current understanding that genuine country ownership of any program is key to reforms that would benefit the poor.

Comment on Para 76 (bis)

76(bis). [The Secretary-General of the United Nations is invited to monitor and report regularly on ODA commitments and pledges in order to ensure a higher degree of predictability, transparency and long-term planning.]

Given the historical lack of accountability on ODA delivery and the asymmetrical relationship between donor and recipient mentioned above, para 76 (bis) is much welcome. 

Expectedly this is opposed by the developed countries on the facetious ground that such monitoring is extant and is undertaken by the OECD, in other words by themselves.

Comment on Para 77

77. Encourage recipient and donor countries, as well as international institutions, to make ODA more efficient and effective for [poverty eradication, sustained economic growth and sustainable development. In this regard intensify the efforts to make ODA disbursement and delivery more responsive to the needs of developing countries taking into account the outcomes of the International Conference on Financing for Development].

77(alt.). Encourage recipient and donor countries, as well as international institutions, to make ODA more efficient and effective. [In this regard, intensify efforts to make ODA disbursement and delivery more flexible, enhance the absorptive capacity and financial management of recipient countries to utilize aid, promote the use of ODA to leverage additional financing for development, improve ODA targeting to the poor and use country owned poverty reduction strategies, including PRSPs for aid delivery, and consider measures aimed at further untying aid, in accordance with the Monterrey Consensus.]

77(alt2). Encourage recipient and donor countries, as well as international institutions, [to strive]to make ODA more efficient and effective. [In this regard, intensify efforts to make ODA disbursement and delivery for poverty eradication, sustained economic growth and environmental protection, taking into account the needs of the developing countries and objectives under the ownership of recipient countries.]

Between the three formulations, para 77(alt) is the most problematic. It is unclear what is entailed with regards to ‘enhancing the absorptive capacity and financial management’ and could be readily interpreted as further conditions for financial reforms and externally imposed constraints on the setting of national budgets. Second, the usage of ODA for attracting ‘additional finance’ while an attractive sounding idea, under current neoliberal economic climate would provide the case for deeper financial liberalization and privatization. Finally, the endorsement of PRSPs is premature and unnecessary. By the IFIs’ own admission, it is too early to make a decisive assessment as to whether PRSPs have been beneficial. As a matter of fact, independent reviews by the UN agencies and NGOs on PRSPs show clearly that they have not lived up to their stated objectives. Para 77.(alt.2) is the best formulation of the three. It is basically the same as para 77 except that it mentions explicitly mentions the ‘ownership of recipient countries’.