Definition and administration of ODA inquiry written evidence

Author: Jie Sheng Li, Adjunct Research Analyst

PhD (Birmingham), Mphil (Cambridge), BSc (Birmingham)

Summary:

In this written evidence, I submit answers to the various questions set out by the International Development Committee, presenting my answers based on my own academic and practical experience.

In particular,

a) I present the background to ODA;

b) the changing nature of international development;

c) the historical background to the 0.7.% aid target and its usefulness and

d) the weak monitoring and evaluation of ODA via other government departments.

The majority of sources and references here are open-source.

Introduction

Official Development Assistance (ODA), commonly but erroneously known as foreign aid in the media and the lay person, is defined by the Organisation for Economic Cooperation and Development (OECD) as:

              [financial aid]… to countries and territories on the DAC List of ODA Recipients… and to multilateral development institutions which are:

i. provided by official agencies, including state and local governments, or by their executive agencies; and

ii. each transaction of which:

a) is administered with the promotion of the economic development and welfare of developing countries as its main

objective; and

b) is concessional in character and conveys a grant element of at least 25 per cent (calculated at a rate of discount of 10 percent.[1]

This definition excludes:

Military aid - The supply of military equipment and services, and the forgiveness of debts incurred for military purposes, are not reportable as ODA. On the other hand, additional costs incurred for the use of the donor’s military forces to deliver humanitarian aid or perform development services are ODA-eligible.

Peacekeeping [Operations] - The enforcement aspects of peacekeeping are not reportable as ODA. However, ODA does include the net bilateral costs to donors of carrying out the following activities within UN-administered or UN-approved peace operations:

human rights, election monitoring, rehabilitation of demobilised soldiers and of national infrastructure, monitoring and training of administrators, including customs and police officers, advice on economic stabilisation, repatriation and demobilisation of soldiers, weapons disposal and mine removal. (Net bilateral costs means the extra costs of assigning personnel to these

activities, net of the costs of stationing them at home, and of any compensation received from the UN.) Similar activities

conducted for developmental reasons outside UN peace operations are also reportable as ODA, but not recorded against the

peacekeeping code. Activities carried out for non-developmental reasons, e.g. mine clearance to allow military training,

are not reportable as ODA.

Civil police work - Expenditure on police training is reportable as ODA, unless the training relates to paramilitary functions

such as counter-insurgency work or intelligence gathering on terrorism. The supply of the donor’s police services to control

civil disobedience is not reportable.

Social and cultural programmes - As with police work, a distinction is drawn between building developing countries’ capacity (ODA-eligible) and one-off interventions (not ODA-eligible). Thus, the promotion of museums, libraries, art and music schools, and sports training facilities and venues counts as ODA, whereas sponsoring concert tours or athletes’ travel costs does not. Cultural programmes in developing countries whose main purpose is to promote the culture or values of the donor are not reportable as ODA.

Assistance to refugees - Assistance to refugees in developing countries is reportable as ODA. Temporary assistance to refugees from developing countries arriving in donor countries is reportable as ODA during the first 12 months of stay, and all costs associated with eventual repatriation to the developing country of origin are also reportable.

Nuclear energy - The peaceful use of nuclear energy, including construction of nuclear power plants, nuclear safety and the medical use of radioisotopes, is ODA-eligible. Military applications of nuclear energy and nuclear non-proliferation activities are not.

Research - Only research directly and primarily relevant to the problems of developing countries may be counted as ODA. This includes research into tropical diseases and developing crops designed for developing country conditions. The costs may still be counted as ODA if the research is carried out in a developed country.

Anti-Terrorism - Activities combatting terrorism are not reportable as ODA, as they generally target perceived threats to donor, as much as to recipient countries, rather than focusing on the economic and social development of the recipient.

The UK’s proposed changes to OECD/DAC rules on ODA

1.                 Is the Government right to seek changes to the OECD’s definition of Official Development Assistance (ODA)?
2.                 What is your response to the Secretary of State’s evidence to us on the areas where the UK is seeking changes:
   o small island states
   o climate change
   o resilience issues
   o transparency
   o gender equality, and
   o peacekeeping?

I shall answer 1) and 2) together. There is no distinctive right or wrong for changes to the definition of ODA. The government as far back as 2010 has already produced policy to shift the ODA budget. The 2010 Strategic Defence and Security Review (SDSR) aimed to have 30% of UK ODA spent in fragile states, states which cross the ODA definition especially in the area of anti-terrorism, refugee assistance military aid and peacekeeping.[2] This was further strengthened in the 2011 Building Stability Overseas Strategy (BSOS) guidance and the usage of then Conflict Pool to address conflict.[3] Conflict prevention was further heighted in the 2015 SDSR as a Tier 1 threat and again, ODA was identified as the main tool in addressing conflict and fragile states.[4] This usage of aid to address conflict is crucial given that 1) the contemporary global environment has seen a rise in intra and inter-state conflict and 2) that alternatives to solving conflict including military intervention are not viable or politically unpopular. British ODA, especially bilateral ODA, is after all national foreign aid and thus can be used to advance the UK’s national interests and protect its national security.

Conversely, others may argue that this is an abuse of UK ODA. After all, DFID was created so that UK ODA would be used solely for the purpose of poverty reduction and international development, not for national interests.[5] More importantly, the usage of foreign aid for non-developmental purposes has been heavily criticised. For example, the Independent Commission for Aid Impact (ICAI) noted that 1) there was insufficient monitoring of how UK ODA was used in fragile states; 2) there needed to be more transparency over how the Conflict Pool and its successor, the Conflict, Stability and Security Fund (CSSF).[6] [7]

Therefore, it is a delicate balance on deciding which way the UK approaches the global community and which way UK ODA or perhaps aid is used. One should remember that while DFID is a cabinet department, it is the UK government which forms direction of foreign policy. Inasmuch as the UK is no longer in the pre-DFID period where aid was vastly for foreign policy and inasmuch as UK ODA is supposed to be for the purpose of international development, UK ODA is still UK-owned financial assistance aimed at other countries. It may be said that there is no clear overall UK national strategy, UK ODA will increasing be used for development and other international affairs-related issues where both are part of and complement each other.[8]

https://www.nao.org.uk/report/managing-the-official-development-assistance-target-a-report-on-progress/

https://www.devex.com/news/oda-redefined-what-you-need-to-know-87776

https://www.gov.uk/government/groups/national-security-council

https://www.gov.uk/government/publications/uk-aid-tackling-global-challenges-in-the-national-interest

https://publications.parliament.uk/pa/cm201011/cmselect/cmpubadm/713/713.pdf

3.                 What is your response to the decisions of the OECD’s Development Assistance Committee reported in the Secretary of State’s Written Statement (1 November, HCSW211):
   o establishment of processes for previous recipients of ODA to:
   a. re-admit them onto the ODA-eligible list if their per capita GNI falls low enough
   b. enable them to receive short-term ODA support in the event of catastrophic humanitarian crises even where their per capita GNI would normally rule them out 
   o changes that increase the amount of the UK’s contribution to UN peacekeeping that may be counted as ODA, and
   o changes that allow 85% of the UK’s contribution to the Asian Infrastructure Investment Bank to be counted as ODA?

For part a), this is more often than not, a World Bank International Development Association (IDA) decision and classification.[9] For b), that is a rather complex definition of ODA, inasmuch as that is increasingly called for in the aftermath of Hurricane Irma. The classification is not up to the UK or any OECD-DAC to simply change, although they can loosely call it ‘foreign aid’ or ‘aid’ in their own terminology. In such cases, it is best to classify them under Other Official Flows (OOFs) and represent under non-DFID funding, most likely under the CSSF. The UK may classify its contributions to the Asian Infrastructure Investment Bank (AIIB), again only such financial flows fall under the ODA definition.[10] With regards to any change in in the definition of ODA, do see these articles: Center for Global Development’s The End of ODA[11] and Overseas Development Institute’s Should the definition of aid be changed (again)?[12]

4.                 Should humanitarian assistance/disaster relief always count as ODA, even if the recipient country/territory is High Income?

DFID has sent aid to natural disasters in high-income countries such as in the aftermath of the earthquake in Japan in 2011.[13] However, a search across the 2011/2012 UK Statistics on International Development indicates that UK ODA was not disbursed to Japan.[14] This may indicate that DFID’s financial contributions were placed within a non-ODA fund, perhaps the then Conflict Pool—one will have to ask a FOIA for this. Coming back to the answer, I believe the UK, post 1997, has adopted a moralistic foreign policy, aiming to assist any country affected by natural disasters when they can.[15] It will be quite imaginative if such financial efforts to be counted as ODA—see my reply to question 3—without criticism from the OECD, the OECD-DAC, the United Nations and the wider international development community,

5.                 Should donors be allowed to direct ODA to poverty-stricken regions and communities within high income countries?

They already do so. DFID works in poorer regions in India, despite India not being classified as a low-income country and having ‘graduated’ from the list of IDA recipients.[16] Such activity does not contravene OECD-DAC rules.

6.                 If the UK is unsuccessful in persuading the OECD to redefine ODA, what should the Government do?
7.                 Do you think changing the law to allow the UK to use its own definition of development spending when accounting for performance against its 0.7% per cent target is justifiable?

I shall answer 6) and 7) together. No, this would prompt the OECD or OEC-DAC to remove the UK as a OECD-DAC member and isolate it from most of the international aid community, excluding non-DAC members and new donors. If the UK is unsuccessful, and there is no current news for any change in the definition of ODA, the UK will most likely disburse aid based on the definition set out by the OECD-DAC. This is based on my observation

8.                 What are the prospects for other members of the OECD/DAC agreeing with the UK’s proposals for rule changes?

I believe all OECD-DAC member states wish to have more latitude over ODA definitions and provisions, and several, including the US in particular, have long ‘violated’ the ODA definition. However, the OECD or OECD-DAC as a whole will remain as the main organ—it is not a multilateral or international organisation by definition/per se—for defining what is ODA. Any changes will be made in unison by OECD-DAC members but definitely slowly.

9.                 What mechanisms do other OECD/DAC members have for encouraging their own compliance with, or progress towards, the 0.7% target? Does any other DAC member have a domestic statutory requirement to meet this target?

There are no formal ‘carrot-and-stick’ measures to ensure all OECD-DAC members meet the 0.7% target. This target originated in the 1970s and was adopted by the UN General Assembly in 1972.[17] This resolution, however, it not legally binding, although over the decades, OECD-DAC members and others have accepted it and tried to reach it.[18] The OECD-DAC’s Peer Reviews of each member state is perhaps main mechanism which influences OECD-DAC states to reach the 0.7% target.[19] Nevertheless, not all DAC members take note of the Peer Reviews. The USA, the largest ODA or foreign aid donor by volume, certainly does not. This is chiefly because US politicians and development practitioners a) do not believe in the economic value of the 0.7% target[20]  and b) the US political system is structured to prevent a focus on targets or statistical targets.[21]

Other donors such as Austria, Belgium, Canada, France, Italy, Korea, Australia and Luxembourg do have internal political mechanisms to meet aid volume targets or the 0.7% figure, although not all such mechanisms may be legally binding.[22] Other non-governmental organisations (NGOs) or think tanks such as The Reality of Aid publish reports urging donors to meet the target.[23] The 0.7% GNI target is a target but clearly not a realistic figure therefore not many donor states aspire to meet it.[24]

The administration of ODA by departments other than DFID

1.                 How effective is the ODA spent by DFID compared with that spent by other Departments?

2.                 How effective is the ODA spent by cross-government funds?

3.                 How well-targeted can other government departments’ (OGDs), or cross-government, ODA be towards in terms of the principal aims of the UK Aid Strategy?

I shall answer 1), 2) and 3 together. The UK is still not an expert in ensure cross-government funds despite creating more of them. These include the Conflict Pool (now the CSSF), the Prosperity Fund[25], and research funds like the Global Challenges Research Fund (GCRF).[26] The UK does publish annual Statistics on International Development and in the recent few years, these statistics provide an overview on ODA disbursement by other government departments and agencies.[27] Cabinet-level departments like the Foreign Office (FCO) have also release their ODA disbursements[28], while the Ministry of Defence (MOD) did so in a FOIA answer. [29] ICAI published an evaluation on these non-DFID ODA flows, recommending that these departments provide more details on their ODA activities in the annual statistics. There is no clear indication when non-DFID departments should spend ODA and when DFID should spend ODA.[30] All this said, the UK is one of the most transparent donors revealing its ODA and non-ODA flows.

4.                 What level of oversight and/or influence should DFID have over ODA spend by other Departments?

None, but DFID should set the example for transparency and accountability of funds.

5.                 Should DFID be solely responsible, and accountable, for all UK ODA spending?

Quite simply, it will be impossible for a major G7 country the size of the UK to allocate aid under one department, even though DFID was formed to do so. This is especially the case in a world where conflict is complementary or equal to international development issues. Furthermore, the continued adherence to the 0.7% target has made parliamentarians call for ODA to also fund development-related activities in other departments, primarily the MOD.[31]

http://www.international-alert.org/ar/blog/development-aid-and-peacekeeping-what-can-money-be-spent-0

6.                 How effective is the current system of scrutiny of ODA spent by departments other than DFID, including by the Independent Commission for Aid Impact?

ICAI does not spend ODA; it monitors ODA and reports directly to the House of Commons International Development Committee.[32]

2855 words (including questions)

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