When a promise is not a promise

For some of the poorest countries in the world, official development assistance (ODA) from the rich countries will be an important source of financing the post-2015 development agenda. However, almost 40 years after a UN General Assembly deadline for rich countries to provide a minimum of 0.7% of their gross national product in such aid, only five countries have fulfilled this target. An 'innovative' Dutch move may well result in the drying of such funds.  Roberto Bissio reports.

---

SINCE the end of colonialism in the mid-20th century, the commitment by advanced economies to contribute to a better future in the countries then called 'underdeveloped' has been one of the pillars of the precarious international architecture. The very Charter of the United Nations commits its members to 'take joint and separate action in cooperation with the Organisation' to achieve 'higher standards of living, full employment, and conditions of economic and social progress and development'.

In October 1970 the UN General Assembly decided, based on the calculations of the Dutch economist Jan Tinbergen (Nobel Prize winner in 1969) on how much investment would be needed to gradually close the gap between rich and poor countries, that 'Each economically advanced country will progressively increase its official development assistance (ODA) to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7% of its gross national product at market prices by the middle of the Decade.'

Almost 40 years after that deadline, only five countries (Denmark, Luxembourg, Norway, Sweden and the Netherlands) have fulfilled this promise which is repeated every year and at every international development conference. The United Kingdom will be added to the list in 2015, but by then the Netherlands will be out of it, as the country's new governing coalition plans to cut ODA to below 0.5% of GDP.

What's the value of a promise never fulfilled? To answer this question, the Dutch government presented to parliament on 14 February the results of a study by an inter-ministerial team. Significantly the team was chaired not by the Foreign Ministry, which oversees Dutch development cooperation, but by the Finance Ministry. The title of the report advances the conclusion: 'Towards a new definition of cooperation.' Since we cannot change the promise, change the terms of what we promised.

According to the current definition by the Development Assistance Committee (DAC) of the OECD, ODA comprises all flows by public institutions to developing countries included in the DAC list aimed at promoting wellbeing and economic development. If these take the forms of loans, not grants, then, in order to be listed as 'assistance', they should be 'soft' loans (at below-market interest rates) and contain a significant concessional component.

The study proposes five different alternatives to redefine aid, but they all have in common the inclusion of 'innovative financial instruments' in the definition and more lax rules on loans, so as to count as ODA credits currently excluded.

One proposed alternative is to exclude 'middle-income countries' completely from the list and concentrate cooperation, reduced to 0.25% of GDP, in the lowest-income countries. Another alternative put forward is to target this same percentage to the poorest countries and reach the 0.7% figure by counting as ODA all types of financial flows to middle-income countries, including funds aimed at 'facilitating success for Dutch companies abroad', particularly in the water and sanitation sector where the Dutch are perceived as having a comparative advantage.

The report regrets that under the current rules 'public funding for private initiatives is also omitted from the ODA statistics in the cases where fiscal measures (tax expenditure) applied by the government encourage private initiatives, even though they act as a lever to release private funding flows'.

If this rule is changed, many countries could reach the 0.7% target simply by counting as aid the activities of their corporations abroad, or worse, large corporations could access the aid budgets, privatise profits if their investments are successful and socialise the losses if they fail.

The report notes that the Netherlands currently spends public monies on 'international public goods' such as mitigating climate change, global security and social assistance to refugees and migrants, and proposes to change the definition of ODA so that these can be recorded as such. This would add to Dutch ODA some 300 million euros per year spent on UN peacekeeping operations and 330 million euros budgeted as future contributions to combating climate change.

The report records that these proposals 'would in all probability raise objections from the G77' grouping of developing countries and could 'compromise other policy discussions', but does not explain why. The reason is, however, not difficult to guess. In 2009 the advanced economies pledged during the Copenhagen climate change conference to increase their contributions to mitigating climate change to $100 billion a year by 2020. This $100 billion would double current annual ODA. If the Dutch proposal becomes the new OECD standard, and there is evidence that other countries are weighing similar options, the Copenhagen commitment would be met basically by relabelling the present ODA funds.

As Eric Clapton sang, 'We made a vow we'd always be friends. How could we know that promises end?'u

Roberto Bissio is the Executive Director of the Third World Institute based in Uruguay and coordinator of Social Watch. The above was first published in Spanish in Agenda Global (28 February 2014), a weekly supplement of the Peruvian daily La Primera.

*Third World Resurgence No. 283/284, Mar/Apr 2014, pp 52-53