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SDGs to Look Beyond ODA as Source of Development Assistance

Photo: UN Photo / Eskinder Debebe

Content by: South-South News

18 September 2015, New York, USA | Brendan Pastor — As the level of official development assistance (ODA) plateaus around $130 billion for the second year in a row, policy-makers are readily embracing alternative sources of financial assistance to developing countries.

Evidence of this is strongest in the 2030 Agenda for Sustainable Development, the new global development framework replacing the Millennium Development Goals at the end of this year. Goal number 17 directly calls for revitalizing the global partnership and embracing new phenomenon like South-South cooperation, welcoming private sources of finance, and mobilizing domestic tax revenue — policies that go far beyond the traditional reliance of public finance from developed countries.

"ODA is necessary, but it is not enough," Wu Hongbo, the United Nations Under-Secretary-General for economic and social affairs, told South-South News during the launch of the 2015 MDG Gap Task Force Report.

"In order to implement the sustainable development agenda, we have to mobilize all resources available in addition to public financing. We need policy guidance that will encourage private sector companies to come on board and support the implementation financially," Mr. Wu added.

As the MDGs wind down their 15-year tenure, the final goal, "develop a global partnership for development," has been seen as half-fulfilled. Overall, ODA has increased over the MDG period, officials claim, but they warn that commitments have not been fully implemented, and aid to the least developed countries has lagged behind considerably.

Just 0.29 percent of the collective GNI of OECD-DAC donors was made. If the full pledge of 0.7 percent had been followed through, ODA would amount to over $326 billion, instead of the $135 billion seen today. Moreover, aid is heavily concentrated in only a few countries. According to the report, roughly half goes to just 22 countries, most of which are middle-income.

The Addis Ababa Action Agenda, the outcome of a major high-level conference this past July that looked for a financial architecture to support the implementation of the SDGs, contains specific references to alternative forms of finance, including ways to compel private finance to work for development.

Policy-makers are keenly aware that the $130 billion in public financing pales in comparison to the over $25 trillion in global capital markets that remains untapped. Debates have therefore shifted to identifying policies that could incentivize private investment into areas of the world that have historically been ignored, or towards programs that support long-term development objectives like education and health.

Nevertheless, officials from developing countries, the United Nations and civil society continue to urge wealthy countries to follow through on ODA commitments, in particular meeting the 0.7 percent target measured against Gross National Income (GNI).

"There are many sources of financing for development and I think the Addis Ababa Action Agenda sets them all out comprehensively, but I think the fact that there are alternative sources does not mean that meeting the ODA target isn't important," said Helen Clark, the administrator of the UN Development Programme. "It's very important, particularly for the poorest countries, where it is quite a significant part of their annual budget provision.

"But I think the key thing is for aid to be very smart and focus on building capacity of developing countries to do things for themselves — mobilize their own resources, build their own institutions, gather their own taxes, and appropriate them to development purposes."

Clark added that public financing should be catalytic and primarily seen as helping provide a foundation for further development, not as a permanent fixture in annual budgets.

Looking toward the 2030 Agenda, policy-makers are likely to welcome alternative sources of financing to supplement ODA, including reaching out to new players in the international system, such as China, India and Brazil — each of whom has become an emerging source of capital, bot financial and intellectual.

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