Development assistance is an investment in the future

Guest blog by J. Brian Atwood, Chair of the Development Assistance Committee of the Organisation for Economic Development and Cooperation (OECD). This blog originally appeared on the Huffington Post.

For the first time in ten years, the total development assistance of OECD member states slightly declined in 2011. The official development assistance (ODA) level had increased by 63% over the previous decade, but three years before the deadline of the Millennium Development Goals by 2015, this decrease is troubling. Do we need to sound the alarm?

The situation today is problematic. The Euro-crisis and the prevailing austerity weigh on the budgets of donor countries. The European Union is currently negotiating its budget for the next seven years (2014-2020) and drastic cuts may be proposed by member states, including in assistance for the poorest countries. Yet the EU has ambitious goals and promises to keep, most importantly the promise to allocate 0.7% of its overall collective per capita growth to ODA.

We have achieved a great deal with the resources that have been committed in the past decade, but so much more was possible. The average member of the Development Assistance Committee (DAC) dedicated only 0.46% [S1] of their GNI to development assistance, far from the 0.7% to which most are committed. If DAC governments had reached 0.7%, not only would we have come further on the MDGs, we would have a world with less conflict and fragility, and with stronger, more resilient developing economies that help sustain the world economy.

Pressure to maintain commitments is generated within the DAC by peers, but it is also applied by public advocacy groups like “ONE.” This organization assigned itself a much needed annual exercise: based on OECD/DAC figures, ONE brings the numbers down to an even more granular level. In its DATA report the organization tracks closely what the donors are doing. French readers, for example, will be interested to know that France reached an ODA level of 0.42% in 2011. This means that the country now needs to shift into high gear to keep its 0.7% promise. France is not alone in Europe, but it has been a leader in development cooperation and others are watching.

The impressive new Development Minister in France, Pascal Canfin, will have to make a strong case that development not only reflects France’s values and its traditional commitment to international development, but is also smart economics. Development prevents expensive conflicts where French military forces could be called to keep the peace. Development creates peace and prosperity, and with that, markets for French goods and services, while underdevelopment creates the opposite.

France plays a key role in the international arena; a role that the country needs to maintain given it has been one of the drivers of international development. Even though new donors are emerging, France, Germany and the United Kingdom, are bellwethers in Europe. These governments need to keep moving in the right direction on international development.

ODA may be a smaller proportion of the financial flows to the developing world, but it is a crucial piece of the global recovery puzzle. The mobilization of domestic resources in developing countries is also increasing. Over the last five years, tax revenues in Africa doubled to reach 520 billion US dollars. At the same time, the development cooperation programs of DAC members have served to encourage this growth in domestic revenues. The burden is being shared more widely, and the end of dependence on external finance has become a concrete prospect for an increasing number of countries. If ODA is less important as a source of finance, it is essential as a catalyst for the reforms and capacities that get development going. Growth today does not come from the old economic powers, it is in the developing world that we find the untapped potential. If we want growth in the OECD countries, we have to adopt a global perspective that encompasses the developing world.

The EU and its 27 member states account for 54% of ODA worldwide. Beyond the volume, however, the quality and effectiveness of development cooperation matters too. It is important to acknowledge the efforts made by the European Union also in this regard. The Agenda for Change and a new initiative calling for more joint programming among member states hold the promise of less fragmentation and better quality – and the ability to act together is what will ensure that the EU really remains the key player. The recent peer review study carried out by the DAC shows that there has been significant improvement in the EU’s capacity to deliver results. There is still work to be done to reduce bureaucracy and transaction costs, but the EU is functioning well in the development arena and it deserves the support of its members.

The DAC estimates development assistance to increase around 2% per year over the next few years. This may sound optimistic but some countries give us hope. The United Kingdom is on track to reach 0.7% by 2015, and Germany also increased its volume last year. Australia set the objective to reach 0.5% by 2015, an important increase for this growing economy. Will France join these nations and resume its rightful place as a leader in development cooperation? All eyes are on what the European Union and member states like France will do next.

Brian Atwood has chaired the Development Assistance Committee (DAC) of the OECD since 1 January 2011. He was previously dean of the Hubert Humphrey School of Public Affairs at the University of Minnesota. Under President Bill Clinton, he was the Administrator of the U.S. Agency for International Development (USAID) from 1993 to 1999.

[S1]0.31% if the weighted mean. The average country effort is higher, around 0.46% (the weighted number is lower given that the big economies that have the most weight have lower ODA/GNI ratios)