The Center for Development Programs in the Cordillera (CDPC) participated in the debate organized by organizations in the province of East Flanders, Belgium on the future of development cooperation. It was a well-timed debate in this period of Covid-19 pandemic where numerous countries are experiencing recession and even a rich country like Belgium is undergoing economic slowdown. The debate was sparked by reported articles and interviews on issues pertaining to development aid as it commands unequal power relations, issues on whether development cooperation should be refocused to address unequal trade instead of financing projects in developing countries, migration, and the EU official development aid which is increasingly directed to support migrants in Europe and poorer country member States while decreasing its support in other countries.
Joining the debate were university professors from UGent and Stad Gent and organizations from Eight World, FEDIAS and CDPC. Eight World is supporting communities in Africa. FEDIAS is working among the African diaspora in Europe. CDPC is supporting the right to development initiatives in the Philippines’ Cordillera region. All three organizations emphasized that the development aid they are receiving from Belgium are untied aid with no conditions set by Belgian donors and partners. Part of the work of these organizations is breaking unequal relations and avoiding building dependency between donors and receivers. FEDIAS stressed the importance of decolonization in development aid. For its part, CDPC highlighted the role played by community opposition against profit-oriented large-scale mining and of conserving traditional seed varieties as contributions in breaking unequal trade relations and in preventing biopiracy by large multinational companies.
The discourses on development aid and development cooperation were well deliberated. As development aid is being questioned, terminologies are evolving at pace with an understanding or development of a framework on development aid. Development aid is noted to be transforming into development cooperation to solidarity cooperation among advocates. University professors reiterated the complexity of development aid or development cooperation, being a political issue. For FEDIAS, development aid is a form of recovery payments for colonization. For CDPC, it is a form of restitution for natural resources being protected by indigenous peoples and other communities and for the product of human labor captured by big multinational companies.
Development Cooperation and Sustainable Development Goals 2030
Development assistance traced its beginning to the aid given by colonizing powers to their colonies. In the aftermath of World War II and as part of the establishment of the United Nations, various forms of economic cooperation were set up. Among these were the International Bank for Reconstruction and Development (now World Bank) and the International Monetary Fund, which were established as forms of cooperation to aid poor countries in building their war torn economies. Others structures and processes of international aid cooperation have been instituted since then.
In 1970, the UN System adopted the official development assistance (ODA) setting a minimum of 0.7% of gross national product of economically advanced countries to support developing countries. Such ODA as prescribed in the UN General Assembly resolution will be untied, in “principle.”
Policy conditionalities on ODA however were later attached to the restructuring of debts of Third World countries in the 1980’s, according to IBON’s primer on Aid and Development Effectiveness. For debts to be restructured, among the conditions set were liberalizing trade and investment and privatization of public assets. Since then, developing countries opened up their economies and sold public assets to private companies including basic social service institutions.
In 2010, in response to the increasing poverty and hunger, UN member States adopted the Millennium Development Goals (MDG) with 8 goals to be achieved in 5 years. In 2015, the MDG was superseded by the Sustainable Development Goals 2030 (SDG).
The SDG expanded the unmet MDG on poverty, hunger, education and health to the 17 sets of the Sustainable Development Goals. The SDG is anchored on the principle of aligning development goals to economic viability, environmental quality and social justice. To achieve these goals, developed countries reaffirmed their commitment to allocate 0.7% of their gross national income (GNI) to finance the SDG. The UN Alliance for SDG Finance estimated that $5-$7 trillion annually is needed to achieve the SDG. Other bodies’ estimate is at $4-$5 trillion annually. However, in various reports by the UN agencies, developed countries are not complying with the 0.7% commitment, bringing the SDG financing gap at $2.5 trillion yearly.
With the current pandemic brought about by the corona virus, the Organization for Economic Cooperation and Development (OECD) reported an additional gap of $2.5 trillion to finance Covid-19 related impacts, and with the $1.75 SDG fund gap, the total financial shortfalls is $4.2 trillion for 2020. In the same report, OECD noted the global financial asset at $379 trillion recorded as highest value, and correspondingly remarked that reallocating 1.1% of these assets held by banks and institutional investors is sufficient to finance the $4.2 trillion gap. (OECD Newsroom, 10/11/2020: COVID-19 crisis threatens Sustainable Development Goals financing.).
The OECD has reported its ODA in 2018 at 0.31% of the Gross National Income of its member States. Its annual average is reported at 0.45%. The contribution of Belgium to ODA in 2019 was 0.42% of its GNI, the highest among OECD countries. In 2018, it contributed $303 million of bilateral aid to the Philippines through civil society organizations (CSOs). In 2017 and 2018, its contributions to CSOs were reported at 20% and 22% share of bilateral ODA to the Philippines.
Future of Development Cooperation
The 17 SDG goals framed on the 3 pillars of economic viability, environmental protection and social justice are noble goals for humanity. These serve as the global core program for development cooperation. All forms of development cooperation are committed to support these goals. In the adoption of the SDG, developed countries did not make any new commitments for additional funding. They only reaffirmed the 0.7% of gross national income to finance the SDG. Even so, fulfilling the 0.7% of GNI will substantially accelerate achieving the SDG.
Instead of pushing for the compliance to the 0.7% to increase financing of the SDG, a mechanism of development cooperation was introduced through a blended finance system. Financing strategy is to be structured to incentivize private investors by bridging infrastructure gaps through finance from the ODA and international public finance. To bridge infrastructure gaps, multilateral development banks are encouraged to invest in transport, energy, water and sanitation. While these projects are needed for recipient countries, these are equally intended to make investments favorable for investors.
To secure a sound environment for investment, public policies have to ensure efficient and effective domestic tax administration, broaden tax base and ensure financial market stability. Increasing tax base can include restructuring personal tax brackets and formalizing informal sectors. ODA will be utilized in capacity building and support to facilitate the execution of these policies.
SDG financing puts substantial emphasis on private financing on projects that align with the SDG goals on economic viability, social justice and environment protection. The strategy is to combine development finance with corporate finance to achieve both development goals and ensure profit for corporate finance. It can be understood as another mechanism of public-private partnership for projects specifically aligned with the development goals. Public funds whether from public development banks or ODA will be used to establish a sound business environment where commercial return is ensured. In order to attract private corporations to undertake development projects, financial returns have to be assured. For OECD, blended finance includes “ability of development finance providers to effectively and efficiently allocate, take and manage risk;” “sustainable market-based solutions ” and “address(ing) market failures.”
With evolving forms of cooperation, such as that of blended finance, development cooperation will correspondingly develop into new mechanisms and processes. In turn, new forms of development cooperation will engender corresponding targeted forms of actions from CSOs. A global network that has been campaigning for development effectiveness is the Reality of Aid network. The network has outlined a 10-point action agenda of retooling the ODA to improve development effectiveness and strengthen partner ownership. (Changing Faces of Development Aid and Cooperation. The Reality of Aid 2018 Report, IBON International, 2018, p19). Among the recommendations is to use the ODA to support local small scale enterprises that are providing livelihoods in urban and rural areas. Of particular interest to CDPC is to retool ODA to support the sustainable traditional agricultural base of indigenous communities supplemented with community-initiated cottage industries or rural industrialization, as these will immensely contribute to reversing poverty and reducing inequality and encouraging indigenous communities to continue conserving and protecting the environment.
The 10-point Action Agenda as defined by the Reality of Aid network for retooling ODA are as follows:
- Achieving the 0.7% Target – DAC [Development Assistance Committee-OECD] providers that have not achieved the 0.7% of GNI UN target for ODA must set out a plan to do so without further delay.
- Addressing the needs of the least developed, low income, fragile and conflict-affected countries – As DAC donors move towards the 0.7% target, they must also meet the long-standing commitment to allocate up to 0.2% of their GNI to Least Developed Countries (LDCs).
- Establishing a rights-based framework – The allocation of all forms of development finance, but particularly ODA and other concessional sources, must be designed and measured against four development effectiveness principles and human rights standards.
- Mainstreaming gender equality and women’s empowerment – Providers of ODA and other forms of concessional development finance (e.g. SSDC [South-South Development Cooperation]) must demonstrably mainstream gender equality and women’s empowerment in all dimensions of development cooperation projects, programs and policies.
- Addressing other identity-based inequalities – Providers of ODA must develop strategies to guide increased efforts to tackle all forms of inequalities, such as those based on economic marginalization, disabilities, sexual orientation, race, ethnicity or age.
- Reversing the shrinking and closing space for CSOs as development actors – All actors for development – governments, provider agencies, parliamentarians, INGOs [international nongovernment organizations]– must proactively challenge the increasing regulatory, policy and physical attacks on civil society organizations, human rights defenders, indigenous groups and environmental activists.
- Implementing clear policies for ODA to improve its quality as a development resource – Development and aid effectiveness principles require practical reforms to strengthen partner ownership to achieve the priorities of ODA.
- Deploying ODA to support private sector initiatives and catalyze private sector funding – ODA should only be deployed for provider Private Sector Instruments (PSIs) in projects/activities that can be directly related to building capacities of developing country private sector actors to demonstrably improve the situations of people living in poverty.
- Rejecting the militarization and securitization of aid – In responding to humanitarian situations and the development needs of countries with high levels of poverty, conflict and fragility, providers should avoid shaping their strategies and aid initiatives according to their own foreign policy, geo-political and security (migration and counter-terrorism) interests.
- Responding to the acute and growing challenges from climate change – All Parties should reach agreement on a post-2020 climate-financing framework for developing countries that meets the growing challenges they face in adaptation, mitigation as well as Loss and Damage. While concessional climate finance meets the criteria for ODA, the DAC should account for principal purpose climate finance separate from its reporting of ODA, acknowledging the UNFCCC [UN Framework on Climate Change Convention] on principle of “new and additional.” The UNFCCC should develop clear guidance for all Parties on defining finance for adaptation, mitigation and Loss and Damage.
On Action Agenda item number 7 on clearer policies in ODA, the suggested retooling includes the following:
- Reversing the declining levels of country programmable aid that is directly accessible to developing country partners;
- Strengthening mechanisms for inclusive dialogue and accountability relating to development cooperation in developing countries;
- Reversing the trend of the increased use of loans as an aid modality, with grants as the default option;
- Reforming technical cooperation practices to respect the principle of demand-led technical cooperation;
- Reversing the trend towards increasing informal and formal tied aid by eliminating formal tied aid for all countries and sectors, while reducing the major barriers facing developing country partners in receiving contracts to implement aid programs and technical assistance;
- Increasing support for domestic resource mobilization efforts by developing country governments through the promotion of progressive taxation and the reduction of illicit flows and transnational modalities for externalizing profits; and
- Strengthening the responsiveness of the multilateral system through reducing donor-led special funds and increasing core resources for key UN development agencies such as UNDP, UNICEF, UN Women and the UN Human Rights Council.
While developed countries are redirecting the mechanisms of development cooperation towards increasing corporate investment in poverty reduction, social justice and environment protection, CSOs are corresponding persisting to challenge such strategy pushing for greater public accountability and aid effectiveness.