The case for including other public flows for development
The future of development aid transparency – the case for including other public flows for development
Why development aid transparency?
Transparency for public flows for development through information disclosure should be non-negotiable irrespective of whether or not they are ‘official development assistance’ (ODA). Given the growth in the number of players in development finance and with the non-DAC donors continuously increasing their aid financing, it is becoming apparent that exclusion of their aid data will prohibit getting a full picture of future global aid governance. Though the OECD Development Assistance Committee (DAC) has long played a key role in defining and capturing data on development finance and monitoring its global standards for DAC donors (OECD, 2011) the question arises as to whether its existing standards or categorizations are inclusive enough to integrate the non-DAC donors or not. There are ongoing efforts, particularly the International Aid Transparency Initiative (IATI), to improve aid data transparency and reform the way aid data is disclosed by DAC donors. However the lack of aid data availability of the non-DAC donors in existing global aid governance is a difficulty, associated with their different data capture, methodology and data categorisations.
For instance China through its recent white paper on aid (Govt of China, 2011) has included its export import banks (Exim) loans as part of its official foreign aid. Will China’s new position challenge the DAC donors ‘ODA’ architecture? And will we see any accommodation on part of DAC donors to consider non-DAC donors’ perspectives of integrating trade finance in their official development finance? Will there be any widening of the scope of how ‘ODA’ is defined by the DAC donors following the Busan High Level Forum? This is a complex issue for OECD DAC’s ‘official development assistance’ architecture and its transparency efforts, as China’s new position illustrates: “Other public flows” for development, as classified by OECD-DAC, includes “officially supported export credits”. So loans from Chinese Exim banks could fall either under the category of “official development assistance” (ODA) or “other official flows”. Data for both these categories are compiled and published by OECD-DAC. But since Chinese Exim bank loans are now classified as ODA they will not fall under DAC’s “officially supported export credit” category—disclosure of which is not mandatory for DAC members. So does this mean that if other donors (DAC and non-DAC) follow China’s example in classifying lines of credit as official development aid this will increase transparency of official flows of finance? That would depend on whether the information is disclosed accurately to OECD or other comparable standards, such as IATI’s.
What’s the linkage with the development effectiveness issue?
Commitments on aid transparency were made in the Accra Agenda for Action where signatories agreed to make aid more transparent and publicly disclose regular, detailed and timely information (Accra Agenda for Action, 2008). A recent online consultation has also highlighted that Transparency is the fourth most important area of the aid effectiveness agenda in the run up to HLF 4. It’s important to note that the details of “other public flows” for development are not publicly available as the access to information is restricted.
However, the lack of consensus between DAC and non-DAC donors of what constitutes ‘official development assistance’ should not be the limiting factor to disclose information. Whether lines of credit are classified as aid or not is less important than whether they are transparent. And the same holds true for opening up of officially supported export credit data of DAC donors which is hidden.
What means are available?
So, the question arises as to what means are available for making officially supported export credits and lines of credit transparent and which of these are practical for both DAC and non-DAC countries? It arises at two levels.
- At the national level – For example the Export Credits Guarantee Department (Regulation and Reporting) bill going to the UK parliament in November 2011 contains transparency requirements as well as regulations. It calls for ‘the publication of an audit of all sums owed to the department, an annual impact assessment and a real-time disclosure policy on all supported projects’
- At the international level -The OECD’s guidelines for Export Credit Arrangements (OECD 2011) seek to provide a framework for the ‘orderly use’ of official export credits and a ‘level playing field’ so that competition among exporters is on the basis of quality and price not subsidies; they have rules for different sectors and for use of export credits with tied aid.
The OECD guidelines don’t contradict the UK Bill, rather they complement it; but they use a ‘gentleman’s agreement’ (p5), with no transparency requirements, to which they hope more countries both DAC and non-DAC will sign up. So perhaps the OECD Arrangements can be seen as a first, easy step for the High Level Forum on Development Effectiveness and G20 to support; transparency is a more challenging step which gives an accountability dimension to the ‘gentleman’s’ agreement’ (like EITI in some ways); and regulations as in the UK Bill go further to limit misuse. If IATI were to address export credits and lines of credit, what should it do? Perhaps IATI could try to come up with a publication format which would be clear and uncomplicated for the audit of all sums owed to the export credit guarantee departments of the donors and a real-time disclosure policy on all supported projects? That doesn’t seem beyond the realms of possibility, as it has already established an international standard to publish all aid information. IATI could have a critical role since transparency is important and they have already been mandated to do so. But would that role be better played if the OECD became more muscular and followed up on its ‘Export Credit Arrangements’ with integration of officially supported export credit statistics alongside its published official development assistance data?
What could HLF4 achieve?
An important step at HLF4 would be to acknowledge the importance of creating transparency of “other public flows for development” as well as of aid. The principle behind this acknowledgement is to carry on the momentum built in the Paris Declaration and Accra Agenda for Action and to go beyond Busan HLF 4 by widening the transparency regime.
Since Accra, IATI is officially designated as the vehicle for fulfilling the existing commitments of transparency. Widening of the transparency regime would further strengthen IATI and would be an appropriate tool to integrate the action and monitoring on already established standards. It will not only integrate non-DAC donors’ public flows for development that are yet to be officially classified as ODA or non-ODA but also DAC donors’ other public flows for development that are not publicly available. Inclusion of disclosure of other public flows for development in the dialogue should be an incentive to attract non-DAC donors to take a full role in the dialogue on Transparency in Busan HLF4 and will shape the future of development aid transparency.