Lecture 3: Typology and modalities of ODA

Question 1

ODA-actors

Answer 1

• Multilateral
• Bilateral
• Trilateral or Triangular
• South-South

Question 2

Bilateral cooperation:

Answer 2

• government agencies of the donor country provide aid to a partner developing country, usually based on the bilateral agreement between these countries (agreed program of cooperation)
• donor has direct influence over the way the money is used
• good visibility of the donor
• risk of donors supporting their own political and economic goals by providing aid (see tied aid)
• various forms: most often project aid, but also debt relief, technical assistance etc.
• can be provided directly to government organisations or to NGOs/companies (and multilateral org.)

Question 3

Multilateral cooperation:

Answer 3

• resources provided to multilateral development organisations (e.g. UN programs, agencies, funds)
• donors are not directly controlling how the money is used
• particular economic and political interests of donors are eliminated, administrative costs should be lower

Question 4

Multilateral cooperation: Different types of contributions

Answer 4

e.g.

core contributions (unearmarked)

earmarked funds

pooled programs and funds

vertical funds (GEF, GF, GAVI)

Question 5

Multilateral cooperation: Different types of contributions: Core contributions

Answer 5

unearmarked funds

Question 6

Multilateral cooperation: Different types of contributions: earmarked funds:

Answer 6

designated to specific programs and projects, can be assigned at the global, regional and (most commonly) country levels (reported as bilateral ODA)

Question 7

Multilateral cooperation: Different types of contributions: pooled programs and funds:

Answer 7

several donors put their money to a joint fund to support specific program (e.g. UN OCHA’s Central Emergency Response Fund)

Question 8

Multilateral cooperation: Different types of contributions: vertical funds (GEF, GF, GAVI):

Answer 8

development financing mechanisms targeted at single issue with mixed funding sources

Question 9

Trilateral/Triangular cooperation:

Answer 9

• partnership between traditional donor (OECD DAC member), newly emerging donor (in the South) and an ODA receiving country
• mostly technical cooperation, capacity building
  takes place mostly in the same region where emerging donor and beneficiary are located
• often based on previous cooperation between traditional and emerging donor that is considered successful and worth transferring to third countries
• OR emerging donor has gained experience in specific areas, the transfer to third countries is supported by traditional donors
• roles:
• traditional donor: financing the program, providing know-how
• emerging donor: transfer of relevant experience that can be applied in another developing country
• increased value for money: contracting less expensive experts from emerging donors
• recipients benefiting from the similarities between the emerging donors’ experience and their own challenges

Question 10

Modalities of development assistance

Answer 10

(=forms of development assistance) mostly applied:

Project support

Budget support

Program-based approaches

Question 11

Modalities of development assistance: Project support:

Answer 11

• funds provided to implement a specific and predefined set of development activities over a specified period of time (= projects)
• detailed set of objectives, activities and expenditures are specified beforehand

two forms:

a) project aid using parallel systems: donor takes the lead in identification and design, provides funding directly to the implementing agency/NGO, using its own disbursement and accounting procedure (= off- budget), donor driven, highly criticized
b) project aid using government systems (scarcely used): resources for projects disbursed through government systems with government accountability

Question 12

Modalities of development assistance: Budget support:

Answer 12

• unearmarked contribution to the government budget with the purpose to implement poverty reduction strategies, macroeconomic or structural reforms
• resources provided by the donor become part of the country’s budget
• total use of recipient government’s systems (allocation, procurement, accounting and audit processes)
• recipient government identifies specific objectives (with the donor => joint consultations)
• donors give up the direct control over how the resources are used

two types:

a) general budget support: no specification for the use of

resources

b) sector budget support: resources to support specific sector

expected benefits:

• increased ownership and empowerment of the partner
• government
• reduced transaction costs
• limited fragmentation of ODA activities
• increase effectiveness of public administration
• improved alignment with partner country systems and priorities

potential risks:

• poor public financial management
• increased aid volatility

“high risk, high return” approach

Question 13

Modalities of development assistance: Budget support: Flow of funds

Answer 13

Question 14

Modalities of development assistance: Programme-based approaches:

Answer 14

• approaches based on the principle of coordinated support for a locally owned programme of development, such as a national poverty reduction strategy, a sector programme, a thematic programme or a programme of a specific organization

features:

• leadership by the host country
• a single comprehensive program and budget framework
• increased use of local systems for program design and implementation, financial management, M&E

Question 15

Other aid modalities: Expert and technical assistance:

Answer 15

• transfer of know-how and experience to developing countries
• experts in certain field (doctors, teachers, experts in agriculture, consultants etc.) are sent from the donor country to pass their knowledge to people working in the same field in a developing country
• seminars, consultations, research etc.

Question 16

Other aid modalities: Scholarships:

Answer 16

• costs of tuition fees and stipends for students from developing countries to pursue a degree in developed country (often in specific fields that are not available or of low quality in the home country , e.g. medicine, agriculture, economy..)
• problem of brain drain?

Question 17

Other aid modalities: Debt relief:

Answer 17

• official agreement between the creditor and debtor aimed at partial or total forgiveness of the country’s debt
• various forms: rescheduling, refinancing, reduction, forgiveness o special forms: debt-for-development swap, debt-for-nature swap

Question 18

Other aid modalities: Food aid:

Answer 18

generally: transfer of food to developing countries

various modes of supply:

a) direct transfers, all food aid originating from a donor country
b) food aid purchases in one developing country for use as food aid in another country (triangular food aid transactions)
c) local purchases, procured in a country and used as food aid in the same country

→ b) and c) should be preferred to support less developed economies

use of food aid:

a) programme food aid: supplied as a resource transfer providing

balance of payments or budgetary support

b) project food aid: usually provided to support specific poverty alleviation and disaster prevention activities, targeted on specific beneficiary groups or areas
c) relief food aid is targeted on, and freely distributed to, victims of natural or man-made disasters

• largest providers: USA, UK, Canada, Japan, more recently China and India
• recipients: sub-Saharan and Asian countries
• donors provide food aid directly or through multilateral organizations and NGOs (e.g. WFP)
• a lot of criticism

Question 19

Other aid modalities: Humanitarian Aid:

Answer 19

• short-term intervention with the aim to improve the living conditions of victims of natural or man-made disasters and complex long- lasting humanitarian crises

phases:

1. emergency relief: immediately after a disaster, meeting basic needs, saving lives
2. early recovery
3. long-term recovery and development: complex recovery of the infrastructure, public institutions and livelihoods => “building back better”

• the timeline of the response depends on the specific situation: type of disaster, its magnitude, preparedness of the country, vulnerability and accessibility of the affected location, resources immediately or locally available etc.
• humanitarian aid is ODA eligible (if provided to a country on DAC list of ODA recipients)

Question 20

ODA statistics: key trends

Answer 20

In 2020, ODA reached its highest levels ever:

• ODA of DAC countries: 0.32% of GNI
• Other donors (esp. Saudi Arabia, Turkey, UAE)
• Private philanthropic foundations

Collectively, DAC members are not meeting the aid targets and commitments

Question 20

ODA statistics: key trends

Answer 20

In 2020, ODA reached its highest levels ever:

• ODA of DAC countries: 0.32% of GNI
• Other donors (esp. Saudi Arabia, Turkey, UAE)
• Private philanthropic foundations

Collectively, DAC members are not meeting the aid targets (0,7% and 0,15-0,20% to LDCs, also share of untied ODA 100%) and commitments

Bilateral budgets declined in several countries (mainly in Kuwait, Saudi Arabia and UAE)

→ in DAC countries still most of ODA on average

Local CSOs based in recipient countries received the lowest share of support:

→ share of bilateral ODA provided to and through CSOs: 15%

Social sector is a priority for DAC members:

• esp. support to government and civil society and health and population policies

Question 21

CSOs

Answer 21

Civil society organisations

Question 22

Private Aid

Answer 22

• private charitable grants, donations
• provided by individuals, private philanthropic foundations, private companies,
• commercial banks, NGOs etc.
• no complete, precise data on private aid
• since 2017, OECD collects data on private development finance from the largest foundations in development cooperation field:

→ cross-border transactions from the private sector, promoting economic

→ development and welfare of countries the DAC List od ODA Recipients

• private organizations’ own resources, donations from corporations and individuals, dividends, etc.
• Bill & Melinda Gates Foundation largest provider
• existing data are likely undervalued:

→not all foundations and NGOs receiving private donations report to OECD

→other possible sources of data on private aid: tax returns, household surveys, NGOs’ surveys

• the majority of private giving comes from the North America, flows to African countries, targets primarily the health and reproductive health sectors