The changing faces of aid: 4 trends that may be widening inequality

Recent changes in the direction and prospect for international aid in the context of Agenda 2030 led us to raise questions on the role of Official Development Assistance (ODA) in meeting the financing needs of Agenda 2030.

Is ODA fit for this purpose? Are the current directions in ODA helping or hindering the realisation of Agenda 2030 and the Sustainable Development Goals (SDGs)?

Many challenges for development in the 21st century require both a human rights-based and feminist approach to development cooperation. Such an approach is one in which the priorities and practices in providing aid and other forms of development finance are thoroughly informed by human rights standards and inclusive policy dialogue that takes into account the interests of the impoverished and marginalised, and that puts in place comprehensive measures to ensure gender equality and women’s empowerment.

The current uses of aid, however, undermine its very essence as a concessional resource dedicated to human rights and the eradication of poverty. Here are some trends from the Reality of Aid Network’s recent report on the Changing Faces of Aid, which draws together views on aid from over 30 civil society organisations.

Security, migration and options for development

Current trends in the allocation of ODA deepen the “militarisation of aid” and its diversion to countries and purposes linked to the strategic security interests of major provider countries. For example, since 2002, a movement towards security priorities has been apparent in bilateral aid allocations to Afghanistan, Pakistan and Iraq, countries of major geo-strategic interest to northern providers.

Despite long-standing Development Assistance Committee (DAC) principles that ODA should not support financing of military equipment or services, diversion of aid to military and security spending persists. In fact, Korea uses ODA to support police training by the Korean National Police Agency in several Asian countries. Training police forces with ODA resources has been a growing area of provider activities in implementing international security policies.

Korean critics suggest that in South Korea, protest-management skills training and Korean-made equipment quash dissent and quell democratisation rallies such as in The Philippines and in South Korea itself.

Private sector resources to achieve the SDGs

There is a general recognition that considerable financial resources are required to meet the financial requirements of the SDGs – although the best way to source these resources is highly contested. Many powerful actors have argued this objective is best accomplished by instrumentalising ODA as a resource to mobilise private sector finance for development through various Private Sector Instruments (PSIs), including those used by specialised Development Finance Institutions (DFIs).

But what do we know about the country level outcomes and impact of private sector finance through PSIs? The short answer is “not enough”. The OECD itself recognises that the evidence base on the impact of blended finance is not yet persuasive: “Little reliable evidence has been produced linking initial blending efforts with proven development results.”

The 2018 Reality of Aid Report highlights several case studies that point to some clear directions. The Dibamba Thermal Power Project in Cameroon, for example, was partly financed through ODA/blended finance mechanisms. In contravention of requirements under Cameroon law, the project implementers largely ignored the need to address local community services. At the broader economic level, the project has heavily relied on foreign technicians, technology and spare parts, making it difficult for Cameroon to “own” and sustain the project. It highlights concerns raised elsewhere by civil society, that private sector instruments and blended finance will be associated with an increase in informally tied aid.

With the further investment of ODA to mobilise private finance for development, ODA will only drift away from its core goal of reducing poverty and inequalities.

Responding to climate change

Climate change can hamper development results and development choices can also change the earth’s climate by controlling or releasing carbon emissions into the atmosphere. The international community has been facing many issues in managing climate change, while also pushing to achieve the SDGs by 2030. The fragmented nature of the global climate finance landscape increases the challenges associated with accessing finance and reduces overall efficiencies (Sachs & Schmidt-Traub, 2013).

With the imperative to scale up climate finance after 2020, all countries and stakeholders must make new and concerted efforts to agree on new targets beyond the $100 billion already committed and to consider new and innovative sources for climate finance. Examples of the latter include carbon pricing for aviation, a financial transaction tax or an equitable fossil fuel extraction levy.

Developed countries must honour their previous commitments to new and additional public resources for international climate finance, while also increasing their ODA for other purposes.

South-south development cooperation (SSDC) in development finance

For over four decades emerging developing countries have been engaging in SSDC to address development challenges, primarily through technical exchanges and the sharing of knowledge. However, to fulfill its promise, civil society activists in the south emphasise that SSDC must be held to standards that are embedded in SSDC principles.

It is essential to strengthen capacities to support inclusive partnerships, greater transparency, and people’s rights. While recognising SSDC as an invaluable resource, it must also be emphasised that it is not an alternative to fully transformed and substantially increased north-south development cooperation.

China’s SSDC in Kenya and Angola, for example, which responds to African countries’ need for infrastructure, is largely driven by China’s economic interests, companies and technologies.

Issues relating to human rights (such as labour rights) or people’s empowerment remain aspirations that are alluded to, but are not tackled directly by either side of the cooperation.

In our next blog, the Reality of Aid Network puts forward a ten-point action agenda for retooling ODA for the positive transformation of development cooperation.

Discuss poverty eradication, the role of aid, the future of NGOs and much more at the Bond Conference 18-19 March.

Our upcoming podcast will be looking at whether private finance can ever really work for the world’s poorest. Subscribe to our podcast on Apple podcasts or on your chosen Android podcast player to get it as soon as it’s published.