The future of development finance: The OECD/DAC’s agenda for modernisation CAPE CONFERENCE 12 - 13 November 2014 Jon Lomøy , Director, OECD Development Cooperation

Today’s development finance landscape 1) More diversification and changing relative importance of financial flows to developing countries

Today’s development finance landscape 2) New actors and instruments

Today’s development finance landscape 3) Recipients: reliance on ODA varies across developing countries and those most in need are starting to receive less Composition of external finance in LDCs and other countries, 2012 ODA growth in LDCs and other countries, 2000-12

Motivation for our agenda for modernisation The 2012 DAC HLM mandate: Making the OECD/DAC statistical system fit for purpose, so that it reflects the broadening of the global development agenda, reflects the new complexity of development finance (actors/instruments) and acknowledges the increased diversity of developing countries and provides the right incentives for ODA allocations. The goal is to maximise resources available for development – our statistical system should promote: the right incentives to maximise overall resource envelope availabe and to encourage smart allocation and catalytic use of resources, international standards for measuring and monitoring of development finance and transparency and accountability of development finance.

Making the OECD DAC statistical system fit for purpose – our reform agenda Main pillars: Modernise the measurement of ODA (in particular concessionality) Create a new broader measure of Total Official support for Sustainable Development (TOSD) and better tracking of resource inflows. Valorise of private finance: better capture the use of non-grant instruments (e.g. guarantees and equity) and design an international standard to measure mobilisation/leveraging

Working on making ODA credible and understandable: Making the OECD DAC statistical system fit for purpose – our reform agenda (1) Working on making ODA credible and understandable: Restore the credibility of ODA as a reliable measure of « donor effort » by agreeing on a clear, quantitative definition of concessionality (solve the present inconsistency problem) Standardise reporting of in-donor costs: Improve legitimacy, transparency and comparability and deal with criticism of some “phantom aid” components

Making the OECD DAC statistical system fit for purpose – our reform agenda (2) Looking beyond ODA: towards a measure of TOSD Not a replacement for ODA nor for shying away from the 0.7% ODA/GNI target but a more comprehensive measure that can help track the broader development agenda of the SDGs. To be finalised in line with the agreed SDGs In practice, includes non-ODA finance for development, peace and security, climate and other global challenges in addition to ODA Seeking to enhance transparency of concessional and non-concessional resource flows to developing countries from DAC, non-DAC and multilateral institutions (standards, norms and partnerships).

Leveraging and incentivising additional development finance: Making the OECD DAC statistical system fit for purpose – our reform agenda (3) Leveraging and incentivising additional development finance: The current ODA measure does not valorise the use of risk- mitigation instruments (e.g. guarantees and insurance) and the development of new innovative financial mechanisms that could mobilise significant volumes of private flows for development Working on a proposal to capture the budgetary effort of leveraging instruments is being explored Working with multilateral and bilateral development agencies to develop on a methodology for collecting data on private finance mobilised through official actions

Criteria for success: A measurement system that carries the right incentives Effectively contribute to transparency and accountability for the monitoring of the post-2015 development agenda Work to assess and measure resources beyond ODA should not be used by donors to back away from existing commitments, including the U.N. target of 0.7% ODA/GNI Better targeting of ODA is critically important going forward, especially for LDCs, fragile states and other countries in need DAC HLM in December 2014 is expected to sign off on key elements of the modernisation work as part of the DAC’s contribution to the financing for development conference.

THANK YOU For more information http://www.oecd.org/dac/Financing- Development.htm

The mandate from the DAC ministers (2012 HLM) Elaborate a proposal for a new measure of total official support for development. Explore ways of better representing both “donor effort” and “recipient benefit” of development finance. Investigate whether any resulting new measures of external development finance (including any new approaches to measurement of donor effort) suggest the need to modernise the ODA concept. Agree on a clear, quantitative definition of “concessional in character” => By end 2014/early 2015