The need to reform the governance of ODA rules
All the flaws in ODA accounting addressed in this website point in the same direction: they all serve to exaggerate the generosity of donors so that they appear to their taxpayers to be more generous than they really are.
This is because the DAC comprises a donors’ club with a vested interest in designing rules to make themselves “look good”.
This conflict of interest is compounded by the fact that DAC delegates and even the technical experts who participate in its statistical working party lack the independence required for developing sound statistics, as they are subject to significant pressures from policy and administrative departments. These pressures have increased as public budgets have become squeezed in recent years. Finance Ministries in particular want to spend as little as possible on development, while being credited with giving as much as possible.
Moreover, in breach of its own 2015 Recommendation on Good Statistical Practice, the OECD has so far been unwilling or unable to prevent itself being used to launder the corrupt ODA statistics that the DAC produces, by presenting them as standard OECD statistical products.
The DAC’s “vested interest” problem is exacerbated by the exclusion of recipient developing countries. They have not had a significant say in what aid and flow statistics count since the earliest UNCTAD meetings half a century ago. UNCTAD’s application for observer status in the DAC statistical working party was rejected in 1978, and neither it nor developing countries as a group have ratified any of the decisions the DAC has taken in the last decade that have inflated ODA numbers.
The upshot of all this is that the DAC’s concept of ODA has now wandered far away from the intention of the UN targets for ODA, and from anything that developing countries would accept. It has become bloated, and its valuation rules contain major logical and mathematical errors.
The DAC is also inclined to forget that its de facto control of ODA rules is an historical accident. The only globally agreed mandates to collect statistics on aid and other resource flows for development lie with the United Nations under Articles 55-60 of the UN Charter and subsequent General Assembly Resolutions. While the UN’s reports on global development finance draw on OECD data, they are not bound by them, and the UN has not even accepted switching the ODA/GNI ratio from net disbursements to grant equivalents.
Only a new governance system run by professionally independent statisticians with full representation of developing countries can restore ODA’s credibility. Such a reform could also help the international community to bring clarity and order to the increasingly ramshackle architecture of targets for aid, resource flows and climate finance.