30 Nov 2011

Does Your Aid Count?

Huffington Post
Le Figaro, France
Degens Industri, Sweden
Klassekampen, Norway
Maaseudun Tuluvasiuus, Finland
Toronto Star, Canada
South China Morning Post, China


If in the last few years you got out your checkbook or credit card and donated to help rebuild  Haiti, rescue Pakistanis from  floods or fund a school in Tanzania, your  contribution did not make its way into global aid figures.

Don't be too offended. Neither did the growing aid disbursements of China, Brazil, India and OPEC members, the generosity of the Gates, Ford and  Rockefeller Foundations or the multitude of private Arab foundations in the Gulf States.

How can this be?  Despite growing political attention to aid in meetings like the recent G20 summit in Cannes, we do not have an inclusive approach to tracking aid.  We have an antiquated system that reports only government aid, largely from European and American donors, ignoring the rise of the BRICs and private donors.

This makes it much harder to ensure progress towards the UN Millennium Development Goals to cut hunger and poverty by 2015.  If we cannot say where aid money is going, how can we possibly assess progress and fill gaps?

Major aid donors gathered in Busan, South Korea on November 28-30 at a High Level Forum on Aid Effectiveness.  Secretary-General Ban, Secretary Clinton and others urged a more inclusive global aid system and better monitoring of aid has to be the first step.

The most systematic effort to track aid today is carried out  by the Development Assistance Committee (DAC) of the Organisation for Economic Co-Cooperation and Development (OECD), but just 23 nations belong.

The DAC's preliminary estimate for 2010 - the leading financial indicator of global humanitarian assistance - counts $129 billion in aid. But that captures only part of the picture - and a distorted one at that. This is no fault of the DAC Secretariat.  It is a political decision by OECD DAC members as to what aid counts, and a political decision by donors outside the system as to whether they will try to register their aid.

The OECD DAC's methodology overlooks private donations that are growing by leaps and bounds thanks to Bill and Melinda Gates, Warren Buffett and a host of less visible donors. Worse yet, non-OECD DAC states are excluded from the final tally altogether.

If the Sorbonne uses French state funds for a scholarship for a young Senegalese, that counts as aid according to the OECD DAC, but if Harvard or Yale does, it does not.

Debt forgiveness or a "concessional" loan by an OECD member government counts, but an outright grant by OXFAM, Islamic Relief or Save the Children does not.

If the Gates Foundation invests $100 million in Kofi Annan's initiative to bring a Green Revolution to Africa, that does not count, but the same donation made by government aid agencies in the US or the UK does.

What is especially strange is that much government aid is channeled at field level through operations run by agencies like the Red Cross and Red Crescent, MSF, and CARE and all these donations are counted -- even though identical activities funded by those groups themselves are not.  It is not the project that matters -- it is the donor.

How distorted has the picture become?  Some years ago, the OECD DAC calculated that total aid numbers would rise by 15-20 percent by including private donations. And that was before Gates and Buffett began providing more than $4 billion a year - surpassing government aid from Italy, Canada and Switzerland and other OECD members.

The massive funds given by private Arab donors through foundations in the Gulf States are also omitted from the totals.   OPEC countries, according to OECD itself, provide aid equal to 15-20 percent of the global figure released each year.

China, an emerging global donor, is not even part of the equation. Last year China's development bank actually lent more money than the World Bank.

Why does better counting make a difference? First, we need to keep the donors honest. It is easy enough for a politician to make a  pledge and then simply walk away.

The G8 Summit in L'Aquila in 2009 provides a telling example. Two years after pledging $22 billion in new funds over three years to  cope with a sharp global rise in food prices, donors have given less than $5 billion.

Reforms could help spur more donations for initiatives like Gates' and Buffett's "Giving Pledge,'' which seeks to raise $600 billion from the world's billionaires.

Perhaps most importantly, an accurate count would help ensure  donations are used effectively. We cannot possibly coordinate with the contributions of private donors and emerging donors like China if we do not track them.

The current system for counting aid reflects the character of the OECD DAC itself. The OECD is very well respected, but remains basically an "Old Boys" club of wealthier governments, largely western and European, in a world economy that is increasingly dominated by Asia.

It is time to rethink the formula for counting aid. The OECD DAC seems anxious to make progress and deserves praise for already reaching out to nontraditional donors like China, India and Brazil.

The face of global humanitarian aid is changing rapidly and it is time we changed with it. Perhaps we need a two-track system tracking Official Development Aid and Private Development Aid. It will not be easy coming up with new rules and success depends on the cooperation of emerging donors, especially China and the OPEC countries, but it is time we start.