Forum on Cooperation for Development: we need new aid delivery mechanisms *

The second Forum on Cooperation for Development held 29-30 June at the UN headquarters in New York, reviewed the Official Development Assistance (ODA) agenda. The main conclusions focused on aid effectiveness to achieve the Millennium Development Goals (MDGs), and the need to reconsider the financial paradigm and incorporate new forms of cooperation.

The UN-Development Cooperation Forum (UN-DCF) met on 29-30 June in New York to discuss a set of five issues related to development and the current nature of partnerships: policy coherence, accountable and transparent development cooperation, South-South cooperation (SSC), competition for limited resources, and achievement of the Millennium Development Goals (MDGs).There was general consensus between all participating State Members, International Organizations and NGOs, about the priority that the MDGs should have on the agenda of the Official Development Assistance (ODA).

Beyond this apparent consensus, there were two clear positions as to how to conduct reforms on ODA and the financial system. On one side, the group of actors who support the implementation of the Paris Declaration signed in 2005 without modifications; and on the other hand, the group of countries that advocate for a more comprehensive approach that seeks to transform the traditional aid scheme for developing countries that generates dependence of Southern countries.

The former group, represented mainly by the United States, the EU and other International Organizations, pushed for the business as usual approach following the agenda of issues inherited from the Paris Declaration and with special emphasis on aid efficiency, control and monitoring.
The alternative position, supported by many developing countries in Latin America, Africa and Asia, argued in favour of the urgent need to reform the international financial architecture, particularly ODA.

As leaders from around the world prepare to meet at the MDGs summit to be held in September 2010 to review the eight goals adopted ten years ago, financing for development is a hot topic that generates opposing views.

Seeking a new paradigm

Five years after the Paris Declaration[1], the changing political and economic context, exacerbated by the global financial and economic crisis has reignited the debate on the need to reform the international financial system. Developed countries already acknowledge that there is need to review certain aspects of financial system, particularly efficiency and a redirection of existing policies. "We are not sufficiently effective, but we are addressing the problem" said Eckhard Deutscher, OECD’s Development Assistance Committee Chair. The traditional view concedes the necessity of revising the global financial system model, but without substantial reforms of the fundamental principles that it is based on. It recognizes that there are shortcomings in the model, but the solution proposed, is to improve it, not to change it.

On the other hand, developing countries and emerging economies argue that a structural reform of the financial system and development assistance is essential to achieve the MDGs; this position was specifically supported by the interventions of Rwanda, Brazil and Venezuela. Professor Juan Antonio Ocampo, from Columbia University, stressed the need for a new financial architecture that is consistent with the paradigm of sustainability. A new architecture should recognize the leadership of Latin American countries regarding the inclusion in any financial reform of key issues such as development and migration. Finally, Ocampo noted that development aid banks, such as the World Bank and IMF, must be reformed since they were highly benefited from the multiple economic crises due to the very dynamics imposed by them. These imply that more often than not, half of the aid money goes to bureaucratic costs generating employment in the country where the institution has its headquarters.

Alternative forms of cooperation

Another consequence of this shifting political and economic global context and the "impact of the multiple crises" (meaning the food, energy, financial and climate crises), is a review of the nature of ODA. The representatives from Bangladesh, the ONE organization, the World Bank and the United States Agency for International Development (USAID) gave special attention to this issue. Two key issues were highlighted in the debate: the significant growth of South-South and triangular cooperation and need the to move beyond a handout mentality of international aid.

United States, France, Spain, the OECD and the World Bank accepted that improvement of development aid efficiency is necessary to achieve the MDGs by 2015. However, they understand that the existing mechanisms and institutions of cooperation for development should remain as they appear in the Paris Declaration. According to the World Bank and some countries in Latin America (Mexico and Colombia) and Asia (Nepal and Indonesia), South-South cooperation cannot be a substitute for the traditional aid model that must remain as the priority.

Various organizations such as the International Trade Union Confederation (ITUC), the Association for Women’s Rights in Development (AWID), Social Watch, the ILO together with several developing countries in Asia, Africa and Latin America and the Caribbean, indicated that the interests and objectives of ODA differ, in many cases, between donor and recipient countries, generating contradictions and delays that go against the achievement of the MDGs. They also emphasized the increase of South-South and triangular cooperation as a result of aid cuts from developed countries due to the economic crisis. They identified this growth as another factor that adds political weight to the South, also paving the way for regional integration and therefore it should be supported by international agencies. They argued that these forms of cooperation are the proper ones to make progress towards achieving the MDGs, since they are based in solidarity rather than conditionality (opposed to the traditional North-South aid model) and take into account the needs of aid recipients. They also noted that ODA should be understood as a tool that helps countries get out of economic underdevelopment, not as a mere form of money handout.

As a closure to the Forum, and leaving these discussions as an area to be explored, the President of ECOSOC, Hamidon Ali, suggested a set of objectives to achieve: cooperation should promote wider political understanding among donors and recipients, climate change aid should be increased, efficient mechanisms should be implemented, mutual accountability is needed including the participation of civil society, fragile States and African states should be given priority for ODA and South-South cooperation must be encouraged and the practice recognized within International Organizations like the UN. Finally, he said it is crucial that donor countries set ambitious goals at the UN summit in September in order to ensure compliance with the MDGs by 2015.

[1] The Paris Declaration on Aid Effectiveness, agreed in March 2005, establishes global commitments for donor and recipient countries to advance to more effective development assistance, in the context of significant increases in development assistance. The intention is to reform the delivery and management of external aid as a way to improve its effectiveness. For more information:
* Based on articles written by Facundo Villar.