Arguing the TOSSD: is the OECD’s new measure for Total Official Support for Sustainable Development a good idea?
Last week, I went to an expert group meeting to discuss a
new framework being prepared by the Organisation for Economic Co-operation and
Development (OECD)’s Development Assistance Committee (DAC) for monitoring and
measuring flows that could be considered developmental but are not currently
captured in Official Development Assistance (ODA, or ‘aid’). This new framework
is provisionally called Total Official Support for Sustainable Development (TOSSD).
The stated purpose of this framework is not to supplant ODA but to provide
transparency on other financial flows that support the new Sustainable
Development Goals (SDGs) adopted by the UN.
Now, I think this agenda
has serious risks attached – it could
undermine aid targets, incentivise the wrong kind of private investments, and
give donors false credit for supporting global public goods. But last week I
was challenged to think about what the positive side might be. I have two
1. For recipients: transparent accounting of costs and benefits?
First, from a recipient’s perspective, the main use could be
a transparent accounting for the balance sheets of donor finance: clearly
exposing both positive and negative aspects. This would provide a welcome focus
on providing recipients with better information about finance that flows to
their countries. This could help them answer key questions when presented with
a donor-supported financing package:
- What are the total financial
costs and benefits?
- What is
the cost to the recipient of the total financing package? How does this
compare to other alternatives? As Eurodad has noted, Public Private
Partnerships (PPPs), which are becoming a preferred donor-backed financing
method, are often designed
to hide this information.
- What are
the liabilities – both explicit and contingent? The nature of private
investment is that projects will sometimes fail. When that investment is in a
public service with human rights implications (such as water supply) or with major
economic consequences (such as electricity or telecoms) then the government is
unlikely to be able to let this happen. Governments will inevitably step in –
meaning that contingent liabilities are very real, and may be very large.
- What are
the overall risks and rewards? This involves getting information on many
- How short term is the finance? Is it ‘hot money’
and likely to leave rapidly if there’s a perceived problem in the country?
- What are the debt risks, including those caused
by the contingent liabilities?
- What foreign currency risks are there? Do these
risks matter in the context of the overall economic situation of the country
(countries that are already highly exposed to foreign currency risks are likely
to want to control or limit further risks).
- Are there tax implications? What can be done to
ensure that tax is not avoided or that unnecessary tax breaks are not being
- What are the overall
development impacts (both positive and negative)?
- Before (ex ante) it will be important to try to
make sure that all finance follows responsible finance standards – such as
those in Eurodad’s
responsible finance charter – to prevent harm and to maximise positive
- During and after (ex post) – it’s not acceptable
to just count an investment at the starting point. It needs to be tracked over
the course of the investment (for example, if the investment collapses and ends
up racking up costs to the government, the overall balance sheet needs to show
this negative impact).
- These thoughts side-step the elephant in the room, which is
why recipients should expect a donor-controlled body such as the DAC to be the
arbiter of questions like this, especially when they have had very little input
into the TOSSD discussions so far.
2. For donors: preventing bad incentives?
Second, from a donor’s perspective, TOSSD presents a huge
risk of bad incentives, but these could be mitigated if the accounting is
complete (covers all financing), separate (does not try to add everything
together to create a false target), and balanced (recognises negative as well
as positive flows).
- A complete picture
would mean cleaning up ODA – recognising that there are several elements in ODA
that do not fit there – such as in-donor refugee costs, in-donor education
costs, and the additional costs of tying aid in order to support donor firms. These
costs should obviously not be included in ODA – as they involve no transfers to
developing countries, and are the consequences of domestic policy decisions. If
they are to be in TOSSD, then they need to pass the development impact test –
which the additional cost of tied aid obviously doesn’t. It would also mean cleaning
up Other Official Flows (OOFs), which is currently a kind of rubbish tip for elements
of donor reporting that don’t fit into ODA. (It would be very useful to have a
proper accounting for official flows that don’t have a development purpose,
such as military aid, but OOF doesn’t provide this.)
- Separate accounting
would mean making estimates for each item separately, but avoiding the
temptation to add them all together into a single TOSSD figure. This would
prevent the danger that TOSSD will be seen as a target that donors aim to
increase. Given that many elements have both positive and negative elements in
their balance sheets, as noted above, then pushing for more TOSSD does not make
sense. It also risks a massive alteration to ODA incentives. If donors that use
ODA to leverage private finance get credit for $1 of ODA plus $20 of TOSSD
additional ‘leveraged’ finance, then there is a clear incentive to spend ODA in
this way. This is despite the problems highlighted above, and also the fact
that $1 of ODA spent on traditional public expenditure – such as education,
health and infrastructure – is, I would argue, more likely to leverage private
- Balanced accounting
would recognise that, for example, private investments may result in additional
finance initially, but may also lead to outflows over time. Failed projects
result in costs. Both sides of the financial balance sheet need to be accounted
Finally, there should be an absolute bar on attempting to
use this process to account for contributions to global public goods, as this
makes no sense unless negative contributions are also included. Why valorise, for
example, the Netherlands’ transfers to support mitigation efforts to reduce CO2
emissions from Chinese power plants, without comparing that with the
Netherlands’ own emissions from its power plants? This is an important task,
but one, I would humbly suggest, that is well beyond the remit and capabilities
of the DAC.
The problem with my suggestions above is that they are a
long way away from where some donors – for short-sighted motives – want to
push the agenda, which is to earn credit for leveraging private finance,
without considering the risks or potential negative outcomes. The question is
whether the DAC is willing to insist that TOSSD is only a good idea if it both provides
useful information for recipients, and cleans up donor accounting. The jury is
still out on that question.