CSO recommendations on the Development Assistance Committee’s Approach to Incorporating Private Sector Instruments in ODA

Added 01 Jul 2016
The Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC) aims to promote greater private sector engagement in development by including allocations to private sector financing instruments (PSI) in the calculation of member states’ official development assistance (ODA). The changes envisioned under the review process are broad and may fundamentally change the nature of ODA by considering non-concessional finance as ODA. They are also set to influence aid allocations, by incentivizing DAC members to make new ODA resources available to PSI (potentially diverting resources from other priorities or modalities), re-label existing resources as ODA (in particular resources currently reported as other official flows, or OOF), or change sector allocations of ODA (PSI tend to target sectors related to economic infrastructure and growth, rather than the social sectors).

We recognise that there is an important role for the private sector in development, and that engaging the public and the private sectors will be critical to meet the financing needs of the SDGs. To this effect, in 2015 we put forward a set of principles to inform how aid donors engage with the private sector in development cooperation. Public engagement with the private sector should be backed by strong principles to ensure that engagement effectively contributes to sustainable development, poverty eradication and inequality reduction. The DAC’s reform process offers an opportunity to develop rigorous and demanding criteria and standards to better regulate the use of aid in private sector investments, and to ensure that development motivations are not undermined by commercial motivations, or the interests of DAC members seeking to use ODA to support their own private sector.

Here, you can download the recommendations – which we address to DAC Members and the DAC Secretariat – aimed at ensuring the reform leads to a principled approach of the use of aid to leverage private finance. We hope these recommendations will be taken into consideration at the meeting of the Working Party on Development Finance Statistics (4-5 July 2016) and at the DAC’s Senior Level Meeting (October 2016).