Is it ODA?
[Regeling vervallen per 01-01-2016]
Factsheet – November 2008
[Regeling vervallen per 01-01-2016]
Is it ODA?
[Regeling vervallen per 01-01-2016]
DAC Members occasionally request the Secretariat’s view as to whether a particular
expenditure should be reported as official development assistance (ODA). This paper
outlines the reasoning the Secretariat uses to answer such enquiries, and discusses
some specific cases. It should not be taken as a definitive guide to ODA eligibility,
since only the DAC may determine such eligibility. Further details are provided in
the Statistical Reporting Directives (available at www.oecd.org/dac/stats/dac/directives).
Official development assistance is defined as those flows to countries and territories
on the DAC List of ODA Recipients (available at www.oecd.org/dac/stats/daclist) and to multilateral development institutions which are:
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i. provided by official agencies, including state and local governments, or by their
executive agencies; and
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ii. each transaction of which:
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a) is administered with the promotion of the economic development and welfare of developing
countries as its main objective; and
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b) is concessional in character and conveys a grant element of at least 25 per cent (calculated
at a rate of discount of 10 per cent)
Economic development and welfare as the main objective
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This is often the decisive criterion for determining ODA eligibility. In the final
analysis it is a matter of intention. But in order to reduce the scope for subjective
interpretations and promote comparable reporting, Members have agreed to limits on
ODA reporting, e.g.:
Exclusion of military aid – The supply of military equipment and services, and the forgiveness of debts incurred
for military purposes, are not reportable as ODA. On the other hand, additional costs
incurred for the use of the donor’s military forces to deliver humanitarian aid or
perform development services are ODA-eligible.
Peacekeeping – The enforcement aspects of peacekeeping are not reportable as ODA. However, ODA
does include the net bilateral costs to donors of carrying out the following activities
within UN-administered or UN-approved peace operations: human rights, election monitoring,
rehabilitation of demobilised soldiers and of national infrastructure, monitoring
and training of administrators, including customs and police officers, advice on economic
stabilisation, repatriation and demobilisation of soldiers, weapons disposal and mine
removal. (Net bilateral costs means the extra costs of assigning personnel to these
activities, net of the costs of stationing them at home, and of any compensation received
from the UN.) Similar activities conducted for developmental reasons outside UN peace
operations are also reportable as ODA, but not recorded against the peacekeeping code.
Activities carried out for non-developmental reasons, e.g. mine clearance to allow
military training, are not reportable as ODA.
Civil police work – Expenditure on police training is reportable as ODA, unless the training relates
to paramilitary functions such as counter-insurgency work or intelligence gathering
on terrorism. The supply of the donor’s police services to control civil disobedience
is not reportable.
Social and cultural programmes – As with police work, a distinction is drawn between building developing countries’
capacity (ODA-eligible) and one-off interventions (not ODA-eligible). Thus, the promotion
of museums, libraries, art and music schools, and sports training facilities and venues
counts as ODA, whereas sponsoring concert tours or athletes’ travel costs does not.
Cultural programmes in developing countries whose main purpose is to promote the culture
or values of the donor are not reportable as ODA.
Assistance to refugees – Assistance to refugees in developing countries is reportable as ODA. Temporary
assistance to refugees from developing countries arriving in donor countries is reportable
as ODA during the first 12 months of stay, and all costs associated with eventual
repatriation to the developing country of origin are also reportable.
Nuclear energy – The peaceful use of nuclear energy, including construction of nuclear power plants,
nuclear safety and the medical use of radioisotopes, is ODA-eligible. Military applications
of nuclear energy and nuclear non-proliferation activities are not.
Research – Only research directly and primarily relevant to the problems of developing countries
may be counted as ODA. This includes research into tropical diseases and developing
crops designed for developing country conditions. The costs may still be counted as
ODA if the research is carried out in a developed country.
Anti-Terrorism – Activities combatting terrorism are not reportable as ODA, as they generally target
perceived threats to donor, as much as to recipient countries, rather than focusing
on the economic and social development of the recipient.
Oda eligibility of aid to multilaterals and ngos
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Annex 2 of the Statistical Reporting Directives lists those international agencies
contributions to which are reportable as ODA. ODA coefficients are provided for United
Nations agencies which conduct part of their activities in favour of development.
These coefficients are revised every few years in consultation with the agencies concerned.
United Nations agencies have established many specific-purpose funds. These are too
numerous, and arise and disappear too quickly, to be listed in the Directives. The
same applies to national non-governmental organisations. In both cases, Members must
use their judgement as to whether contributions have an ODA character2. When in doubt,
they may consult the Secretariat, at dac.contact@oecd.org providing details of the fund in question.
The Directives also list the main international non-governmental organisations (INGOs)
contributions to which are reportable as ODA. These are increasingly numerous. Where
Members have contributed to INGOs not on this list, they should assess their ODA character
in the light of the INGOs’ aims, programmes and membership. If they believe the contribution
should be counted as ODA, they should inform the Secretariat so that Members can consider
the INGO in the annual review of Annex 2.
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2. The coefficient established for an agency partly active in development does not normally
apply to specific-purpose funds it sets up, the ODA character of which should be assessed
individually. For example, 70 per cent of contributions to WHO’s core budget are reportable
as ODA. But contributions to WHO’s bilharzia programme are 100 per cent ODA-reportable,
while contributions to its International Agency for Research on Cancer are not ODA-reportable.
Official agencies
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Official flows comprise transactions undertaken by the official sector (i.e. Government)
at their own risk and responsibility, regardless of the source of funds (taxation
of or borrowing from the private sector). Official agengies include federal, state
and local departments and agencies. The market-based transactions of central monetary
authorities, however, do not enter into the statistics.
Sometimes one official agency subsidises another. Since the subsidy is internal to
the official sector of the donor country, it is not reported as a flow. Rather, the
transaction recorded is that between the subsidised agency and the developing country.
If this transaction meets the other ODA criteria described in this paper, it is recorded
as ODA.
Official subsidies to private firms may be recorded as other official flows (OOF).
They are not considered to meet the tests of ODA, since by definition they support
activities with a primarily commercial objective.
Official subsidies to private not-for-profit organisations (‘non-governmental organisations’)
that are active in development are reportable as ODA.
Flows
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Flows are transfers of resources, either in cash or in the form of commodities or
services. Since DAC statistics concentrate on transactions likely to have a development
impact, loans for one year or less are not counted. Repayments of the principal of
ODA loans count as negative flows, and are deducted to arrive at net ODA, so that
by the time a loan is repaid, the net flow over the period of the loan is zero. Interest
is recorded, but is not counted in the net flow statistics. Where official equity
investments in a developing country are reported as ODA because of their development
intention, proceeds from their later sale are recorded as negative flows, regardless
of whether the purchaser is in a developed or a developing country.
Disbursements are measured on a cash basis, not an accruals basis, except that:
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• wherever contributions to multilateral development banks and funds are made in the
form of promissory notes, the full amount of the note is recorded at the time of deposit;
and
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• the net present value of debt relief provided by implementing a Paris Club debt reorganisation
through debt service reduction is reportable as an ODA grant in the year of the reorganisation.
Some transactions not recorded as transfers in balance of payments statistics are
nevertheless eligible to be recorded as ODA, since they represent an effort by the
official sector in favour of development. These include the costs of developmentally
relevant secondary and tertiary education and vocational training (including stipends
and travel) provided to developing country nationals in the donor country, the administrative
costs of ODA programmes, subsidies to non-governmental organisations, in donor refugee
costs and programmes to raise development awareness in donor countries.
Capital investment in the donor country is not regarded as a flow and is therefore
not eligible to be reported as ODA. This applies even to the construction and equipment
of training and research facilities related to development issues. The running costs
of such facilities may, however, be counted as ODA.
Concessional in character
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From the earliest discussions of the concept of ODA, Members agreed that it should
represent an effort in favour of developing countries by the official sector. Loans
at market terms were excluded. When in the early 1970s interest rates began rising
sharply, it was further specified that loans could only be reported as ODA if they
had a grant element of at least 25 per cent, calculated against a notional reference
rate of 10 per cent per annum.
These elements remain today. In recent years, long-term interest rates in most OECD
Member countries have fallen well below 10 per cent, so the 25 per cent grant element
level has become easier to attain. But to qualify as ODA, loans must still be concessional
in character, i.e. below market interest rates.
Where concessional and non-concessional financing are combined in so-called ‘associated
financing packages’, the official and concessional elements may be reported as ODA,
provided they have a grant element of at least 25 per cent. Such contributions must
also meet the special concessionality tests for associated financing, which are based
on market interest rates and set out in the Arrangement on Guidelines for Officially
Supported Export Credits (OECD, 2008 Revision).