Financing global public goods

Robin DaviesAssociate DirectorDevelopment Policy CentreCrawford School of Public Policy

13 February 2014

Structure

• GPGs – what they are, how they’re produced, which ones receive the most financing, and from what sources

• Financing trends – long-term trends in the provision of aid financing for GPGs, based on a new analysis of data from the OECD’s Creditor Reporting System (CRS)

• The changing aid context – recent changes in the context for aid, and how they might affect the financing of GPGs and/or the standard narrative about aid

• A revised aid narrative – a conservative proposal for modifying the standard aid narrative so as to accommodate and facilitate financing for GPGs, and thereby achieve other positive outcomes

GPGs important for development

• Infectious disease surveillance, control, and eradication

• Sustainable management of trans-boundary natural resources, such as the atmosphere, forests, fresh water and fisheries

• The production of knowledge for development, which both cuts across and extends beyond the above two areas

• Free and open trade?• Global financial stability?• Peace and security?

GPG funding priorities

GPG funding sources

Newer GPG funds & organisations

Major

• GAVI Alliance (founded in 2000)• The GAVI Alliance-related

International Financing Facility for Immunisation (2006)

• The Global Fund to Fight AIDS, Tuberculosis and Malaria (2002)

• The Climate Investment Funds (2008)

Other

• The Critical Ecosystem Partnership Fund (2000)• The Global Crop Diversity Trust (2004)• Numerous health-sector product development

partnerships, such as the Medicines for Malaria Venture (late 1999) and the Drugs for Neglected Diseases Initiative (2003)

• Pilot “pull” mechanisms, such as the Advance Market Commitment for pneumococcal vaccines (2006) and the AgResults initiative (2012)

• World Bank-led mechanisms such as the Extractive Industries Transparency Initiative (2002) and the State- and Peace-building Fund (2008)

GPG financing growth (1)

• DAC donor funding for GPGs grew from $4 billion annually in 2002–03 to $12 billion in 2010–11

• Multilateral spending on GPGs grew from $1 billion to $3 billion• DAC donors’ complementary expenditure grew from $12 billion to

$22 billion• Multilateral complementary spending grew from $4 billion to $7 billion• As a share of ODA from DAC donors, spending on GPGs went from

under four per cent to over eight per cent• As a share of multilateral spending, spending on GPGs went from five

per cent to 15 per cent

GPG financing growth (2)

Changing context for aid

1. Aid from traditional sources is currently declining in overall volume

2. Even without the recent volume declines, aid was becoming much less important than it was compared to other sources of finance

3. Aid from traditional sources is now competing with aid or aid-like flows from emerging economies

4. There are fewer poor countries and, as a result, more poor people in middle-income countries (MICs)

Multilateral aid in the ODA definition

Official Development Assistance (ODA) is defined as: • those flows to countries and territories on the DAC List of ODA

Recipients and to multilateral institutions which are:• provided by official agencies, including state and local

governments, or by their executive agencies; • and each transaction of which:

• is administered with the promotion of the economic development and welfare of developing countries as its main objective; and

• 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).

Reforming the GPG delivery system

1. International development organizations should adopt institutional and cross-institutional strategies for contributing to the supply of GPGs through both country and global programs

2. Need to create incentives for the pursuit of GPGs through mainstream country operations, rather than merely through global programs

3. MDBs should be enabled to offer flexible financing packages to clients, which provide sufficient incentives to undertake or modify investment intentions in favor of global public goods

4. A dedicated GPG financing facility would preferably be established at arm’s length from any existing institution, but using existing administrative structures and financing channels

Summary

• The use of aid for global public goods has grown in importance but doesn’t register in the standard aid narrative, according to which aid is a transfer of resources to poor countries for the purpose of helping those countries meet their own national development objectives

• Now that the supply of aid from traditional sources looks set to decline, along with the demand for such aid from many recipients, aid for global public goods could either expand or contract as a share of total aid (don’t ask me which way it will go…)

• Expansion or at least a maintenance of the status quo would be the better option but the disconnect between the current narrative and aid allocation practice could well become untenable

• A conservative modification of the narrative to accommodate global public goods seems feasible, without risking public support for aid, and could help clarify agency mandates and increase multilateral effectiveness

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