Statement by Mr. Thomas Stelzer, Assistant Secretary-General for Policy Coordination and Inter-Agency Affairs to the Development Cooperation Forum - Introduction of the report of the Secretary-General
New York, 30 June 2008

Mr. President,
Excellencies,
Ladies and gentlemen,

It is an honour to introduce the report of the Secretary-General for the first Development Cooperation Forum (E/2008/69).

The Secretary-General’s report has drawn on a broad consultative process over the last two years, including the issues and analysis during the high-level fora held in Vienna in 2007 and in Cairo earlier this year.

The Forum is taking place at a time when the global economic outlook is grim. There is growing concern that a global economic downturn might lead to protectionism and jeopardize development progress. Rising food and energy prices are taking their tolls on people, especially the poorest, around the world. Climate change is making the path to sustainable development more complex and uncertain. The need for finance and technology to address these crises is increasing significantly.

Progress in the global partnership for development has been uneven. While private flows and trade continue to expand, there has not been a commensurate equitable distribution of benefits. ODA has fallen in real terms in the last two consecutive years. Most donors are not on track, and some are not even planning ahead to meet the 0.7 per cent target. Even the internationally agreed target of $130 billion by 2010 seems beyond reach.

We need to better understand the bottlenecks to scaling up aid so that we can address them urgently. We also need to move forward with mutually supportive policies on trade, debt, investment, technology and systemic issues which, combined with actions in the area of climate change and food security, would greatly enhance the impact of development cooperation.

Against this overall backdrop, I would like to underscore three key messages from the report.

First, policies in the area of development cooperation are not providing sufficient support for the realization of the internationally agreed development goals, including the Millennium Development Goals. At the midpoint in the global effort to achieve the MDGs by 2015, we have not yet managed to put these goals at the centre of either development cooperation strategies or national poverty reduction strategies.

In particular, aid allocations are not sufficiently conducive to progress towards the development goals. Aid does not flow systematically to the countries, regions and sectors where it is most needed. We need to consider introducing a more balanced approach to aid allocation across programme countries based on poverty indicators, structural vulnerability to external shocks and progress towards the internationally agreed development goals.

Regarding the sectoral allocation of aid, the attention to the social sector has been accompanied by declines in the shares of aid for infrastructure and agricultural development, which are equally critical for poverty reduction. Major increases in aid are needed in these areas, as well as for the Aid for Trade Initiative and for financing of climate change adaptation and mitigation. The current food crisis underscores the importance of global support for raising agricultural production in developing countries – an area of major neglect of the past decades. Stepped up aid must also be directed to strengthening national capacities to coordinate, manage and oversee aid. These capacities are crucial for ensuring national ownership and leadership of development cooperation, and hence, for aid’s effectiveness.

This brings me to my second point, which is that we need to strengthen the aid quality and effectiveness framework. The Paris Declaration process to increase aid effectiveness has identified key principles for international development cooperation, such as country ownership, mutual accountability and managing aid for results, in addition to improving monitorable indicators. But the negotiations did not engage the full range of stakeholders. As a result, the Declaration does not deal with several issues of key concern to programme country governments, such as conditionality.

Besides restricting policy space, conditionalities often add to transaction costs and exacerbate the unpredictability of aid. The counterproductive impact of conditionality is compounded by the persistence of tied aid. This means that the proportion of aid used to purchase goods and services from programme countries remains low, thereby limiting the effect of aid spending on promoting private sector growth in developing countries.

To address some of these concerns, efforts to promote mutual accountability at the country level should be accelerated. And the Paris Declaration targets for aid effectiveness should be strengthened by setting targets for streamlining policy conditionality and for untying aid.

This links to the third message. South-South and triangular cooperation is helping to diversify sources of financing for development cooperation. Almost all South-South development cooperation is in the form of project finance and technical assistance, with little or no conditionality attached. This makes such cooperation more attractive to programme countries than aid tied to policy changes. An estimated two thirds of South-South development cooperation is provided as loans on concessional terms. The risk of debt becoming unsustainable is thus smaller.

At the same time, there could be a more concerted effort by the countries involved to identify the lessons to be learned from South-South and triangular cooperation. The involvement of Southern contributors in policy dialogue with programme country governments at the national level could be strengthened. Another important step would be an internationally agreed definition of what constitutes aid, including the concessionality of financing.

The Development Cooperation Forum has a role to play in advancing work on each of these three sets of issues. The Forum can analyze and foster exchange of experiences on how national development strategies, aid policies and allocation practices can more successfully contribute to achieving sustainable results. It can contribute to strengthening aid quality and effectiveness as well as mutual accountability at the global and country level. This role might be enhanced by the Accra Agenda for Action in September. And the Forum may launch processes to help assess the scale, scope and effectiveness of assistance provided by non-DAC sources. In doing so, it should address major problem areas, such as fragmentation in aid-giving, the proliferation of different aid disbursement procedures and the lack of predictability in aid flows. Such unpredictability makes it difficult for recipient countries to manage their public expenditures and ensure a stable flow of resources to achieve the MDGs.

Another important function of the Forum would be to serve as the place to assess the implications of emerging issues such as climate change and food security on development cooperation.

In all its efforts, the Development Cooperation Forum should serve to strengthen the voice of programme countries, non-DAC development cooperation contributors and other partners, such as parliamentarians and civil society, in an inclusive global dialogue on key development cooperation issues. The stakes are high, and the ambitions are large, but let this first session testify to the effective role that the Development Cooperation Forum can play in creating such a dialogue.

Thank you.