Working Party on Statistics

Transcription

1 For Official Use DCD/DAC/STAT/M(2002)1/PROV DCD/DAC/STAT/M(2002)1/PROV For Official Use Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 30-Jul-2002 English - Or. English DEVELOPMENT CO-OPERATION DIRECTORATE DEVELOPMENT ASSISTANCE COMMITTEE Working Party on Statistics SUMMARY RECORD OF THE 52nd MEETING held on 4-5 June 2002 (Note by the Secretariat) This is the full meeting Record. Reporting Directives for the Creditor Reporting System. Reporting on the DAC Questionnaire. Review of the List of ODA-eligible Organisations. ODA eligibility of the Clean Development Mechanism. Creditor Reporting System: annual Report; progress on Improved Reporting of External Debt; report on Aid Targeting the Rio Conventions; revision of CRS Purpose Codes to collect information on Traderelated Technical Assistance and Capacity Building. ODA Coverage: current Statistical Issues in the DAC; counting as ODA the value of tax concessions for donations to NGOs; review of the DAC List of Aid Recipients. Programme of Work and Budget for English - Or. English Contact person: Brian Hammond Tel: (33-1) Fax: (33-1) brian.hammond@oecd.org JT Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format

2 SUMMARY RECORD OF THE 52 ND MEETING OF THE DAC WORKING PARTY ON STATISTICS Paris, 4-5 June 2002 Item 1: Election of Chair and Vice-Chair 1. On the proposal of the European Commission, seconded by Germany, the meeting elected Mr Fritz Meijndert of the Netherlands as Chair and Ms Anette Simonsen of Norway as Vice-Chair. Item 2: Adoption of the Agenda [DCD/DAC/STAT/A(2002)1] 2. The agenda was adopted. Item 3: Approval of the Summary Record of the 51st Meeting [DCD/DAC/STAT/M(2001)1] 3. France proposed some amendments to the record, especially as regards the refugee costs item. These were discussed and agreed with the Secretariat. France also requested clarification of the status of a meeting not chaired by a Member. After checking with the Directorate for Legal Affairs, the Secretariat (Mr Hammond) advised that there was no legal irregularity with the Secretariat chairing a meeting. He would, however, change the designation to Acting Chair where appropriate. With these changes, the record of meeting was agreed. 4. The United Kingdom pointed out that at the last meeting of the Working Party on Statistics, Members had agreed to replace gross national product (GNP) with gross national income (GNI), and wished to know whether the impact of this change or the revision of the ODA/GNP target had been discussed at the International Conference on Financing for Development in Monterrey. The Secretariat (Mr Hammond) stated that he was not aware of any such discussion, but that EU Members made specific undertakings in relation to ODA/GNI and the UN had agreed with GNI for the Millennium Development Goal indicators. Item 4: Reporting Directives for the Creditor Reporting System [DCD/DAC/STAT(2002)1] 5. The Secretariat (Ms Benn) thanked Members for their active participation in the revision of the CRS Directives. The work had started in a brainstorming session in July The Working Party had discussed draft directives in informal meetings in November 2000 and February 2001 and had agreed the major part of the Directives at its meeting on 6-7 June Proposals for specific reporting instructions on contributions to NGOs, debt reorganisation, non-export-credit other official flows and tying status in the context of the DAC Recommendation on Untying ODA to LDCs had been discussed at the informal meeting in April 2002 and were now presented for approval. 6. The Secretariat noted that the revised CRS Directives superseded instructions in DCD/DAC/TD/ECG(90)1 except for reporting on export credits. They would be implemented from 1 July 2002 after being approved by the DAC. The changeover period was expected to vary from one Member to another but hopefully would not last more than 18 months. The Secretariat would shortly circulate an electronic version of the Directives to facilitate the process. It proposed to review the Directives in the 2

3 light of their implementation in two years. A User s Guide was on the Secretariat s work programme for The Working Party approved the Directives presented in DCD/DAC/STAT(2002)1 with the following comments and amendments: Paragraph 4: At the request of France, the meaning of the word confidential was clarified in a footnote copying text in paragraph 19 of DCD/DAC/TD/ECG(90)1. Grey box after paragraph 29: To avoid ambiguity, the first paragraph should read as follows: Tied aid credits (tied and partially untied loans and grants and associated financing) are subject to disciplines concerning their concessionality levels, recipient countries and developmental relevance. These disciplines are designed to ensure that aid is not used for commercially viable projects and that recipient countries receive good value for money. Paragraphs 61-62: Germany requested rewording the instructions to make clear that Members were responsible for reporting data permitting the compilation of the Reference Indicators Matrix whereas it was up to the Secretariat to calculate the matrix. Germany also pointed out that it was not always possible to report tying status project by project, but aggregate data could be estimated. It was therefore not correct to consider as tied contributions for which tying status had not been reported and, consequently, the first sentence of paragraph 62 should be deleted. Several Members supported Germany s proposals, noting however the importance of keeping the CRS Directives in line with the DAC Directives. The Working Party agreed to edit the text in paragraphs as follows: 61. The tying status items should not be completed for administrative costs (activities with purpose code 91010). Transactions are reportable as tied unless the donor has, at the time of the aid offer, clearly specified a range of countries eligible for procurement which meets the definitions of untied or partially untied aid (see para. 29). For activities for which the tying status is reported, the sum of the amounts reported as untied, partially untied and tied should equal the total amount of these activities. 62. For the purposes of monitoring the 2001 DAC Untying Recommendation, Members that can report the tying status of free-standing technical co-operation (FTC; as indicated at item 31) at the level of individual activities in the CRS are invited to do so - in particular for FTC to Least Developed Countries (LDCs). Members without full CRS coverage of the tying status of their bilateral ODA to LDCs should report an annual aggregate of their total bilateral LDC ODA (including FTC) that is untied. Paragraphs 70-71: Germany suggested making a cross-reference to the definition of Associated Financing in Annex 2. Japan suggested giving reporters the option of using different transaction numbers for the components of an Associated Financing package provided the link was explained in a remark under item 26. This was agreed. Paragraphs 103 and 112: Germany pointed out that instructions for reporting commitment data on cancellation and conversion of ODA debt were not in concordance with the Handbook for Reporting Debt Reorganisation on the DAC Questionnaire [DCD/DAC/STAT(2000)16]. The amount reportable as a commitment for debt forgiveness should be the same in both systems to permit automatic generation of DAC commitment aggregates from the CRS. The Secretariat explained that reporting only forgiven and converted interest avoided overstating total ODA commitments over time and suggested that question of reviewing the DAC Handbook be left for 3

4 later consideration. The Working Party agreed with the original text of paragraphs 103 and 112, noting their inconsistency for the time being with the DAC Handbook. Paragraph 108: Reiterating its wish to ensure maximum consistency in reporting on debt reorganisation in the DAC and on CRS Form 2, Germany proposed specifying that the amount to report as a commitment for rescheduling of OOF debt as ODA included any principal and interest to be rescheduled in the future, as stated in the DAC Handbook. This was agreed. Paragraph 159: The Working Party agreed to change the rules of disclosure of non-export-credit OOF data. The data remained confidential at the level of individual activities, but no restriction was placed on the disclosure of commitment data on non-export-credit OOF aggregated by DAC5 sector within a recipient from each donor, provided they combined at least three activities. 8. The Working Party noted that amendments approved at its meeting on 6-7 June 2001 did not appear in the document. The Secretariat apologised for this mistake and circulated the correct version of the paragraphs in question at the meeting. It would make sure that they were incorporated in the final version of the Directives, which should also include an updated version of the list of Donor and Agency codes (Annex 3) and the DAC List of Aid Recipients (Annex 4). Norway suggested that the numbering system of the purpose codes be reviewed for internal consistency when the Directives were reviewed in The United Kingdom and the Netherlands thanked the Secretariat for the work on the Directives and expressed their appreciation for the consultative drafting process. Item 5: DAC Reporting Item 5.1: Reporting on the DAC Questionnaire [DCD/DAC/STAT(2002)2 and Room Document 1] DAC Reporting 10. The Secretariat (Ms Ahmad) urged Members to complete their DAC reporting by end-september at the latest, in order for the data to be processed, verified and corrected where necessary, for inclusion in the DAC publications. Portugal and Korea said they would report in July as usual, whereas most other Members confirmed they would complete their reporting by end-september. Australia and Germany expect to submit their tables in October, and France stated it would try to report by end-november. Following the United Kingdom's suggestion, it was agreed that the Secretariat would circulate to Members the table on their reporting performance on the DAC questionnaire, before it was presented to the Senior Level Meeting. 11. As an alternative to filling in the Excel tables provided for the DAC Questionnaire, the Secretariat had initiated a DAC Standard Data Format (SDF) to facilitate reporting. Finland (see Room Document 1) and Switzerland had already adopted this format and would continue to use it. Austria, Belgium, and the Netherlands may move to SDF reporting in the near future and the European Commission was considering doing so for its 2003 reporting. While a majority of other Members had no immediate plans for SDF reporting, several stated they were considering this reporting option. The Secretariat (Ms Ahmad) was at Members disposal for any questions and assistance. 12. Although reporting on certain policy-related items improved slightly compared to the previous year, there were still many gaps concerning data on aid through NGOs. Members were encouraged to provide these missing amounts even if they are late. Belgium, Canada, the European Commission and the 4

5 Netherlands stated they would be able to provide data on aid through NGOs this year. The United Kingdom produced these figures internally but could only provide them at a later date. France, Japan, and the United States were working on improving reporting on this item. Portugal pointed out that this item was not relevant as its aid was generally provided only to, and not through, NGOs. Private Flows 13. Several Members did not provide a detailed country breakdown of private flows on Table DAC 4, which constitute a major aspect of development financing, making it impossible for the Secretariat to compile meaningful and complete data on individual aid recipients net resource inflows. The Secretariat (Ms Ahmad) reaffirmed that detailed data on private flows were treated as confidential and asked Members not providing this detail to check again with their Central Banks and see whether this information could be obtained. Norway suggested that a letter from the Secretariat, explaining its data needs and confidentiality arrangements, might be helpful in reassuring Central Banks and encouraging them to provide better data. 14. Finland indicated it would contact its Central Bank during the summer. Greece said it was discussing how to obtain detailed data with its Central Bank, which already provided FDI data to the OECD. The Netherlands had also initiated discussions with its Central Bank. Australia saw no prospect for better reporting. Canada could only provide detailed country data on non-bank export credits, but not on FDI and bank data. Denmark and Switzerland stated that they could not obtain any more detailed data from their Central Banks due to a policy protecting the identity of small investors. Suppression of certain items on the DAC Questionnaire Table DAC Members approved the Secretariat s proposal to abolish the following memorandum items on Table DAC 1 since reporting was incomplete and relevant commitment data could be found in the CRS: Assistance for democratic development (code 202) Contributions to combating narcotics (code 204) Assistance for demobilisation efforts (code 209) Food Aid through the UN (code 220) Food Aid through the EC (code 225) Total contributions to combating narcotics (including non-oda, code 203) Types of aid (columns) on Table DAC There was no consensus to abolish the columns on types of aid on Table DAC 5, even though aggregate data were available in Table DAC 1 and the detail by sector in the CRS. Norway pointed out that the columns could be used to help compile Table DAC 1, and suggested that the interlocking structure of the statistics made them more robust. Furthermore, Members expressed a need for clarification of the classifications used. The Chair and Vice-Chair suggested they would review these and propose a more relevant breakdown of types of aid. Table DAC Members agreed to suppress Table DAC 10 on technical co-operation personnel by recipient country. 5

6 18. The Secretariat (Ms Ahmad) said Members should feel free not to report the suppressed memo items on Table DAC 1, or Table DAC 10 for 2001 flows. However, if their systems generated these automatically, there was no need to make changes to suppress the reporting for this year. The 2003 DAC questionnaires on 2002 flows would incorporate the changes. Reporting technical co-operation expenditure and personnel on Table DAC Only Belgium, Canada, Denmark, France, Greece, Japan, and Korea completed Table DAC 9 last year and intend to continue reporting. Germany and the Netherlands would submit their missing Tables DAC 9. The United States would try to report on 2001 flows. 20. Switzerland would look into reporting aggregate data this year, and Italy proposed to provide data only on its core aid programme. The European Commission said it might be able to report in two or three years, after its information systems were revised. 21. Australia, Austria, Finland, Portugal, Sweden, the United Kingdom did not foresee reporting Table DAC 9 on the grounds that the data were resource intensive, came from many sources, were difficult to obtain and incomplete. Norway found the table not really relevant, since it only funded a handful of TC personnel. 22. In response to Belgium s proposal to abolish the gender disaggregation on Table DAC 9, the meeting accepted the suggestion of the Secretariat (Mr Hammond) to consult with the Working Party on Gender Equality before taking this step or proposing other changes to Table 9. Item 5.2: Review of the List of ODA-eligible Organisations [DCD/DAC/STAT(2002)3] 23. The Secretariat (Ms Ahmad) introduced the document and invited Members views on the changes proposed to Annex 2 of the DAC Statistical Reporting Directives on the List of ODA-eligible organisations. Any changes agreed would be reflected in a revised List to be posted on the internet Members agreed to add the following four organisations to Annex 2: International Tropical Timber Organisation (ITTO), United Nations Mine Action Service (UNMAS), Common Fund for Commodities (CFC) and Médecins Sans Frontières (MSF). Norway was concerned that adding ITTO to the List might create pressure and a precedent to include other commodity organisations, and the Netherlands and the United States stressed the need to examine each commodity organisation on a case-bycase basis. Only those organisations whose mandate and activities met the purpose test of ODA should be included. The Secretariat (Mr Scott) agreed that it would be necessary to examine each of these organisations thoroughly, since they had been set up with the dual motives of commodity market stabilisation and commodity industry development, and since some of the commodities involved were also produced in developed countries. On this basis, Norway later confirmed it would accept adding ITTO. 25. There was no consensus to include the International Criminal Court (ICC), the United Nations Office of the High Commissioner for Human Rights (OHCHR), the International Work Group for Indigenous Affairs (IWGIA) and War-Torn Societies International (WSPI). France stated that it was too early to decide on whether or not to consider ICC for inclusion on the list as the Court was not yet operational. Concerning OHCHR, France pointed out that this organisation had more and more 1 See: 6

7 development related activities and Belgium, the Netherlands and Spain wished to include this organisation on the List. The Netherlands stated they wanted to include IWGIA and Norway also wished to include WSPI. However, Germany, the United Kingdom and the United States agreed with the arguments in the document not to include these organisations. The Secretariat (Mr Hammond) suggested that if further consideration were to be given to including OHCHR and IWGIA on the list, then ODA coefficients might have to be considered given the breadth of these organisations mandates. 26. The Secretariat (Mr Hammond) recalled that it had been intended to revise the ODA coefficients applied to certain multilateral organisations. It had not yet done this, both because of pressure of work and because the revision of the DAC List had the potential to invalidate any calculation of the ODA share of the agencies activities. France did not accept these reasons, especially in relation to the Global Environment Facility, where it reported that the focus on developing countries had intensified, meaning that a higher ODA coefficient was necessary. The Secretariat stated that new coefficients for GEF would be proposed in time for reporting 2003 reporting on 2002, which was the earliest the new coefficients could have been applied in any case. 27. It was agreed that Members had until 30 March 2003 to submit any new proposals and relevant background information for Annex 2, which would then be considered at the next meeting of the Working Party on Statistics. Item 5.3: ODA eligibility of the Clean Development Mechanism [DCD/DAC/STAT(2002)4] 28. The Secretariat (Mr Scott) introduced this paper. He recounted decisions by various bodies that suggested that expenditure on projects for which donors received carbon credits should not be recorded as ODA. He noted, however, that none of these decisions was absolutely conclusive on the matter, and stressed that only the DAC was entitled to decide on ODA eligibility. 29. If no decision could be reached, the normal procedure was for the status quo to apply, but Mr Scott observed later in the discussion that the status quo was not clear either. On one view the status quo was that projects in such fields as power generation or forestry had long been reportable as ODA, and should continue to be so. On the other hand, one could see CDM projects as a new type of project which could provide financial benefit to the donor and so could not be reported as ODA until the DAC made a positive decision to that effect. In this situation it would be most unfortunate if no interim position on ODA eligibility could be agreed, especially since the Marrakech agreement provided for the possibility of obtaining credits even for expenditure dating back to Denmark, Finland, Germany and the Netherlands agreed with the proposal in the paper that expenditure on CDM projects for which donors received carbon credits should for the time being not be reportable as ODA. Denmark and Germany (supported on this point by Australia) highlighted valuation problems, especially if donors tried to split projects into ODA and CDM components. Denmark and the Netherlands believed that if CDM projects were to be allowed as ODA, then the value of any CDM credits obtained would have to be deducted from ODA. 31. Australia, France, Japan and Spain disagreed with the proposal. They said it was premature to make even an interim decision at this stage. The mere fact that a Member applied for a carbon credit did not mean that the main objective of the relevant expenditure was to meet its Kyoto target: rather, activities could have multiple motives. 32. Japan believed that ODA funding might be appropriate for CDM projects that were environmentally desirable but economically unviable, and reported that the Secretariat of the UN 7

8 Framework Convention on Climate Change had confirmed that ODA funding was not excluded from the CDM. Japan believed that the Secretariat had inappropriately invoked the consensus rule in the paper, and should not have taken sides on the issue. It would be premature to agree to deduct the value of carbon credits from ODA at this stage: further discussions were necessary with the Working Party on the Environment, the Secretariat of the UN Framework Convention on Climate Change, and possibly EPOC. 33. France formally registered its disagreement with the Secretariat s suggestion that, until there was a consensus to the contrary, ODA reporting should not include expenditures on projects for which carbon credits were sought. France also believed that the EU decision referred to in the paper only applied to the purchase of carbon credits under emission trading arrangements, and did not prohibit EU Members from obtaining carbon credits from projects they funded by ODA. 34. The Secretariat confirmed with Members that it was for the DAC, not the UNFCCC, to rule on ODA eligibility and undertook to consult the UNFCCC and the WP-ENV in order to develop fresh proposals on this issue for consideration by the DAC in the autumn. Item 6: Creditor Reporting System Item 6.1: Annual Report on the Creditor Reporting System [DCD/DAC/STAT(2002)5] 35. The Secretariat (Mr. Grolleau) presented the annual CRS report and mentioned the new improvement in the coverage of bilateral official development assistance (ODA) commitments reported on Form 1, compared with the DAC s aggregated statistics. For the period under review (2000), the ratio was equal to or better than 95% for both geographical and sectoral coverage. Because of the high coverage ratio and the quality of the data over a significant period, it was possible to satisfy the definite interest in special studies. 36. Reporting on disbursements had continued to improve and had made for new developments (Netherlands Interdisciplinary Demgraphic Institute, FAO), but because coverage of grant disbursements was inadequate, these data could not be used to reply satisfactorily to requests for sectoral and geographic analyses of disbursements. The Secretariat would be contacting Members whose reporting was incomplete or lacking. 37. Coverage of Official Aid flows had deteriorated in The main reasons for this unsatisfactory result had been identified and the Secretariat was considering a number of ways in which Members could be approached with the object of improving the situation. The Secretariat (Mr. Grolleau) mentioned the use of on-line CRS data to analyse aid flows to CEECs/NIS in preparation for the Conference of European Environment Ministers. Members would be consulted directly by the Environment Directorate to confirm and possibly add to the list of activities reported to the CRS for CEECs/NIS. 38. Coverage of Other Official Flows remained difficult to assess and did not appear to have improved. Members were invited to contact the Secretariat to ensure consistency between their reporting in the DAC Questionnaire and in the CRS. The new Reporting Directives for the CRS provided fresh clarification on the definitions of the different types of financing that fell into this category, so progress was expected. 39. Information continued to be disseminated via the traditional methods involving publications, but was also being spread more widely thanks to the manifold possibilities opened up by the Internet. The special studies were available on the DAC site; public information on individual activities was available 8

9 on-line and specific sites were already in existence or being constructed (Rio, Mali, disbursements by sector, WTO). Members receiving requests for information concerning them, and already reported to the Secretariat, were invited to refer inquirers to these web pages. Item 6.2: Progress on Improved Reporting of External Debt [DCD/DAC/STAT(2002)6] 40. The Secretariat (Ms Guz) gave an update on reporting on outstanding bilateral loans. She thanked Members for the many improvements in reporting over the last three years, particularly regarding coverage. She reminded Members that Form 2 data are required by end-march for the compilation of the May edition of the quarterly publication Joint BIS-IMF-OECD-World Bank statistics on external debt, and asked those Members not yet fully reporting their OOF loans to start doing so. Item 6.3: Report on Aid Targeting the Rio Conventions [DCD/DAC/STAT(2002)7] 41. The Secretariat (Ms Benn) thanked Members for their efforts to collect data on aid targeting the Rio Conventions. Twenty Members had contributed to the study which made it representative. Before making the data available to interested users, the Secretariat wished to verify if Members agreed with the data analysis presented in Annex 1. Comments were invited by 21 June 2002 at the latest, so that a document could be prepared for distribution at the Johannesburg Summit late in August. 42. The Secretariat invited discussion on future data collection on the Rio markers. In its view, it was preferable to keep regular CRS reporting as simple as possible and to conduct special studies when needed. The quality of data collected this way could be expected to be better than if Rio markers were introduced in standard reporting requirements. The Secretariat noted that comments on future data collection could also be made later on, in writing and at the meeting of the Working Party on Development Co-operation and Environment in November. 43. Finland and the Netherlands stated that they did not foresee any problems in publishing the data in the form suggested in Annex 1, but would confirm this before 21 June. France said it needed to verify the data it had reported. Sweden requested that tables and charts in Annex 1 explicitly mentioned that they were on a commitment basis. The Netherlands noted it intended to include the Rio markers in its internal reporting system. Norway and the United States said their preference was for special surveys. Item 6.4: Revision of CRS Purpose Codes to collect information on Trade-related Technical Assistance and Capacity Building [DCD/DAC/STAT(2002)8] 44. The Secretariat (Mr. Hammond) noted the current political enthusiasm for increasing traderelated technical assistance and capacity building. Mr. Hammond reported on the Secretariat s collaborative efforts with the WTO in implementing the Doha Development Agenda database. Referring to the joint letter from the Secretary-General of the OECD and the Director General of the WTO, he presented the methodology and the two-stage timetable (2002 and 2003). The Secretariat explained that this work should for the most part be done by trade experts, with the support of DAC statistical correspondents. It was also indicated that the data would be stored in an independent database, linked to the CRS by the project identification number. 45. In this framework, document DCD/DAC/STAT(2002)8 proposed the addition of four new codes under section 331 Trade Policy and Regulations. The document also proposed the revision of codes and In response to a question from the United States, and to proposals from Germany and the Netherlands, the Secretariat explained that current codes and would be merged under new 9

10 code 33110, and agreed to add references to wholesale/retail trade and trade promotion to the description of the new code Once these changes were made, the new codes and revisions proposed in the document were accepted by the WP-STAT. In response to a question from Japan, the Secretariat explained that these changes would not affect table DAC In regard to the Doha codes, the United Kingdom had submitted the codes to its trade experts, who had judged that most activities could fall under several codes. Germany and Japan felt that there were too many Doha codes in relation to the number of projects. The Secretariat explained that, whereas activities might fall under several different codes, they had to be divided up between them. In addition, the Secretariat explained that the Doha codes were linked to WTO mandates and had been established through WTO negotiations in which the DAC Member country governments had taken part -- a situation rendering any proposal for new changes to the codes at this stage difficult. 47. The Secretariat also explained that Members had requested that the Doha codes be structured for incorporation into the CRS. For the sake of coherence, the Secretariat had amended the Doha codes, replacing codes 33120, and respectively with codes 33121, and In addition, the description of code was changed to read Trade Facilitation Procedures. 48. The United States, having worked on a similar project for two years, had grasped the extent of the difficulties involved, even for trade experts. Germany explained that it would have difficulty obtaining the 2002 data because of its federal structure, and might have to submit provisional data, to be replaced at a later date by the final CRS data. The EC asked for clarification on how the study s results would be distributed. Norway, while acknowledging the advantage of having the DAC Secretariat co-ordinate this type of work, felt that the Secretariat should make more allowances for the potential reporting difficulties of DAC Members when it negotiated with other organisations. Norway felt that the allotted time for verifying data was too short, threatening the quality of the data. The Secretariat recognised this limitation, but felt that improvements could be made during the second stage in Item 7: ODA Coverage Item 7.1 Current Statistical Issues in the DAC [DCD/DAC(2002)17/REV1, DCD/DAC(2002)4 and Room Document 2] Item 7.2 Counting as ODA the value of tax concessions for donations to NGOs [DCD/DAC/STAT(2002)9 and DCD/DAC/A(2002)9/FINAL/RD1] 49. Several Members updated their responses to the proposals in DCD/DAC(2002)4, and a matrix summarising all responses to date is at attachment A. 50. Introducing this item, the Secretariat (Mr Scott) referred to Members previous discussions of the issue at the informal meeting, and pointed out that the main arguments for and against counting tax concessions as ODA were summarised in DCD/DAC/STAT(2002)9. He wanted to draw attention to one particular point. This was that tax effects were on the revenue side of national accounts, whereas flows traditionally measured only expenditures. He therefore suggested that Members favouring counting tax concessions as ODA faced the challenge to: Explain the logic of counting as an official flow the effect of action which took place before funds became official. Suggest how a decision to count tax deductions as ODA could be justified, given that all other tax effects mentioned in paragraph 9 of the referenced paper would continue to be excluded. 10

11 51. France described these arguments as technocratic and suggested that since fiscal measures generated a flow from north to south, they should be counted as ODA. 52. Spain made the following points: The economic effect of a tax concession was the same as that of an explicit subsidy payment. The argument some Members had made that the NGO community might resent having some of their flows attributed to the official sector should be rejected since the NGOs had no standing in determining the rules for ODA reporting. The claim that tax concessions were not flows was beside the point, since cancellation of private debt also generated no flow, yet was recorded as ODA. [The Secretariat later explained that debt cancellation changed the sector of a flow that had already occurred. The present procedure was therefore to make a negative entry against the private sector and make a new entry under ODA grants. The two entries balanced in respect of loan principal, yielding no new net flow.] Rather than raise problems with the proposal, the Secretariat should have undertaken technical work to enable the concessions to be counted. It was no harder to measure concessions than expenditures, and Spain already had the necessary data. The UK Gift Aid scheme, under which taxpayers earmarked part of the taxes they paid for designated NGOs, was allowed as ODA. Since tax concessions achieved the same result at lower administrative cost, they should be ODA also. 53. Italy supported France and Spain, adding that the recent International Conference on Financing for Development had placed special emphasis on increasing public-private partnership. How could this be encouraged without appropriate tax deductions? 54. Germany, the Netherlands, the United Kingdom and the United States opposed counting tax concessions as ODA: The UK and the United States believed that the Secretariat was right to warn Members of the possible consequences. The UK also stated that it had consulted Eurostat, which advised that foregone revenue was not treated as expenditure in EU statistics. Germany and the United States did not agree that counting tax concessions as ODA would increase flows; rather, it would simply transfer part of the flows now reported as private into ODA. A key question for the United States was the extent to which it was desirable to extend the tentacles of government into private activity. Germany and the UK did not agree that the calculation would be simple, since assessing the effect of foregone revenue required knowledge of what the funds would have been used for had they been collected. Denmark added that governments that granted tax concessions generally found a way of making up the shortfall through other tax collections, so the question arose whether the loss being measured was net or gross. 55. The Netherlands noted that further discussion of the political aspects of this question would take place before and at the Senior Level Meeting. It was proper that the Working Party should point out the possible pitfalls of entering previously uncharted territory. 11

12 56. Australia had some sympathy with the position of Italy and Spain, but also agreed with Germany that the potential benefits of counting this assistance might have been overestimated. Australia pointed out that the paper offered both the possibility of further discussion, and the addition of a memo item to cover the share of private flows that might be attributed to tax concessions, and that these need not be mutually exclusive. The Netherlands supported adding a memo item, but Germany, Japan and the United States opposed it, citing calculation problems and the associated administrative burden. Japan added that it saw no need for any further review of the question, and suggested that those Members who so wished should simply calculate the amount foregone and publicise this at their own discretion. 57. The Secretariat (Mr Hammond) observed that the proposal represented the first attempt to extend the boundary of official within the definition of ODA, and would contradict the underpinning methodology of DAC statistics, namely the balance of payments and national accounts. Nevertheless, to clarify the amounts involved and facilitate further discussion of this issue, the Secretariat would send out a request to Members for any data they might have on the value of tax concessions for private contributions to NGOs. 58. The Chair would report on the discussion to the DAC to assist it in preparing a more policyoriented debate at the Senior Level Meeting. The Chair also reminded Members of the request in the agenda to notify the Secretariat by 21 June 2002 of the threshold levels economic internal of return (EIRR) required for domestic public investments. Japan noted, under other business, that it would not notify its EIRR as it did not want to change the ODA discount rate. Item Review of the DAC List of Aid Recipients [DCD/DAC(2002)16 and Room Document 5] 59. The Secretariat (Mr Scott) reviewed the main points of the background paper and made two updates: The effect of adding the Part II CEEC/NIS to the list of ODA recipients would increase Members bilateral ODA by about $3 billion per year, as stated in the paper. But there were also significant contributions from multilateral agencies, especially the EC. If contributions to these agencies were to be counted as ODA, then the total increase in ODA would be about $5 billion annually. At the DAC meeting on 6 May 2002, an additional option had been floated: using the UMIC threshold of about $3 000 p.a. of per capita income as the cutoff for ODA eligibility. The effects of both this option and the option of using the HIC threshold were set out by Member in the Room Document. 60. Belgium suggested that future presentations should show the per capita income of the CEEC/NIS on Part II so that Members could see which countries would be eligible for ODA under each method. France and Japan expressed reservations about relying solely on World Bank income thresholds, which were not necessarily as objective as they might seem. Other measures of development status might also be examined: a point supported by the Netherlands. 61. Several Members highlighted the possible political sensitivities of changing the List in a manner that would increase the apparent level of ODA so soon after promises made at the Monterrey conference to boost the real level of aid. Japan said there was no evidence that the reasons that had led to the two-part list were not still valid, and that unless such evidence was forthcoming, the list should be reviewed according to the established procedure. Canada suggested instead that the list could remain as it was for another year while options were examined. 12

13 62. The Chair stated that the record of the discussions would be conveyed to the DAC together with additional information that might be useful in advancing discussion of the issue. 63. The Meeting agreed to the proposal to change the acronym LLDC to LDC, in conformity with UN practice. In answer to a question from Germany, the Secretariat (Mr Hammond) agreed to examine possible new abbreviations for less developed countries, which had hitherto been shortened to LDC. 64. Portugal asked when East Timor could be added to the list of Least Developed Countries. The Secretariat (Mr Scott) explained that the LDC list was maintained by the United Nations. He added that DAC practice to date had been to update the LDC list as soon as a change was made, whereas changes in the other income categories were only made at the time the List was reviewed. Item 8: Programme of Work and Budget for The Secretariat (Mr Hammond) introduced the paper. He noted that the format was taken from the main DAC programme of work and budget, which was still under preparation, and that the paper also gave a résumé of the conclusions of the informal meeting of the Working Party in April He invited Members to comment on the programme, on the record of the issues, and on the proposal to proceed with some of them in 2003 in preparation for an informal meeting in early The Netherlands agreed with the work programme, but wanted the priorities to be indicated. They regretted that the statistical review would not take place and would welcome an update to Is it ODA?; perhaps Should it be ODA? They asked if there was an indicative way of recording planned volume increases and policy plans, given the HLM focus on medium-term predictability of aid flows. Denmark supported the need for adequate statistical resources in the Secretariat. France agreed providing that the work is what Members want, but had reservations on that latter point, as items such as the DAC List, ODA reporting issues and CDM were not mentioned in the paper. They regretted that the budget figures were not included. They wanted the last sentence of Item 1.4 in the annex referring to statistical credibility to be removed and felt that only Part 1 resources should be used to fund missions. Spain wanted the tax issues to be mentioned in the PWB and accepted that Members should fund when they call for special advice a service that they had found useful in the past. Austria commended the work of the Secretariat, but urged it to be more modest and to concentrate on basic activities. They were interested in how DAC was contributing to UN, IMF and WB efforts on reporting on MDG Goal 8. They noted that WP-STAT had a role to keep ODA simple and to be careful in interpreting political pressure to rearrange reporting. 67. The Chair agreed that the ODA reporting issues should be mentioned specifically and noted that he would raise these issues when reporting to the DAC at its meeting on 17 June. The Secretariat (Mr Hammond) said he would circulate the budget figures and a text, amended in the light of the discussion, for comments by 12 June. He noted that DCD/DAC(2002)8 had provided an interpretation of the ODA commitments made before and at Monterrey and requested Members provide details of new announcements so that the paper could be updated periodically. Item 9: Other business 68. The Netherlands advised that in changing its reporting system it was housing on the MDGs Rio and Dutch policy goals. A description (in English) was available by on request. 69. The Chair noted that he would be asking the DAC to be clearer in specifying their requirements, as otherwise political and technical issues get mixed up. 13

14 70. It was agreed that the next meeting would be on 9 and 10 June 2003 followed by an AiDA participants meeting on 11 and 12 June to which WP-STAT Members would be welcome. 14

15 ATTACHMENT A: MEMBERS' COMMENTS ON POSSIBLE CHANGES IN THE RECORDING OF ODA (UPDATED JUNE 2002) DCD/DAC/STAT/M(2002)1/PROV A. RECORDING THE EFFECT OF TAX MEASURES 1. Deducting from ODA income tax paid by technical co-operation personnel 2. Counting as ODA the value of tax concessions for contributions to NGOs B. CHANGING THE VALUATION OF LENDING AND DEBT RELIEF 3. Revising the discount rate used to determine the ODA-eligibility of loans 4. For loans, counting only the grant equivalent as ODA 5. Valuing debt relief in terms of the benefit to the aid recipient Australia No No No Further analysis on rationale, feasibility and impact required C. ALTERING THE CATEGORISATION OF FLOWS 6. Counting earmarked funding to multilateral orgs. as multilateral rather than bilateral 7. Counting funding of GPGs separately from ODA Explore further Satisfied with the existing approach Austria No comment No comment No Accepts the present methodology but are open for discussion GPGs need to be clarified Belgium No Yes Yes Yes Yes No No comment Acceptable if no repayments are recorded Canada No No Yes No No Yes Complicated and mixes flows with stocks; investigate further Use rule of thumb; more complex, accurate calculations not worth the effort Denmark No No Yes No No Yes Undecided In favour of pursuing discussions Finland No No No No No No Yes If taxes were to be considered then must be systematically New category for GPGs exceeds DAC responsibility But open for discussion France No Yes No No No No No Germany No No No No No Maintain credibility of ODA but open for discussion Concept of flows would be abandoned GPGs need to be clarified and definition agreed on Ireland No No comment No comment No comment No comment No comment Italy No Yes No No No No High per cent of projects for GPGs fall within ODA Japan No No No No No Yes No 15

16 A. RECORDING THE EFFECT OF TAX MEASURES 1. Deducting from ODA income tax paid by technical co-operation personnel 2. Counting as ODA the value of tax concessions for contributions to NGOs B. CHANGING THE VALUATION OF LENDING AND DEBT RELIEF 3. Revising the discount rate used to determine the ODA-eligibility of loans 4. For loans, counting only the grant equivalent as ODA 5. Valuing debt relief in terms of the benefit to the aid recipient C. ALTERING THE CATEGORISATION OF FLOWS 6. Counting earmarked funding to multilateral orgs. as multilateral rather than bilateral 7. Counting funding of GPGs separately from ODA Netherlands No No Needs further discussions Needs further discussions Needs further discussions Needs further discussions Are there new arguments to pursue the discussion? Maintain DAC conclusions of 1993 New Zealand No comment No comment No comment No No comment Not totally opposed but concerned about the practicality of reporting Norway No No No comment If taxes were to be considered then they must be systematically; concerned with practicality of reporting Willing to discuss Problematic regarding concept of flows Sec. needs to pursue the issue with agencies most concerned Portugal No No No No No No Spain Yes No No Yes Conducted a study to deduct income tax WP-FA is examining the issue Sweden No No No No No Sec. should propose an alternative methodology Switzerland No No No No No Open for discussion GPGs need to be clarified GPGs need to be clarified Needs to build on discussion in WP-FA But open for discussion Open for discussion United Kingdom No No Yes No No No No Sec. should propose an alternative methodology United States No No No comment Discount rate should reflect market costs Apply a coefficient approach to activities No comment No No 16