The UAE and the OECD Development Assistance Committee

June 22, 2015
The UAE and the OECD Development Assistance Committee
Richard Woodward
Richard Woodward Non-Resident Fellow - International Economics

In July 2014, the UAE became a Participant in the OECD’s Development Assistance Committee (DAC). By attaining this status, reserved for non-OECD countries who nevertheless wish to contribute to DAC deliberations and learn from its collective expertise, the UAE has cemented its status as one of the world’s leading aid donors. This article briefly outlines the role played by the DAC, one of the world’s leading if least known development institutions, before going on to what has motivated the DAC and the UAE to regularise their previously ad hoc relationship.  Finally, the piece considers the implications of this tie up for both parties.

Conceived in 1960 initially as the Development Assistance Group, the DAC has been the main conduit through which OECD members have sought to meet their pledge under Article 1(b) of the OECD Convention “to promote policies designed to contribute to sound economic expansion in…..non-member countries in the process of economic development”. Unlike many other international organisations active in this field, such as the multilateral development banks, the DAC has no operational mandate. It does not lend money nor does it actively contribute to development projects on the ground. Instead the DAC is primarily a deliberative forum where 29 of the world’s leading aid donors convene to share, and distil best practices from, their experiences with the aim of coordinating and improve the effectiveness of overseas development assistance (ODA).  The application of these practices is monitored through regular peer reviews of the development programmes of DAC members. In addition to its policy knowledge DAC is also renowned as a creator and curator of statistical data on international aid.

Reminiscent of the wider OECD, the DAC exerts a discreet discipline over international development thinking and practice. Largely spared the grandstanding that mars other development institutions the DAC has revolutionised the way in which overseas aid is measured and tracked, promulgated an array of standards to enhance aid effectiveness and assisted other institutions to set and supervise development objectives, most notably the UN’s Millennium Development Goals. The DAC’s influence derives from the weight of its members’ contribution to ODA combined with the authority derived from the accumulated wisdom and expertise of the OECD and national officials involved.

Today the DAC’s members provide around three-quarters of global aid flows. Much is made of the fact that this proportion has tumbled from a peak of 95% in the 1990s. This period was an aberration however, with the 2000s witnessing the DAC member’s share reverting towards its long term average. In other words, the DAC is used to sharing the development arena with non-members. Nevertheless there were three features of the new donors which suggested a more fundamental challenge to the DAC inspired development landscape. First, unlike in the past, the generosity of non-DAC donors looks likely to persist gradually eroding the DAC member’s share of aid and thus its influence in the architecture of development governance. Second, many of the new or re-emerging donors are also substantial recipients of aid from DAC members challenging entrenched North-South perspectives of development assistance. Finally, although their importance is sometimes overstated, the financial contributions of non-DAC donors are underpinned by national and international development institutions whose prescriptions contradict those endorsed by the DAC.

The rise of new or revitalised non-DAC donors posed a potential threat to DAC’s prominent position in the field of development governance. Against this background in 2011 the DAC embarked on a global relations strategy. At the core of this strategy was a commitment to strengthen relations with non-DAC states. Theoretically Participant status at the DAC is open to all countries but the stipulation that “the partnership should serve the interests of both the country concerned and the DAC and should not impact on the efficient functioning of the Committee” is likely to limit it in practice. As well as assisting the DAC to fulfil its core mission of coordinating aid policies closer ties with emerging donors offered other potential benefits. For instance, bringing these states into the DAC’s reporting mechanisms would yield more complete aid data cementing the organisation’s reputation as the custodian of global ODA statistics and analysis. Moreover, it was anticipated that through exposure to and interaction with the DAC’s routines, rules and procedures, non-DAC members might be socialised into the DAC community. Broadening the appeal and acceptance of its perspectives would also strengthen the DAC caucus in the more universal global development organisations.

Despite a fluctuating relationship, the UAE makes a logical choice as the Committee’s inaugural Participant member. Engagements between the DAC and the UAE date back to the 1970s, but lately their interactions have become more systematised. For many years the UAE reported its aid data to the DAC under an umbrella group of ‘Arab countries’ but since 2010 has submitted this information separately. The UAE also became the first non-DAC donor to supply data to the DAC’s Creditor Reporting System. This system requires countries to disaggregate their aid data in order to render transparent the purpose and destination of ODA. The UAE’s invitation also reflected growing cooperation with the DAC’s members. For example, the UAE has worked with the US to sustain poverty alleviation efforts by the governments of Afghanistan, Yemen and Pakistan. There was also a sense that the DAC could learn from the mechanisms through which Arab states coordinate their aid practices. Simultaneously the UAE has taken steps to consolidate its approach to overseas aid. The UAE has been amongst the most generous non-DAC aid donors but its contributions were erratic and not always coordinated or transparent. The creation of the Ministry of Development and International Cooperation in 2013 was designed to put the UAE’s handouts on a more consistent and sustainable footing and boost its profile as a provider of global development finance. In 2013, the UAE provided aid worth 1.34% of its Gross National Income, making it the world’s most munificent donor relative to its economic size.

For the UAE the foremost benefits of being a DAC Participant are reputational and educational. Reputationally the DAC is not just important for what it does but what it signals to others. The benchmarks promulgated by the DAC are widely extolled as international best practice standards to which aid donors should aspire. Association with the DAC will burnish the UAE’s credentials as a ‘leading’ player in the arena of global development governance. Educationally the UAE’s deeper immersion in the DAC process, including the right to participate in its High-Level Meetings and technical committees, will enable its policymakers to learn from the experience of their peers. Equally the UAE’s new status may entail some downsides. Although it will not participate in the DAC’s peer review process, sustaining its engagement will require UAE to reconcile its behaviour with DAC standards. This will compromise its ability to extend assistance to certain countries, particularly those lacking in good governance. Cosying up to the DAC might improve the UAE’s reputation amongst the developed countries of the OECD but, as Mexico and Chile discovered following their OECD accession, this could damage its standing amongst countries in the Global South. Unlike Mexico and Chile the UAE is not seeking full OECD membership. Nevertheless its intimacy with the DAC maybe interpreted as an act of treachery by those in the Global South who see the policies pursued by of OECD countries as the cause of their persistent under-development. This is a particular concern at a time when the OECD and related institutions are in danger of being eclipsed by new institutions touted by the rising powers.

Unquestionably, the award of Participant status marks a step-change in DAC-UAE relations. . In the immediate term the development generates benefits for both parties. For the DAC its intensified relationship with the UAE is evidence of it adopting a more inclusive stance and winning fresh adherents to its best practices. Meanwhile the UAE is acknowledged as one of the foremost members of the global development community. The longer term significance of these changes is more difficult to discern but certainly there seem to be limits on how far the UAE-DAC relationship can progress. For example,  the UAE recognises that a more profound entanglement with the DAC may mean having to tolerate the Committee’s peer review process, something it has hitherto regarded as an intolerable intrusion on its freedom of action. Ultimately the real import of the UAE’s rendezvous with the DAC may be as a signifier of wider changes in global development institutions. As the emergence of the Asia Infrastructure Investment Bank demonstrates, the future of global development governance looks set to be more fragmented with the established distinctions between ‘North’ and ‘South’, and aid ‘donor’ and ‘recipient’ already blurring. From the perspective of both the UAE and the DAC, a closer union is a pragmatic response to coping with an uncertain future.