8.9 Proportion of ODA provided to help build trade capacity

Modified on 2012/11/05 14:08 by MDG Wiki Handbook — Categorized as: Uncategorized

Contents

GOAL AND TARGET ADDRESSED

Goal 8. Develop a global partnership for development. Target 8A. Develop further an open, rule-based, predictable, non-discriminatory trading and financial system. Includes a commitment to good governance, development and poverty reduction—both nationally and internationally. Target 8B. Address the special needs of the least developed countries. Includes: tariff and quota-free access for least developed countries’ exports; enhanced programme of debt relief for HIPCs and cancellation of official bilateral debt; and more generous ODA for countries committed to poverty reduction.

DEFINITION AND METHOD OF COMPUTATION

Definition
The proportion of ODA provided to help build trade capacity is the proportion of sector-allocable official development assistance (ODA) provided by Organisation for Economic Co-operation and Development/ Development Assistance Committee (OECD/DAC) donors directly to a developing country that is committed for activities that help build trade capacity. It is now generally referred to as ‘Aid for Trade’.

This indicator is expressed as a percentage.

Concepts
Sector-Allocable assistance is flows that are allocated for specific sectors such as health, energy, or agriculture. Contributions not subject to allocation include general budget support, actions related to debt, humanitarian aid and internal transactions in the donor country.

Official development assistance (ODA) comprises grants and loans (i.e. flows or transfers of resources, either in cash or in the form of commodities or services) to developing countries and territories on the OECD/DAC list of ODA recipients and to multilateral development institutions that are provided by official agencies, including state and local governments, or by their executive agencies. The flows must have the promotion of the economic development and the welfare of the recipient countries as their main objective. ODA transactions are made at concessional terms and convey a grant element of at least 25 per cent (calculated at a rate of discount of 10 per cent). Technical cooperation is included. Grants, loans and credits for military purposes are excluded.

The Organisation for Economic Co-operation and Development/Development Assistance Committee (OECD/DAC) is a committee that consists of major bilateral donor countries and the European Commission, which coordinate their aid programmes around common objectives. Developing countries and territories for this indicator are considered as countries eligible for ODA according to the DAC list of ODA recipients. (See references for link to current list of countries).

Activities to help build trade capacity are those activities which enhance the ability of the recipient country to: Trade capacity building activities (or Aid for Trade) are classified by the World Trade Organization (WTO) and the OECD under four categories:


  1. Technical assistance for trade policy and regulations covers support to: (a) trade policy and administrative management; (b) trade facilitation; (c) regional trade agreements; (d) multilateral trade negotiations; and (e) trade education/training.
  2. Productive capacity building (including trade development) covers support to: (a) banking and financial services; (b) business and other services; (c) agriculture, forestry and fishing; (d) industry; (e) mineral resources and mining; and (f) tourism.
  3. Economic infrastructure, which covers aid for communications, energy, transport and storage; and
  4. Trade-related adjustment, which covers contributions to developing country budgets to assist the implementation of trade reforms and adjustments to trade policy measures by other countries, and alleviate shortfalls in balance-of-payments due to changes in the world trading environment.
Since 2008, the OECD Creditor Reporting System allows components of a productive capacity building project to be marked as relevant to trade development, using a "trade development policy marker". It identifies trade development activities within the broader aid-for-trade category of building productive capacity (i.e. activities marked as contributing "principally" or "significantly" to trade development). As the marker was introduced only in 2008 and its use is voluntary, not all donors report it. Thus as the data for trade development are partial, they are not separately reported for this MDG indicator. Instead, all productive capacity building is included as a proxy to provide a longer time series.

Method of computation
This indicator is calculated by dividing ODA to help build trade capacity by total sector allocable ODA and multiplying by 100.

RATIONALE AND INTERPRETATION

At the Fourth Ministerial Conference of the WTO, held in Doha in 2001, donors committed to providing increased support to help developing countries, especially the least developed countries, build the capacity to trade and to integrate into world markets.

The 2005 Hong Kong WTO Ministerial Declaration called for more and better aid for trade and set in motion the Aid-for-Trade Initiative to help low income countries overcome structural limitations and weak capacities that undermine their ability to produce, compete and maximise the benefits from trade and investment opportunities. The objectives for the initiative include:
Data collected for this indicator will help monitor donor countries’ support to increasing developing countries’ trade capacity.

SOURCES AND DATA COLLECTION

Data on ODA are part of DAC members’ official statistical reporting to the OECD. Non-DAC donors' reporting takes place on a voluntary basis. A network of national statistical correspondents collects data from aid agencies and government departments (central, state and local) on an ongoing basis. Their task is also to ensure that reporting conforms to the Statistical Reporting Directives (definitions and classifications) agreed by the DAC. The DAC Secretariat responds to any questions about the data and can also give users advice on data analysis.

ODA is classified by purpose codes. Purpose codes identify the specific area of the recipient’s economic or social structure the transfer is intended to foster.

DISAGGREGATION

Data on ODA flows for activities to help build trade capacity can be disaggregated by donor, recipient country or geographical region, as well as by sector and aid activity.

COMMENTS AND LIMITATIONS

Each ODA activity can be assigned only one purpose code. For activities cutting across several sectors, the code corresponding to the largest component of the aid activity is used. For aid to build trade capacity, it is unlikely that this coding will affect the overall figures, but it might mean the sub-components of technical assistance for trade policy and regulations are not precise when a single activity addresses several of them.

Sector-allocable ODA comprises only aid that can be apportioned by sector. Although some aid that is unallocable by sector (e.g. general programme assistance, debt relief, humanitarian aid and others) may enhance trade capacity, its amount is unknown and so unallocable aid is excluded from the calculation of the indicator, in order to avoid the assumption that none of it is for trade capacity building.

The inclusion of all aid for productive capacity building overstates the amount that is directly targeted on building trade capacity. However, as noted above, not all donors are using the marker to identify activities that are contributing principally or significantly to trade development, so there are incomplete data and also a short time series as the indicator was introduced only in 2008. Nonetheless, most increases in productive capacity offer the potential to increase trade and having a time series provides a proxy of whether this aspect of trade capacity is receiving a larger or smaller share of sector allocable aid.

GENDER EQUALITY ISSUES

ODA can support gender equality and women’s empowerment. Donors score relevant activities with a gender equality policy marker as defined by the DAC. This marker identifies activities which are focused principally or significantly on achieving gender equality and women’s empowerment.

DATA FOR GLOBAL AND REGIONAL MONITORING

All data on ODA are collected by the OECD/DAC Secretariat from its 24 members, then checked and aggregated by the OECD/DAC Secretariat. The DAC Secretariat collects data through two systems:
Regional and global aggregates are made by straight addition and do not involve any estimation for missing values.

Data on ODA to build trade capacity were collected through the joint WTO/OECD Trade Capacity Building Database (TCBDB) from 2001 to 2008. Since 2008, the OECD Creditor Reporting System (CRS) has been used to monitor global flows of the broader Aid for Trade (AFT) agenda. This transition has resulted in the inability to collect trade capacity building data on the same basis as before. Instead, the new system offers proxy measures for key AFT categories: trade policy and regulations; building productive capacity (of which trade development); economic infrastructure (energy, transport & telecoms); and trade-related adjustments. Data are collected and then checked and aggregated by the OECD/DAC Secretariat. Bilateral work with reporters is undertaken as necessary in order to resolve reporting issues.

SUPPLEMENTARY INFORMATION



EXAMPLES



REFERENCES

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. DEVELOPMENT ASSISTANCE COMMITTEE (annual). Development Co operation Report. Paris. Available from www.oecd.org/dac/dcr

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. DEVELOPMENT ASSISTANCE COMMITTEE (annual). International Development Statistics. Paris. Available from www.oecd.org/dac/stats/idscd

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. DAC List of ODA Recipients. Paris. Available from www.oecd.org/dac/stats/daclist

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. DEVELOPMENT ASSISTANCE COMMITTEE (website). Aid for Trade. Paris. Available from www.oecd.org/dac/aft

WORLD TRADE ORGANIZATION AND ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (annual) Aid for Trade at a Glance. Pairs/Geneva. Available from www.wto.org/english/res_e/publications_e/aid4trade09_e.htm or www.oecd.org/document/56/0,3343,en_2649_34665_42835064_1_1_1_37413,00.html