Official development assistance

The OECD defines Official Development Assistance (ODA) in the following way: “Flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25 percent (using a fixed 10 percent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries (“bilateral ODA”) and to multilateral institutions. ODA receipts comprise disbursements by bilateral donors and multilateral institutions. Lending by export credit agencies—with the pure purpose of export promotion—is excluded”.

Official development assistance typically supports capacity building, technology improvement, infrastructure development, environmental conservation and the removal of structural barriers, as well as providing technical assistance and other resources to catalyse development. In terms of regional and sector focus and types of intervention, donors and multilateral agencies each have their own ODA priorities and strategies. Historically donor priorities have not necessarily matched those of recipient countries, which has resulted in low ODA efficiency. ODA flows are generally in the form of debt, grant, or technical assistance and have two main channels:

  • bilaterally: from the donor agency to the recipient;
  • multilaterally: through international agencies which raise their resources from donor agencies and international financial markets.

Various specialized bodies including public institutions, private companies, non-governmental organizations (NGOs) and private voluntary organizations carry out the development activities on behalf of the agencies and recipients. Based on the survey data complemented by the OECD/DAC statistics and UNCTAD (2007) a partial picture can be established which may represent the best available summary on external financing to forests in developing countries.

Figure 1 - External Financial Flows to ForestsFigure 1 - External Financial Flows to Forests

It shows that that the current annual bilateral and multilateral flows to forests amount to about USD 1.9 billion and the foreign direct investment to forest industries to about USD 0.5 billion.

The level of ODA financing to forests includes about USD 700 million for forest conservation. In addition, the conservation NGOs and philanthropy focus on this thematic area in their funding. Based on the survey, in 2000-2007 the bilateral and multilateral financing flows have increased by almost 50% while in FDI to forest industry the increase has also been fast. There is a considerable annual variation in the financing flows in the case of many sources which record commitments rather than disbursements, as the decisions on large projects easily create wide variation in the data. The growth in the external financing flows to forests has partly been a result of increasing engagement of the multilateral sources as their share of the total public financing increased from 26 to 42% during the study period. The multilateral sources accounted for three quarters of the total absolute increase in the aggregate public flows during the study period. However, bilateral ODA also has increased, albeit at a slower rate.

Bilateral ODA to forests mainly comes from relatively few sources. About 95% is provided by nine donors (Japan, Germany, the European Community, USA, the Netherlands, Switzerland, the UK, France and Finland) (Figure 4.2). Japan’s share is overwhelming accounting for 48% of the total in 2005-2007, or significantly higher than in 2000-2002, when it was 35%.

Figure 2 - Sources of Multiteral ODA 2000-2007Figure 2 - Sources of Multiteral ODA 2000-2007

The main source of multilateral financing to forests is the World Bank Group, and its share in the total has increased from 51% to 73% in 2000-2007. More than a half (55%) of the World Bank Group’s financing to forests has come from the International Finance Corporation (IFC) in the form of equity and credits to private sector enterprises. The contributions of the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD) have also increased during the study period, albeit less than that of IFC.

Figure 3 - Sources of Bilateral ODA 2000-2007Figure 3 - Sources of Bilateral ODA 2000-2007

The survey data did not allow elaboration of a comprehensive analysis of the forest ODA breakdown by recipient countries and therefore the partial DAC data (OECD 2008a) had to be utilized. Since 2000, two-thirds of the cumulative forestry ODA as recorded by DAC has been allocated to Asia, only 20% to Africa and 11% to Latin America. Asia’s share peaked in 2003 when it reached almost 80% of the total. In terms of income level, the least developed countries received 18% of the total and the other low income group another 39%. The rest (43%) was channeled to middle income countries whose shares show a slightly declining trend in the total. In 2006 India absorbed 22% of the total forestry ODA, followed by China (13%) and Viet Nam (12%). Together with Indonesia, Cameroon, Tanzania, Bolivia, Brazil, Colombia and Honduras, these ten countries received two-thirds of the total forestry ODA, which is therefore very concentrated and significantly more so than in the case of ODA to biodiversity. However, the three largest ODA recipients are the same countries in both cases; in forestry they accounted for 48% of the total and in biodiversity, 36%.

Figure 4 - Country Recipients of ODA by Income Group 2001-2006Figure 4 - Country Recipients of ODA by Income Group 2001-2006

The information on this page is derived from the following source:

Markku Simula. 2008. Financing Flows and needs to implement the Non-Legally Binding Instrument on all Types of Forests.