Trade Interests and UN Funding

Commercial Earmarking of Multi-bi Aid

Paweł Gmyrek

• Publisher: Routledge
• Year: 2021
• Print ISBN:
  9780367545628
• eBook ISBN:
  9781000406948
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

This book examines a particular type of donor behavior – known as country earmarking of contributions – which occurs within the voluntary financing system of the United Nations.

The research demonstrates that already during the period of the Millennium Development Goals a large share of the voluntary multilateral funding decisions was influenced by the commercial priorities of the OECD/DAC donor countries. The theoretical contribution focuses on disentangling the mix of policy advantages that can be pursued through linking of donors' commercial priorities with multi-bilateral development programs. The book considers its empirical findings within the current framework of the Sustainable Development Goals and the associated aid financing architecture. It demonstrates that, despite many negative associations of commercial aid giving, it is difficult to make an indisputably negative judgment on the practice of commercial earmarking in the specific context of the specialized UN agencies. The author argues that whether commercial earmarking proves to be a curse or a blessing for the multilateral development institutions will very much depend on the availability of parallel, flexible funding, and the creation of adequate political and operational space for supranational norm-keepers.

Synthesizing the existing knowledge concerning the supply-side of multi-bi aid, this book provides an accessible, entry-level overview of the topic that will appeal to students and scholars of global governance and international organizations.

1 Key concepts, definitions, and scope

• Earmarking of aid
• Financing of specialized UN agencies
• Donor countries
• Aid recipients

The aim of this chapter is to introduce the main conceptual definitions concerning the financing structure of the UN’s specialized agencies. The first section defines multi-bi aid, which is the main topic of this study. By illustrating the complexity of contemporary multi-bi instruments, the chapter demonstrates how funding definitions can differ from the perspective of donors, UN agencies, and aid recipient countries. Based on this introductory discussion, the second section of the chapter describes the selection criteria used in this study that allow for a meaningful comparison among the donor countries, the multi-bi aid recipients, and a number of UN agencies. It also discusses a method of identifying multi-bi aid allocations that are earmarked by donor countries to specific recipient countries from the overall pool of Official Development Assistance (ODA).

Specialized UN agencies and multi-bi aid

Specialized agencies are independent international organizations, which form part of the UN family and coordinate their work with the UN through negotiated agreements.¹ These normative agencies have a particular role within the multilateral system, as they execute mandates related to the setting and monitoring of internationally defined technical standards. Contrary to the financial setups of the UN Funds and Programmes, their core presence, roles, and activities are covered through the most traditional form of multilateral funding: the assessed contributions provided by virtue of states’ membership.

Such assessed contributions – sometimes referred to as “regular budget” – typically originate from fixed provisions in member states’ national budgets and are only partially accounted for as development funding.² In fact, from the donors’ point of view, an assessed contribution to a specialized UN agency is more likely regarded as a long-standing multilateral membership fee, rather than development aid per se.

Numerous specialized agencies of the UN had been created prior to the emergence of ODA and, during their initial period of existence, relied exclusively on their regular budget funding. The rapid decolonization of the 1960s brought about the phenomenon of aid, which today has grown to the size that awards it a frequent reference of an “aid industry.” With aid came donor agencies, aid budgets, procedures, and financial instruments, as well as the rules on the use of such resources.³

While these financial flows were booming, so was the multilateral system’s interest in this new flow of finance. Only between 1960 and the end of the 1990s, 110 new international organizations became eligible to receive ODA funding. By 2019, the total number of institutional aid recipients exceeded 260.⁴ Those exciting developments, however, held an unpleasant surprise for the specialized agencies of the UN and their financial departments: the international community, so enthusiastically investing in ODA’s expansion, had little appetite to increase the assessed contributions to these multilaterals. While numerous factors were at play in this collective reservation, one of the arguments laid out by Erin R. Graham is of particular importance to the topic of this book. By creating a possibility of channeling part of the constantly growing ODA to the already-existing international organizations, donor countries could exert their desired policy influence, at the same time saving themselves the headache of negotiating new international cost-sharing deals and entering into long-term commitments.⁵

Faced with the stagnation of their regular budgets, most UN agencies developed systems to capture additional financial resources from this growing pool of ODA.⁶ With time, the UN agencies and individual donors increased their direct cooperation, creating a major new flow of voluntary contributions that often exceed their regular budgets (see Table 1.2).⁷ Contrary to the regular budgets, however, these new funds largely came with donor-specified conditions for their use, also known as “earmarking.”

Multi-bi aid: different perspectives

The term “earmarking” is typically understood as an upfront specification of the geographic and thematic priorities, for which allocated funds should be used. Initially derived from public finance literature, the concept is now commonly applied in the aid industry.⁸ In line with the Organisation for Economic Co-operation and Development/Development Assistance Committee (OECD/DAC)’s official definition, as soon as voluntary multilateral funding carries any degree of earmarking, it is immediately classified as “multi-bi aid.” Such multi-bi aid is considered as “bilateral resources channeled through a multilateral agency, and therefore technically qualify as part of bilateral ODA.”⁹ The striking element of this definition is that, from the DAC’s point of view, multi-bi aid is essentially a bilateral flow that ended up being given to a multilateral. Most multilaterals hardly ever see multi-bi aid in the same way.

With a constant push for more policy coherence and harmonization, such voluntary funds have been fully internalized by the UN organizations and form an integral part of their resource planning and programming processes.¹⁰ Most assessments of the UN’s financing account for the multi-bi aid together with all other types of funding and simply encourage their stronger integration into the overall budgetary structures.¹¹ Multi-bi budget lines often form one of the key components in the multi-annual partnerships between donors and the UN agencies, and many practitioners would have difficulties in considering such funds as an extended form of bilateral assistance. For example, the UN Chief Executives Board (UNCEB) reports the multi-bi funding in the UN system-wide financial statistics as “voluntary specified contributions,” which captures the broad notion that the use of such resources is subject to donors’ upfront earmarking decisions, but still classifies them as part of the overall financial envelope of a given UN agency.¹² This widespread acceptance of the multi-bi aid should not perhaps be surprising, given the fact that it has been the only consistently rising governmental funding source of the UN over the recent decades.

Figure 1.1 Multi-bi aid in the context of voluntary and assessed contributions in the ILO – a conceptual scheme.

Today, the conceptual relationship between the different forms of funding received by the specialized agencies of the UN is illustrated in Figure 1.1. The illustration relies on a concrete case of the International Labour Organization (ILO) and the overall funding envelope received by this agency in the financial year 2018. The figure indicates which part of the overall ILO funds would be considered as multi-bi aid, according to the OECD/DAC definition, and could be summarized as follows:

In the most recent budgetary biennium 2018–19, total assessed contributions to the ILO amounted to $797 million. Half of that amount ($398 million) could therefore be accounted as total assessed budget for the year 2018. During the same year the ILO received another $486 million in voluntary funding. This consisted of $27 million in voluntary core, and $459 million in contributions earmarked to a different degree.¹³ Only the latter source of voluntary funding corresponds to the OECD/DAC definition of multi-bi aid and to the UNCEB definition of specified contributions. This means that in the year 2018, the total multi-bi funding provided by donors to the ILO represented 51 percent of the total ILO resources and 94 percent of its total voluntary funds.

Country-earmarking: the smoking gun of donor-driven decisions

From the internal programming perspective of an individual UN agency, earmarked voluntary funding does not form a homogenous block. Instead, it consists of several types of financial assets, differentiated by the level of donor’s control over how such funds can be used. While the agency-specific instruments vary, in conceptual terms, voluntary earmarked funds can be broken down into three main types:

• Thematically earmarked
• Geog...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• List of abbreviations
• Foreword
• Acknowledgements
• Introduction
• 1 Key concepts, definitions, and scope
• 2 A world to gain: policy advantages of commercial country earmarking
• 3 What else explains earmarking? Lessons from the literature
• 4 Multi-bi aid data
• 5 Country-earmarking in practice: the empirics
• 6 Breaking down the numbers: what did we learn?
• 7 Conclusion: policy implications
• Select bibliography
• Index