Cablegate: Oecd: Opportunities to Advance U.S. Development Priorities

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1. (SBU) Summary: OECD development institutions provide
opportunities for harnessing the OECD's unique strengths (donor
coordination, peer learning, analysis of market-based best
practices, and statistics) in support of U.S. development
priorities. As the USG looks for ways to elevate its development
efforts, decisions will need to be made on the level of USG
involvement in and support for three OECD development institutions
-- the Partnership for Democratic Governance (which the U.S. was
instrumental in creating), the OECD Development Center (which the
U.S. was also instrumental in founding, but then left in 1997), and
the OECD Development Assistance Committee (DAC).

2. (SBU) The recently-created Partnership for Democratic Governance
(PDG) brings OECD expertise to the problems of fragile and
post-conflict states. Three years into its creation, members are
faced with the question as to whether it should be folded into other
OECD activities (or be allowed to expire.) The OECD Development
Center is a think-tank that brings rigorous OECD-standard production
of statistics and policy analysis to development issues, but that
works in partnership with regional institutions such as the African
Development Bank and has broad developing country acceptance as an
independent institution. This is now a good time to review whether
the U.S. should rejoin the Development Center. The OECD Development
Assistance Committee (DAC) is the premier venue for donor
coordination and incubation of development policies (such as the
Millennium Development Goals). A decision to seek a U.S. leadership
role in the DAC would help ensure DAC support for U.S. development
goals, and demonstrate the renewed U.S. focus on development.

3. (SBU) And finally, there is growing developing country demand for
OECD economic development policy expertise. The OECD Center for Tax
Policy, the DAC and the Development Center are working together to
respond to a request from twenty-plus African countries to learn
from the OECD and its member countries how to better mobilize
domestic resources, particularly taxes. The United States can
support initiatives such as these by prioritizing development
funding within the assessed budget envelope for increases (which
requires cutting back other OECD activities), encouraging more
cross-committee work and by providing voluntary contributions. End

4. (U) OECD development institutions provide opportunities for
harnessing the OECD's unique strengths (donor coordination, peer
learning, analysis of market-based best practices, and statistics)
in support of U.S. development priorities. The OECD can advance US
principles of partnership, economic development, gender and
coordination. This cable discusses the opportunities ahead for using
the OECD development institutions to the best effect.

Partnership for Democratic Governance (PDG)

5. (U) The PDG was conceived and championed by State's Office of
Policy Planning to help states in fragile and post-conflict
situations deliver essential public services and strengthen
governance institutions. The State Department's office of Conflict
Resolution and Stabilization (S/CRS) has recently assumed
responsibility for PDG from the Bureau of Economic and Business

6. (SBU) The PDG's brief lifespan has been controversial. Some OECD
members did not support the PDG's establishment. Other OECD members
were split between those advocating field projects (such as the
United States), and those preferring that it remain
research-oriented. In the event, the PDG has steered a middle road,
launching pilot projects in three countries, while pursuing
"knowledge development activities" (reports, conferences, etc). It
was expected that the PDG would design projects for donor funding,
but the PDG's first projects found no funders, and it had to use its
own funds (provided by voluntary contributions, including from the
United States) to implement them. The PDG's 2008-11 budget is .6.8
million of which the USG contributed $3 million.

7. (U) PDG's outputs to date include: projects in Guatemala
(reinforcing Municipal Governance), Liberia (Strengthening the rule
of Law, and Georgia (Enhancing Aid Effectiveness and Donor
Coordination). A project request from Haiti, on innovative

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possibilities to support the justice System, was under
consideration. Other PDG products include a PDG-African Development
Bank Conference on "Contracting-out Core Government Functions and
Services in Post-Conflict and Fragile Situations," a Joint
PDG/Berlin Center for International Peace Operations Senior Level
Policy Dialogue on Deployable Civilian Capacity for Stabilization
and Reconstruction, case studies on Afghanistan, Haiti, South Sudan,
Timor-Leste on "bridging Capacity Gaps in Situations of Fragility"
and case studies on Afghanistan, Southern Sudan on "Contracting out
Government Functions and Services: Emerging Lessons from
Post-Conflict and Fragile Situations."

8. (U) In mid-2010 PDG members will consider renewal of the
mandate. They will have a comprehensive evaluation of PDG in hand
to assist in this decision (S/CRS and USAID have participated on the
evaluation Steering Committee.) In a June 2009 letter from
Secretary Clinton to SG Gurria, the USG committed to continuing
support for PDG through the end of its mandate in February 2011 but
has made no commitments past that date.

9. (SBU) PDG issues for decision for the USG (with S/CRS lead) in
the coming months include:

-Should the PDG mandate be renewed or allowed to expire?
-Should the PDG be folded into the OECD Development Directorate with
a more modest mandate?
-Should PDG continue, including with a mandate to pursue an expanded
role in areas such as civilian response?

If the decision is to continue the PDG mandate, funds will need to
be identified for future USG contributions.

The OECD Development Center (DC)

10. (U) President John F. Kennedy proposed the creation of the
Development Center in 1961 to serve as an interface between the OECD
and developing countries. Since its creation in 1962 (two years
after the OECD was created), the Center has served as a forum for
developing countries - including government, business and civil
society leaders - to share and learn from each other's economic and
social development experiences, as well as from those of OECD
countries. The Center has considerable autonomy within OECD. It
has recently grown from 22 to 38 members, including 15 developing
country and emerging economy countries. Several others, notably in
Africa, are in advanced membership discussions.

11. (SBU) Developing and emerging country policy makers have sought
policy guidance from the Center, seeing the Center as offering an
"independent" perspective. For example, after Nelson Mandela was
released from prison, and two years before he was elected President,
he asked the Center rather than the World Bank or the IMF to help
prepare his party for governing. The Center's significant, yet low
profile support proved crucial in helping the ANC to reorient its
policy thinking and to implement the market-friendly policy
framework pursued by its first two presidents.

12. (SBU) Most OECD members are also members of the Development
Center. However, the U.S. withdrew in 1997, citing - in writing -
that budgetary reasons were the only factor. The British and
Japanese also withdrew, but they also cited management concerns,
including concerns that the Center's analytical program was not
sufficiently attentive to member interests. Subsequently, the U.S.
internally indicated that it shared these management concerns and
cited them as a reason for being hesitant to re-join. The U.S.
absence is frequently and publically noted by other OECD members.

13. (SBU) The U.K. rejoined the Center in 2007, after providing one
million pounds to the Center to help it tighten its management
policies and practices. Japan has been reviewing whether to
re-join, and has indicated that a positive decision by the U.S. to
re-join could help push it in the same direction (although Japan has
publicly acknowledged that its current budget constraints might call
this into question.)

14. (SBU) Under new and improved management, the Center is regularly
invited by members of Congress to discuss its works and findings.
Its annual presentations of the Latin American and African Economic

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Outlooks and other reports on Capitol Hill have reportedly helped
generate Congressional interest in launching a Development Center
Caribbean Economic Outlook. Unfortunately, the current dynamic and
effective Center Director just announced his departure.

15. (SBU) The US Mission strongly supports rejoining the Development
Center (under the assumption that the new director will be someone
who has the necessary qualifications). The Center's work program
and the U.S. perspective match. Its findings in its regional
economic outlooks generally re-enforce the benefits of
market-oriented policies, transparency, and good governance,
articulated by experts from the region. What is unique about the DC
is that it is not about development by donors - it is about best
practices for and by developing countries in managing their own
economies in a fiscally responsible and equitable manner. US
membership would also allow us to orient the DC towards key U.S.
priorities (such as MENA, the Caribbean, and work on gender).

16. (SBU) Development Center issues for decision for the USG (USAID
lead) in the coming months include:

-Should the USG rejoin the DC (roughly $1.3 million/year)?
-Should the USG provide grant funding for certain elements of the
Center's Work Program?
-Should the USG attend DC meetings as an observer, but provide no
new funding?

The OECD Development Assistance Committee (DAC)
--------------------------------------------- --

17. (SBU) The OECD's Development Assistance Committee (DAC) provides
the platform:

-To extend relevant best practices and lessons learned from OECD
work to developing countries (taxes, procurement, public finance,

-To continue to track and assess donor commitments to key U.S.
priorities (gender, food security, global climate change -
adaptation and mitigation);

-To enable developing countries to take fuller ownership over
donor-funded development assistance programs in their countries by
helping improve the transparency, accountability and effectiveness
of their public finance, procurement, and performance monitoring

-To directly communicate and obtain support for the forthcoming U.S.
development strategy and goals to other OECD member countries and
multilateral organizations, and through the DAC's subsidiary bodies,
to developing countries, civil society, and the private sector.

U.S. Chairmanship of the DAC

18. (SBU) USOECD strongly recommends that the United States identify
and propose a U.S. candidate for Chair of the OECD's Development
Assistance Committee for the term beginning January 2011. The DAC
is the premier donor coordination institution, and a unique venue
where the major donors meet to agree on the "rules of the road" for
development assistance. It is an ideal forum in which to exert US
leadership with a view to bringing greater consistency and
effectiveness to development assistance globally and to encourage
other countries to share the burden.

19. (SBU) The US last chaired the DAC from 1994-1999. The current
chair, Eckhard Deutscher (Germany) will have served three years at
the end of 2010. Looking back at the previous chairs, the DAC chair
has tended to be a senior career employee of a development agency;
USAID has historically picked the candidate and funded the position
(the Chair's government pays the Chair's salary and overseas living
expenses/travel etc).

20. (SBU) If the USG decides to suggest a candidate for the DAC
Chair and USAID again funds the position, then a candidate should be
settled upon within the next several months, preferably before June
2010. This timing will permit the U.S. to "introduce" the candidate
in June 2010 to other heads of key donor agencies at the annual

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informal heads of donor agency meeting, to other organizations at
the annual IMF-World Bank meetings and permit a scheduling of visits
to key donor capitals before a "vote" in early December 2010.

Advancing U.S. Development Priorities by
Leveraging Relevant OECD Expertise with Reforming Developing
--------------------------------------------- ---

21. (SBU) USOECD has examined how the U.S. can advance development
by better tapping into and leveraging OECD's deep knowledge base and
staff expertise. There is an emerging recognition that the OECD has
expertise developing countries want, but that it is often not
effectively exploiting these opportunities because of the
stove-piped operations of OECD's technically-oriented committees.
In addition, committees work under a rigid budget envelope, thereby
creating a strong disincentive to divert resources from planned
activities in favor of collaboration with OECD development entities.
There are, however, some excellent examples of collaboration that
clearly demonstrate the potential within the OECD:

-- The OECD Center for Tax Policy (CTP), the DAC and the Development
Center are working together to respond to a request from twenty-plus
African countries to learn from OECD countries how to better
mobilize domestic resources, particularly taxes, so they can fund
more of their own development priorities and reduce a dependence on
donor assistance;

- The Asian Roundtable on Corporate Governance serves as a regional
hub for exchanging experiences and advancing the reform agenda on
corporate governance based on the OECD Principles of Corporate

- The OECD working Party of Senior Budget Officials brings together
senior budget officials in Latin American and Asia. It provides
technical support to governments based on cross country analytical
studies in order to identify best practices, peer reviews of the
budgeting systems and updating of extensive databases of budget
institutions and practices.

22. (SBU) These efforts dovetail with the Paris Declaration and
Accra Agenda for Action commitments to support efforts to help
developing countries increase the abilities of their peoples and
institutions to assume greater responsibility and ownership for
their own development. And they support on-going U.S. efforts to
improve the quality of partner-country public financial management
and procurement systems, both of which are key to giving citizens,
foreign investors, multilaterals and others confidence.

23. (U) At the January 21 Council meeting on development, USOECD
urged the OECD to:

-Focus its development efforts in a way that will allow it to make a
noticeable difference and learn from its efforts. The OECD cannot be
all things to all countries.

-Choose a limited number of issues of importance to developing
countries and OECD core competency (such as tax,
governance/anti-corruption, investment, and innovation). The OECD
should work horizontally with the DAC and Development Center on
bringing its expertise to regional or even country-specific

-Invite countries to participate which are able to benefit, as
reflected by a willingness to put resources or high-level
participation on the table and a track record of sound economic
policy and good governance.

24. (SBU) Further extending OECD expertise to developing countries
in a number of focused areas would require approximately $2.5
million to provide additional staff and resources for the relevant
OECD committees. Given the Zero-Real-Growth (ZRG) budget envelope,
any new work must be funded by reducing other activities, finding
efficiencies in existing work (such as improving cross-committee
collaboration) or through voluntary contributions. We believe that
all three of these options should be pursued for the 2011-2012

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25. (SBU) The OECD's competencies can be deployed to build capacity
in developing countries and advance US principles for development.
There are high expectations for US leadership on development at the
DAC and at the OECD overall It is the opportune time for the U.S. to
signal its intent to lead by demonstrating its interest in the DAC
chair, expressing its intent to work multilaterally by rejoining and
building on what the Development Center has to offer, and better
leveraging OECD resources in key policy areas to assist developing
countries help themselves. Kornbluh

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