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RUEHSS/OECD POSTS COLLECTIVE
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RUEHSG/AMEMBASSY SANTIAGO 0020
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RUEHSA/AMEMBASSY PRETORIA 1996
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UNCLAS SECTION 01 OF 05 PARIS 000101 
 
SENSITIVE 
 
SIPDIS 
 
ALSO FOR USAID 
 
SENT FROM USOECD 
 
12958:  N/A 
TAGS: EAID EFIN OECD XA XE XF XL XM
SUBJECT: OECD: OPPORTUNITIES TO ADVANCE U.S. DEVELOPMENT PRIORITIES 
 
PARIS 00000101  001.2 OF 005 
 
 
 
¶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 
Summary. 
 
¶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 
Affairs 
 
¶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 
 
PARIS 00000101  002.2 OF 005 
 
 
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 
 
PARIS 00000101  003.2 OF 005 
 
 
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, 
anti-bribery). 
 
-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 
systems; 
 
-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 
 
PARIS 00000101  004.2 OF 005 
 
 
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 
Countries 
--------------------------------------------- --- 
 
¶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 
Governance; 
 
-  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 
efforts. 
 
-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 
biennium. 
 
 
PARIS 00000101  005.2 OF 005 
 
 
Comment: 
 
¶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