Summary and Conclusions

Overview

With a net Official Development Assistance (ODA) of 456 million United States dollars (USD) [5.6 billion Austrian schillings (ATS)] in 1998, Austria ranked 16th among the 21 Development Assistance Committee (DAC) Member countries. Its official development assistance/gross national product (ODA/GNP) ratio of 0.22% was slightly below the DAC average of 0.24%.

One pending issue in the Austrian aid programme is that it still needs an overall strategy binding all the expenditures that Austria considers as ODA to a clear set of development objectives. Currently, Austria's reporting of bilateral ODA includes three components - concessional export credits, assistance to refugees in Austria, and imputed student costs - which do not have development as their primary objective. Although the combined share of these components has been reduced significantly from the level of 55% of total ODA in 1994, they still attract a considerable share of 18%. This amount is almost equivalent to the 20% ODA spent for the bilateral programme under the Department for Development Co-operation (DDC) within the Ministry for Foreign Affairs (MOFA).

The Austrian aid programme has also yet to strengthen effective co-ordination mechanisms. Responsibilities for aid efforts remain dispersed over a number of ministries and provincial and local government authorities. Basic tasks such as ensuring consistency and sharing information among ministries still tend to be ad hoc, reflecting the fact that the government as a whole has not treated its ODA components as part of a coherent programme. Currently, MOFA's role is limited to awareness-raising and persuasion initiatives. Greater coherence could be achieved if MOFA had a more extensive and explicit leadership role, backed by a clear political mandate from the government.

Selected major components of the Austrian ODA programme

Multilateral co-operation

Thirty-two percent of Austria's ODA is disbursed to multilateral organisations. Since its accession to the European Union in 1995, a large part of Austria's contributions to multilateral co-operation has been taken up by the European Community (EC). In recent years, Austria has progressively taken on an active involvement in the shaping of EC development policies. Contributions to the EC budget have constantly risen from USD 84 million in 1995 to USD 97 million in 1998 (about a fifth of total Austrian ODA). Forecast data suggest that in 2000, contributions will be further increased to USD 161 million, including disbursements to the European Development Fund (EDF).

Debt relief

As a follow up to the decision of the G7/G8 Cologne Summit in 1999, Austria announced its intention to forgive up to 80% of its debtor countries' loan obligations under the HIPC Initiative. This amount includes the cancellation of Austria's export credits and guarantees. Austria's debt relief time schedule and sequencing will depend on the implementation of the enlarged HIPC Initiative.

Co-operation with Central and Eastern European Countries (CEECs) and the New Independent States (NIS)

Twenty-five percent of Austria's bilateral ODA gross disbursements was made towards Europe. Austria's co-operation with CEECs and NIS is managed by the Austrian Federal Chancellery. The new co-operation strategy has two specific objectives: (i) assist selected CEECs to prepare for EU accession, and (ii) strengthen efforts in building a pluralistic democracy and a sustainable market economy. The sector priorities include: energy; environment and water resources management; employment and social services; and public administration. The strategy concept is guided by principles of good neighbourhood and based on a strong involvement of the Austrian business community. This programme could benefit from discussions carried out at the DAC, such as good governance, peace and conflict prevention.

The bilateral programme of the Department for Development Co-operation

In recent years, the DDC has made real progress in: concentrating project activities and budgets to its partner countries; focusing increasingly on cross-cutting issues; developing aid management tools; and clarifying relationships with NGOs. On the other hand, the quality of its programme is affected by: a relatively high number of partner countries; a limited number of country and sector strategies; staffing situation; and a need to mainstream poverty focus at all programme levels. This component, which is generally considered the Austrian core bilateral aid programme, utilises only about 20% of the total ODA budget.

ODA reporting issues

Concessional export credits

Although the share of concessional export credits has fallen from 27% in 1994 to 4% in 1998, by definition, export credits do not strictly fall under ODA, as their primary motivation is generally not developmental. As specified in the DAC Statistical Reporting Directives, if a grant or a concessional loan that is linked to developmental objectives is provided to soften the terms of the export credit, then that grant or loan may be reported separately as 'Associated Financing' and counted as ODA. The export credit part, on commercial terms, has to be recorded as 'Other Official Flows'. Despite these rules, Austria is reporting its whole financial package as concessional loans under 'Non-Grant Bilateral ODA'. The explanation of the Austrian authorities is that the concessional and the non-concessional parts cannot be separated for calculation. Due to this practice, Austria's ODA outflow is overstated, although the subsequent repayments of these loans could reduce net ODA. Moreover, since export credits are not linked with DDC's bilateral programme, as a consequence, countries such as China and Indonesia have become the top recipients of not only the export credits, but of the entire Austrian bilateral ODA.

Imputed student costs

The share of imputed student costs in total ODA has been approximately 9-10%, which is a figure half as large as the total budget for DDC's bilateral programme. According to the DAC Statistical Directives, imputed student costs are eligible for inclusion in ODA if they are part of a conscious policy of development co-operation which includes specification of the costs in official budgets. However, Austria seems to use a retroactive method by totalling the running costs of Austrian universities and higher education establishments, dividing it by the total number of students to obtain the unit cost per student, and then multiplying it by the number of students from developing countries. (By law, students from developing countries are exempted from paying tuition fees.) In other words, any student originating from a developing country who is studying any subject, irrespective of developmental objectives, could be included and counted under ODA. Austria needs to modify its treatment of this component, as well as to make information more transparent.

Assistance to refugees in Austria

The share of ODA spent for refugee assistance in Austria (excluding expenditures by local authorities) has considerably declined from 21% in 1992 to 7% in 1998. However, the reporting of these expenditures is not complying with the DAC Statistical Reporting Directives, which specifies that refugee assistance can only be claimed as ODA for the first year of stay in Austria. As Austria states that refugee-linked expenditures cannot be clearly distinguished between the first and subsequent years, this component is frequently reported beyond the one-year threshold. On the other hand, refugee assistance is now combined with appropriate integration activities, such as language, educational and vocational training programmes which are tailored towards the labour market needs of the refugees' home countries.

Recommendations

• Austria should increase ODA to reach a level that would appropriately reflect its economic performance and capacity.

• Austria should have an overall aid strategy that links all its components to a clear set of development objectives. In this connection, Austria should reconstitute and strengthen its ODA Advisory Council.

• Mechanisms should be set up to co-ordinate the ODA activities of all agencies concerned, share more information, and mainstream DAC principles.

• A comprehensive ODA budget comprising all aid components, with the expenditures reported in one annual report, should be established. Such a report may also help raise public awareness and support.

• Reporting on concessional export credits, assistance to refugees, and imputed student costs, should be brought in line with DAC reporting requirements and practices. Planned discussions between Austrian authorities and the Secretariat should settle all pending discrepancies in ODA interpretation and reporting.

• The share of DDC budget should be increased to reach a level commensurate with that of other DAC Members' core bilateral programme.

• DDC should enhance its programme by: i) focusing more on poverty reduction; ii) concentrating on a reduced number of partner countries; iii) increasing country and sector strategies; iv) increasing evaluations; and v) reforming hiring policies and improving human resources management. DDC should also strengthen its role in monitoring and evaluating the export credits.