The Arrangement on Officially Supported Export Credits provides disciplines for tied aid as well as transparency requirements for trade-related untied aid. In addition, the Agreement on Untied ODA Credits Transparency (hereafter “the Agreement”) agreed to by the Participants provides disciplines and transparency measures for untied Official Development Assistance (ODA).
The Arrangement provides disciplines on tied aid. These disciplines are also called the “Helsinki” disciplines and were agreed in 1991 by the Participants with the aim of limiting the use of concessional financing for projects that might be supported through commercial financing. These rules were also developed to redirect tied aid away from richer countries, which should be able to attract commercial credits, and towards developing counties, that are less well off.
The prevailing tied aid disciplines are detailed in Chapter III of the Arrangement and the transparency requirements relating to tied aid (e.g. prior/prompt notifications, enquiries and consultations) are set out in Chapter IV of the Arrangement. For operational purposes:
Countries whose per capita Gross National Income (GNI), according to the World Bank data, is above the upper limit for lower middle income countries are ineligible to tied aid.
Participants shall not provide tied aid that has a concessionnality level of less than 35% for eligible countries, or 50% if the beneficiary country is a Least Developed Country (LDC).
Tied aid is not allowed for commercially viable projects for non-LDC eligible countries
The Arrangement provides transparency disciplines for trade-related untied aid (See Chapter IV of the Arrangement).
In 2004, the Participants agreed to the Agreement on Untied ODA Credits Transparency (the “Agreement") which came into effect for a two-year period in 2005 and has subsequently been extended eight times (most recently in 2022). The Agreement was inspired by the Recommendation on Untying Official Development Assistance to Least Developed Countries (April 2001) and benefitted from inputs from the Development Assistance Committee of the OECD.
The goal of the Agreement is to create more effective competition in the use of development assistance loans by ensuring that they are used for the purchase of goods and services from any country rather than only those from the country providing the loan. This agreement is also meant to avoid the circumvention of the Helsinki disciplines (or tied-aid disciplines) through the use of untied aid.
In order to achieve this goal, the Agreement requires that the Participants, when extending untied ODA credits, to provide information among themselves and to the general public on the projects benefitting from ODA credits and respect internationally recognised competitive bidding procedures.
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