The Mix-up between Climate Finance and Overseas Development Assistance In Bangladesh: Perspectives from the Practitioners

Climate Change is a global problem and a serious threat to mankind, but the contribution of countries to climate change and their capacity to prevent and cope with the consequences differs from one another  (UNFCCC, 1992). Article 4.3 in the UNFCCC stipulates that developed countries (Annex II Parties) should transfer financial resources to assist developing countries for Climate Change adaptation and mitigation (IPCC, 2014); other Parties are also encouraged to provide support willingly: this fund is defined as Climate Finance (CF). On the other hand, Overseas Development Assistance (ODA) is another well-known concept, which is defined as government aid designed to promote the economic development and welfare of developing countries; this aid includes grants and “soft” loans.  The expression of CF provisions as ‘shall’ indicates that financial obligations under Articles 4.3 and 4.4 are mandatory and so differ from ODA (Jordan & Werksmann, 1994).

However, the irony is that most of the CF, since 2010, is regarded as repackaged ODA (70-80%) (Oxfam, 2012; Nakhooda, et al., 2013). While the latter does not increase in real terms, the former does. What is alarming is that some countries even try to dilute the differences between CF and ODA. Against the backdrop of global dynamics, Bangladesh is regarded as one of the most vulnerable countries (Kreft et al., 2015) for her suffering from increased magnitude and severity of climate disasters in recent years. About 2% of our GDP is lost a year from climate impacts (ADB, 2014). Economic Relations Division (ERD) has been assigned as the National Designated Authority (NDA) to maintain the inflow and mobilization of the funds under CF projects into the country; this entity’s officials have been dealing with negotiations and the representatives of the development partners for several years under designated wings. However, there are certain gaps between the published literature and the views of the practitioners of the country when it comes to CF and ODA. The authors of the article, hence, wanted to evaluate what the practitioners of the country thought about this mix-up via short interviews at the ERD under the Ministry of Finance (MoF) of the Government of Bangladesh (GoB) in an attempt to bridge the gap and publish a full report; an overview of the interviews have been highlighted henceforth.

Starting out, almost every one of the officials interviewed stated happily that the GoB receives enough ODA and it is increasing in terms of absolute money; sources have been both multilateral and bilateral. However, in relative terms, the ODA is decreasing. This view is in tune with the published statistics which states that ODA now forms only about 4% of the country’s Gross Domestic Product (GDP) (Trading Economics, 2017). This is good news for the country, because it portrays the country’s ever-expanding GDP and illustrates its increasing strength and self-sustainability. However, a few did mention that even when the funds are disbursed, a huge percentage from grants and loans go into foreign consultancy.

A surprising deviation from the literature (which emphasizes on the urgency of defining CF and creating a proper framework, as mentioned previously) opined by the practitioners was their ‘non-urgency’ to differentiate between CF and ODA. They mentioned that differentiating between CF and ODA is difficult and hence, missing. Many even went on to say that climate finance’s activities can be considered as development activities, so why is there the need to differentiate.

As for CF, over the last few decades, GoB has spent almost a billion US dollars on several mitigation and adaptation projects on climate (Khan, 2015). One of the biggest among these funds – the Green Climate Fund (GCF) – can provide CF for GoB, but they include several terms and conditions that are not easy to achieve and/or fulfill. Hence, even with its availability, accessibility became an issue as the project proposals could not meet up with the expectations and so, almost no funds have been disbursed from this fund for either mitigation or adaptation purposes to Bangladesh. GoB is not well prepared to handle fast-moving funds, like GCF as there are still lackings in experience, expertise, training and customization of projects according to donor interests. Even the officials themselves declared that training is needed for CF officials. It is believed by some that Bangladesh does not get enough CF as per its vulnerability, because donors think there is a lack of capacity within the country and hence, without doing capacity-building in terms of both skills and implementation, the donors’ trust and goodwill cannot be won.

The investigators were suggested to look into agreements with development partners to understand if loopholes exist. ERD officials further stated that a bigger problem exists in reporting and accountability, which is also supported by literature (SBSTA, 2016); for example, European donors handle accounting in cash while CF accountancy was done on an accrual basis.

To conclude it is important to note that the CF practitioners are relatively new at this ‘CF game’ as its operations started only a few years; the same was noted when ODA first started coming into the country. However, it is also important for the practitioners to build capacity of writing better projects, push to get a universal CF definition to reduce repackaging as this reduces the total amount, as ODA amounts are going down  and climate vulnerability and correspondingly CF will become more important and improve reporting to enhance the mobilization of CF as well as ODA into the country.

 

Sadia Nur Hia, Shirotaz Kamal and  Raisa Bashar

Ms .Hia and Ms. Kamal are senior students of the Environmental Science and Management department of North South University, Bangladesh and Ms. Bashar is the Lecturer of the Department. They can be reached at sadia.nur.hia@gmail.com