Domestic taxes and cross-border private flows are playing a greater role. Domestic tax revenue is increasingly becoming a key source of funding for development, in particular for middle income countries (MICs) richly endowed with natural resources. However, for some middle and Low Income Countries (LICs) and some Least Developed Countries (LDCs), their narrow tax base and limited options to raise domestic revenue are real challenges. Available data for the period 2003-2011, show that tax revenue as a per cent of Gross Domestic Product (GDP) for most countries in the region are below global averages: high income countries (38%), MICs (25%), and in low income countries (less than 20%).
External resources to the region are also increasing. Foreign Direct Investment (FDI), portfolio equity, long-term debt, short-term debt, remittances, South-South Cooperation (SSC), philanthropy and ODA are all playing a role with different added value for different elements of development planning and budgeting. This is true for the region as a whole, for every sub-region, and for most countries individually. Between 1990 and 2011, ODA as a share of total external finance to the region has significantly reduced from 14 per cent of US$227 billion (1990) to 3.4 per cent of US$120 trillion (2011). This share gets even smaller (0.2% for 2011) when domestic development finance sources are added. Many countries including a number of LDCs, Pacific Islands, and MICs maintain that development co-operation is still important and has a continued contribution to make towards their development paths. Afghanistan, Pakistan, Viet Nam, and India remain in the top ten recipients of ODA. Combined, these changes are creating increasing complexity for development planning, public investment programming, budgeting and in coordinating the various activities of various actors of development.
Recognising that this will look different in different country contexts, the AP-DEF has begun building the evidence from a ‘country up’ approach to capture the changing landscape at a regional level. As part of the region’s readiness for Post-2015, the Asia-Pacific Development Effectiveness Facility (AP-DEF) is helping countries from the region better understand the potential implications these may have for development partnerships and financing sustainable human development, beyond 2015.
The AP-DEF Secretariat has developed the Development Finance and Aid Assessment (DFAA) as an innovative tool to map the different finance inflows to their countries in recent years and to assess future flows and their feasibility. It also assesses the policy, legal and institutional framework governing different sources of development finance and cooperation, the technical systems and tools, and the human resource capacity engaged in accessing, managing, coordinating, delivering and reporting on each flow. In particular, the DFAA helps articulate the added-value that each source can bring in an increasingly complex and diverse landscape.
Three countries (Papua New Guinea, the Philippines and Viet Nam) have conducted DFAAs and two (Lao PDR and Bangladesh) are currently underway. Each country has adapted the generic DFAA methodology to reflect their policy context and questions and the significance of the different sources in funding their current or next medium-term national development plans, Post-2015 priorities and/or LDC graduation strategy. More countries from the region and beyond have shown interest in conducting a DFAA.
At this juncture, and prior to more countries conducting Development Finance and Aid Assessments, UNDP Asia-Pacific Regional Centre as the AP-DEF Secretariat, sees the need to undertake a methodological review of the DFAA. Therefore UNDP seeks to engage a short-term consultant to undertake a DFAA review.
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