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Financing the UN Development System: Opening Doors (2018)

This is the fourth annual report of Financing the United Nations Development System, a report that attempts to provide fresh insights into the funding of the UN development system and into the positioning of that funding within the larger financing dynamics of the 2030 Agenda.

Publication details

Title:Financing the UN Development System: Opening Doors (2018)
Type:Financing the UN Development System
Issue:4
Author:Dag Hammarskjöld Foundation and UN Multi-Partner Trust Fund Office
Published:11 September 2018
Licence: All rights reserved
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Three years have passed since the adoption of the 2030 Agenda for Sustainable Development and financing has become a key element in the discussions on how to achieve its 17 Sustainable Development Goals (SDGs). A few years into its implementation, there is now, perhaps, a better understanding of what is at stake.

On one level, we describe the system as a relatively simple one dominated by grant receipts and grant disbursements for agreed purposes. While this is true on the surface, the deeper analytical dive of the report shows that the SDGs requires the UN grant resources to be positioned more strategically to impact much greater and more diverse financing flows.

The overall ambition of this report is to contribute to – and push forward – current and future discussions related to the UN’s role in financing development. Armed with the latest statistics and with a broad menu of ideas for change, we hope to do just that. Read the Executive Summary.

The table below provides an overview of the five types of financial instruments currently in use in the UN system and are essential to understanding UN financing.

 

Part One - Chapter One: REVENUE

The UN system total revenue for 2016 was just under US$ 50 billion. This represents an increase of over US$ 1 billion compared to the year before and of US$ 7 billion compared to 2012. The table below provides an overview of total revenue by UN entity and financing instrument.

Growth in earmarked funding continues to outpace that of core funding. In 2016, more than half of the total revenue was earmarked contributions (54%), while the more flexible assessed and voluntary core contributions represented 28% and 10% respectively.

If we then look at the funding of the UN system by function, we see that operational activities for development (OAD) represent 66%, while 14% is allocated to global norms, standards, policy and advocacy.

If we examine the positioning of the UNDS among the main multilateral actors, we see it retains a significant presence, accounting for 31% of total multilateral aid. However, what is also made clear in the report is that the UNDS is the only one of the major players whose resource base is dominated by earmarked resources.

Next figure provides data on the sources of ODA within the 12 largest OECD-DAC donors to the UN.  This table is based on data provided by OECD-DAC and will likely grow in importance as the ‘whole of government approach’ embraced by the 2030 Agenda places more burden sharing on governments. Global public goods (GPG) increasingly can not only be seen as in the domain of foreign affairs ministries. Within governments the responsibility for reaching the targets of the Sustainable Development Goals (SDGs) will involve more ministries.

Finally, the last figure in this chapter focuses attention on core, pooled and earmarked contributions of the top 12 countries to UN operational activities in 2016. It shows the different funding mixes adopted by different donors. It points to the need, within the UN system, for entity-level approaches to devise successful resource-mobilisation strategies.

Part One - Chapter Two: EXPENDITURE

The second chapter of Part One provides an overview of UN expenditures. In particular, it provides historical data by entity, as well as expenditures by region and by income status. It shows that among UN entities the growth in overall expenditures over the past 11 years has been heavily concentrated within the UN Secretariat that is, for example, hosting the UN Office for the Coordination of Humanitarian Affairs (UNOCHA), and the main UN humanitarian entities such as the International Organization for Migration (IOM), UNHCR, UNICEF, UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) and WFP.

Meanwhile, in 2016 Africa continued to be the region with the proportionally highest UN expenditures (34%), followed by Western Asia (22%), Asia and the Pacific (13%), Latin America (10%) and Europe (3%).

With regards to UN expenditure by income status, we see highest expenditures in low-income countries, while the largest increase, on average US$ 25 million per country, was in lower middle-income countries, compared to the previous year. UN spending in upper middle-income countries has instead dropped slightly.

This figure provides an interesting comparison between expenditures on development, humanitarian and peace- and security-related operations in 36 crisis-affected countries. Concentrating on the first ten countries, which represent close to 60% of the total expenditure, only 16% goes towards development activities, compared to 37% towards humanitarian and 47% towards peace- and security-related activities.

Part One - Chapter Three: EXPLORING DATA QUALITY

The third chapter of Part One provides a deep dive into the world of data. The new finance architecture requires a far stronger level of commitment to fact-based policy-making. In the words of the famous physician and public-educator Hans Rosling, we must fully embrace a new culture of ‘factfulness’⁴. Factfulness could be interpreted as the guiding spirit of the Paris Climate Declaration with its emphasis on self-reporting, and is equally the lode star of this report. The commitment to flood the first half of the report with data is a conscious effort to make policymakers more aware of the basic numbers. This report, as it has done in previous editions, points to the inconsistencies in the data being used, which has an important impact on policy-making. There is notably a serious credibility gap in reporting on normative activities, a centrepiece of the 2030 Agenda.

Each chapter of Part Two of the report also raises data related issues. Chapter One addresses the issue of estimating the current allocation of global finance to the Sustainable Development Goals. Chapter Two raises issues, among many others, of how to calculate China’s development finance. The voice of civil society in promoting transparency and accountability is also raised in a number of papers. Estimating the net impact of different instruments such as blended finance is a constant theme of Chapter Three. Chapter Four, finally, includes a number of data challenges directly relevant to the UN. In short, factfulness represents a core dimension of financing for the 2030 Agenda.

Part Two, Chapter One: THE BIG PICTURE

Part Two, Chapter Two: BROADENING PERSPECTIVES

Part Two, Chapter Three: GAME CHANGERS

Part Two, Chapter Four: INNOVATIONS IN MULTILATERAL INSTRUMENTS FOR THE 2030 AGENDA

Conclusion

The subtitle of this report, Opening Doors, aims to provide an image of the opportunities ahead. There are lots of different doors into new financing for the SDGs. Some are already ajar, while others require a push.  They all need to be opened and explored. This report attempts to provide fresh insights into the funding of the UN development system and into its positioning within the larger 2030 Agenda financing dynamics. On one level, we describe a relatively simple-looking system, dominated by grants. A deeper analytical dive shows an increasingly complex and diverse financing context, requiring the UNDS grant resources to be positioned evermore strategically to impact much greater and more diverse financing flows.

A number of headline messages and themes emerge from the report. Getting to more funding and financing arrangements and moving away from the dominant ‘disbursement culture’ presents several real challenges. It will require a significantly different approach to defining, monitoring and measuring the impact of SDG investments. A successful new approach will need to be underpinned by a robust capacity, skill-set, expertise, language as well as more data.

In addition, the new finance architecture and approach will require a strong commitment to fact-based policy-making. The strong focus on data of the first half of the report being a conscious effort to make policymakers more aware of the basic numbers, and not least, where we have found the data lacking.

Important work remains to be done in advancing new thinking and new approaches to partnerships for financing the 2030 Agenda. The landscape of influential actors and partnerships is radically different from that which dominated the Millennium Development Goals era. The key issue is not about new public and private actors per se, but about their positioning and the role they expect to, and can, play. In addition, there is a clear evolution in the positioning of different elements of civil society. Overall there is need for a fundamental rethinking of the future relationship between public and private actors, and financial flows.

The Secretary-General’s reform agenda adopted by Member States in 2018 is designed with intent – to clear a path ahead that will reposition the UNDS for relevant and impactful support to countries in their achievement of the SDGs. The new and complex financing elements of this transformational reform vision will be essential, not optional, drivers of overall success. It is high time to push open some doors.

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