Time for OECD DAC reform and a UN convention to define what can be counted as aid

The OECD’s Development Assistance Committee (DAC) has since its creation in 1961 wielded near-total control over what qualifies as “aid,” defining the terms and shaping global standards to the benefit of rich donor countries.  Ahead of next year’s Fourth International Conference on Financing for Development (FfD4) in Spain, calls for reform within the DAC are reaching a fever pitch.

More and more civil society organizations are calling for a radical overhaul of global development governance. One of the key demands is the creation of a new UN Convention on International Development Cooperation, which would transfer the power to decide what counts as aid from an elite club of wealthy countries to UN members. This shift would give all countries, donors, and aid recipients alike, a voice regardless of economic power.

Some 60 years ago, rich countries created the DAC under the OECD’s umbrella – rather than the UN – to keep Soviet influence at bay during the height of the Cold War. Over time, the Committee became the sole authority on what qualifies as “aid”, as well as the primary source of aid statistics. This has allowed donors to avoid accountability, with practices like classifying the costs of hosting refugees within their own borders as aid, even if these have little or no real link to development.

Today, this governance system is illogical and clearly outdated. The Cold War ended over 30 years ago, emerging economies have become donors too, and today’s aid system is much more complex than what an organisation with such a restricted membership can effectively manage.

More importantly, it is morally indefensible, as countries receiving aid are not able to take part in defining something that affects them so directly. If aid and development are truly meant to ensure justice for the Global South, and if the goal is to transition from a donor-recipient model to one of equal partnership, then the DAC must practice what it preaches.

This is why a new UN Convention on International Development Cooperation, a body where all countries — donors and aid recipients alike — are equally represented, would help democratize global decision-making. The Convention should establish comprehensive rules for development cooperation, framing aid not as charity but as a matter of justice to redress historical injustices. It should prioritize ending poverty and reducing inequality and ensure that donor countries come to view the goal of allocating 0.7 per cent of their Gross National Income (GNI) to aid as a starting point, not as a ceiling.

Rich donors may view this proposal as a potential loss of power, influence, or even purpose. But are these fears justified? A new UN Convention would compel DAC members to share power with recipient countries and, hopefully, put an end to self-serving practices like counting donations of surplus vaccine as aid in their budgets. But this reform wouldn’t make the DAC irrelevant. In fact, it would provide a unique opportunity to leverage the DAC’s expertise and move from empty rhetoric about equal partnerships to genuine collaboration between aid donors and recipients.

Here are three ways this donor-exclusive club could remain relevant and impactful even if the UN Convention on International Development Cooperation becomes a reality:

First, the DAC could continue to serve as a vital space for donor coordination while expanding engagement with so-called “new donors,” including emerging economies. Although these countries increasingly provide development aid and assistance, they have so far largely been excluded from the DAC. Greater inclusion would also allow rich countries to improve their relationships with multilateral institutions, governments, and private sector representatives outside the committee. The DAC would remain a donor-only club, but one that acknowledges and collaborates with all donors.

Second, the DAC can encourage members to learn from each other’s best practices, shifting focus from endless debates over what qualifies as aid to practical strategies for using aid more effectively. Freeing up both money and time would allow members to prioritize impactful initiatives that reduce poverty and inequality.

And third, the DAC could unleash its hidden gem: the Working Party on Statistics. This group performs exceptional statistical analysis and continuously refines members' reporting methodologies. They generate high-quality, comparable data that is essential for development agencies, non-governmental organizations, academia, and think tanks. By strengthening this body, the DAC would gain the tools to measure inequality more accurately, a crucial first step to reducing it.

Keeping what works well while embracing necessary improvements offers the DAC an opportunity to make a meaningful impact and to adapt to the needs of a world that has dramatically changed since 1961.

The upcoming Conference on Financing for Development is the right moment to support a more balanced, inclusive approach to aid – one that considers the needs of all countries, not just the interests of the wealthy. By focusing even more on these three proposed areas, the DAC can stay in the game, strengthen what it does best and, most importantly, commit to what is fair.

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Salvatore Nocerino is Aid and OECD Lead at Oxfam International.