Supply chain ODA: Current issues and solutions

Growing international demand for more stable and sustainable supply chains presents a fresh new set of challenges for developing countries, which are home to both large reserves of important raw materials as well as production facilities for major global corporations. In response, Official Development Assistance (ODA) is increasingly being deployed to shore up supply chains in developing countries. This ODA typically goes to firms in the logistics, business services, manufacturing, mining and quarrying, and trade sectors. In 2022, supply chain ODA comprised 9.9 percent (USD 18.3 billion) of all ODA provided by member states of the Development Assistance Committee of the Organisation for Economic Co-operation and Development (OECD), a grouping of ODA donors. South Korea, a major ODA donor, is also sending more and more supply chain assistance to developing countries, as supply chain ODA has risen from USD 390 million in 2012 to USD 1.72 billion in 2022. The vast majority of Korean supply chain ODA (94.2 percent as of 2022) is concentrated in the logistics (transportation and storage) sector. Korea is among the largest providers of supply chain ODA in this sector, but the country has contributed little to no ODA for development in the business services, mining and quarrying, and trade sectors. In this report, I identify several key issues in supply chain ODA and propose solutions for tackling some of the more intractable problems in the space. First, as the scope and definition of supply chain ODA lacks clarity, I survey the landscape to better identify its contours. We find that while mining and quarrying has emerged as the central area of concern in recent years, it is important for policymakers to consider entire supply chains in designing ODA programs, rather than focusing to an excessive extent on procurement of raw materials. Second, most supply chains extend across multiple countries, making it difficult to spatially demarcate supply chain ODA with any degree of accuracy. To deal with this, I advise policymakers to consider the offer-based approach to ODA, an alternative to the more traditional request-based approach. Third, because supply chain ODA is often meant to serve the interests of both the donor and recipient countries, there can be confusion and even tension over how to evaluate the performance of these ODA programs. It is therefore important to adopt measures that help prevent conflicts of interest between donors and recipients in the planning, execution, and evaluation of such programs. Thanks for reading this abstract of a report by the Korea Institute for Industrial Economics and Trade!