Innovation and Additionalty for Development Finance: Looking at Asia

The issue of introducing innovation in financing came into discussion at Monterrey in response to the recurring failure of most developed countries to live up to their commitment to enhance flows of official development assistance (ODA) to the developing countries in order to attain the Millennium Development Goals (MDGs). This paper argues that attempts to identify such innovative sources have been neither innovative nor effective in meeting the needs of the developing countries. The paper indicates that in most countries in Asia domestic savings, foreign direct investment (FDI) and migrant remittances have, in recent years, overtaken ODA as the principal source of development finance. Any search for both innovation and additionality in development finance should accordingly focus on making more effective use of Asia’s growing external capital surpluses and inflows of migrant remittances in enhancing the region’s development capacity.