International Cooperation: Origins of the Funds

Introduction

Not all aid received is the same and within the framework of International Technical Cooperation (ITC) this is no different. This post will deal only with the ITC, which is characterized by being non-reimbursable, unlike the funds granted by the Credit Agencies (CA) - for example the World Bank - as a loan. In the ITC, funds are not obtained, but inputs such as consultancies, equipment, training, technology transfer, among others.

As a note of color, we will not present real cases, not to confuse them, but as a measure of protection for the parties involved. If necessary, we will take the case exposed in the work Principles of Tax Administration (In Spanish) of the People's Republic and Metropolis as a base.

Fund's Origin

International Government Cooperation (IGC)

Let's imagine that a country wants to help a third party through cooperation. It does this with its own resources, originating from the collection of taxes from its citizens, once their needs are covered. However, since resources are finite, the donor country must prioritize aid based on its strategic objectives, which may be economic, social, environmental or other. Then, Bilateral Technical Cooperation (BTC) is called that which occurs directly between two countries, a donor of funds and a recipient.

It may be the case that - depending on the objectives - the participation of several donors may be necessary for a single recipient, something that can occur in the African continent, forming something that we will call Mixed Bilateral Cooperation (MBC).

Both in the case of the BTC and the MBC, the management of these resources is carried out through the competent organizations in matters of cooperation of the different donor countries, such as the International Cooperation Agencies (ICA). As an example we can cite USAID or giz.

Finally, it may be the case that several countries come together to promote the advancement of a common axis in what we will call Multilateral Technical Cooperation (MTC), forming Multilateral Organizations for International Cooperation (MOIC). These organizations receive contributions from all their members, based on parameters such as the gross domestic product or GDP (ie, the higher the GDP, the greater the contribution) for channeling them to the different recipients. In other words, in these cases both the donor and recipient countries make contributions to the MOIC, based on the variables approved by the members to determine them.

Both in the BTC and in the MBC or the MTC, the donor's interest in the progress of the program on which the funds are based clearly emerges. Ultimately these are funds from taxpayers that could have financed goods and services within their borders but chose to do so elsewhere.

Non-Governmental International Cooperation (NGIC)

In many cases it is not governments that donate the funds, but may also be non-governmental actors (for example, foundations), whose origin may be civil society donors, such as private banks. We will call these entities Non-Governmental Organizations (NGOs).

Quick Recap

Based on all of the above, we can say that:

1. The funds donated arise mainly from taxes that the donor collected or was able to collect and that he was able to use to finance programs within his borders but chose to do so through International Cooperation projects.
2. In return for these funds, the donor must explain to its citizens the progress of the program and therefore has an interest in knowing its progress.
3. Since the funds are finite, the donor prioritizes the destination based on their needs and those of the recipients.
4. All member countries of an MOIC make a contribution, which depends on the amount based on pre-existing parameters.
5. In no case do funds from non-reimbursable contributions come from nowhere, but are always based on taxes collected or that could be collected. In other words, the donations are based on the funds that certain countries (the donors) decided to invest in others with less relative development.

In summary, it is possible to determine that a program will be viable if the following two conditions are true:

1. The donor country has the funds earmarked for ITC.
2. The cooperation program is aligned both with the objectives and policies of the donor and the recipient.

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