Financing sustainable development with enhanced domestic resource mobilization: transitional role of international cooperation

The Sustainable Development Goals are very comprehensive, reflecting the increased diversification and complication involved with the development challenges the world is facing in the post-2015 period. Also taking place is a dramatic change in the global landscape of development finance, in which domestic public revenues have risen rapidly to become the largest source of finance. Official development assistance (ODA) for domestic resource mobilization (DRM) will remain essential to accelerate economic growth and lift people from extreme poverty, particularly in the low-income countries. The combination of technical assistance and increased financing for capacity-building can play a vital role in strengthening DRM and lead to more effective and efficient use of public expenditure. The present report first reviews the latest literature on the rationale for this path and the emphasis on public domestic resource mobilization. It then looks at the two-decade experience of the Japan International Cooperation Agency (JICA) with the Mongolian tax authority as an example of international cooperation that supports enhanced DRM. After reviewing the events chronologically from the mid-1990s to the 2010s, key takeaways from JICA are given with a focus on capacity development. Finally, the report discusses the transitional role of international cooperation in this regard. It points out that to effectively carry out capacity development, a long-term commitment and joint concerted efforts from the global community are needed. This, in turn, requires a change in mindset from being oriented towards results management at the individual project level to applying programme-based management, which entails combining different types of operations to meet the national development goals and strategy. In addition, it must go hand-in-hand with strong country ownership to come up with indigenous solutions. In the case involving JICA and the Mongolian tax authority, implementing quick-impact projects and showing the impacts at each stage has convinced the latter of the need for a long-term commitment to the results. The long-term commitment of traditional donors from the North could facilitate the participation of emerging donors in a concerted manner. It could scale up capacity development efforts by facilitating triangular cooperation to promote DRM in many countries.