OECD Development Co‑operation Peer Reviews: Korea 2024

Annex B. Progress against OECD legal instruments under the responsibility of the DAC

Recommendations adopted by the Development Assistance Committee (DAC)

DAC Recommendation on the Terms and Conditions of Aid [OECD/LEGAL/5006]

The average grant element of Korean official development assistance (ODA) commitments was 90.5% in 2020 and 85.2% in 2021, when grants dipped below the norm of 86%. This was the first time since joining the DAC in 2010 that Korea did not meet the requirements of Paragraph 2 of the Recommendation on the Terms and Conditions of Aid. At 0.25%, Korea’s ODA commitments as a share of gross national income almost met the DAC average country effort of 0.27% in 2021. This percentage does not meet the requirements of Paragraph 3 of the Recommendation.

In 2020-21, Korea met the commitment on the special terms for least developed countries (LDCs) (Paragraph 8), exceeding the 90% norm. The grant element of bilateral ODA commitments to LDCs reached 95.8% in 2020 and 94.4% in 2021. If this trend persists for 2022 and beyond, Korea will be on track to meet the alternative norm of maintaining a three-year average of grant element of bilateral ODA to LDCs beyond 86%.

DAC Recommendation on Untying Official Development Assistance [OECD/LEGAL/5015]

Korea is not yet aligning with the DAC Recommendation on Untying Official Development Assistance. The share of de jure untied ODA provided to countries covered by the Recommendation stood at 70.5% in 2021 compared with 80.0% in 2020. The majority (~90%) of Korea’s tied aid was provided by KEXIM-EDCF to finance infrastructure projects mostly in the transport and energy sectors (OECD, 2022[1]).

On average over the five-year period of 2017-21, Korea awarded 31% of untied contracts (in terms of value) to domestic entities. This share serves as a proxy for de facto share of untying.

Regarding adherence to the transparency provision of the Recommendation, Korea consistently reports to the DAC Secretariat on its ex-post contract awards. It does not, however, report to the DAC Secretariat ex ante. Korea has informed the Secretariat that it will improve its implementation of ex ante notifications in 2022. This additional transparency would allow for a more disaggregated analysis of de facto tying in terms of the sector and procurement regime.

DAC Recommendation on the Humanitarian-Development-Peace Nexus [OECD/LEGAL/5019]

Korea has improved its understanding of the complexity of crisis response beyond humanitarian assistance. The 2019 DAC Recommendation on the HDP nexus came at a time when Korea was very active in the policy discussion in the International Network on Conflict and Fragility (INCAF) and a co-chair of INCAF. In 2019, Korea revised its humanitarian strategy to integrate elements of the HDP nexus approach, and in 2021, Korea also developed a stand-alone HDP Nexus Implementation Strategy. It also funds the Nexus Academy, an online interactive course to promote better understanding within and between organisations of the full range of responses to effectively save lives and deliver sustainable development and peace.

Korea’s relatively new KOICA Conflict and Fragility Program emphasises the importance of analysing the root causes of structural drivers of conflict and requires close co-ordination with United Nations (UN) Resident and Humanitarian Coordinators and Special Representatives of the UN Secretary-General. Through the programme, Korea can fast-track spending outside of the N-2 programming cycle. For example, 2023 was the first year since the start of the civil war in Yemen that Korea was able to provide development co-operation in Yemen through this programme. Working with international organisations, Korea contributed to programmes on the rule of law and those promoting social cohesion through water and agriculture investments and a focus on persons with disabilities. Korea’s focus on the peace pillar is primarily via social cohesion. Korea’s contribution to peace as measured by the OECD is limited: In 2021, Korea’s total peace ODA contribution amounted to USD 128.8 million, representing only 0.8% of DAC members’ total peace ODA. Korea’s humanitarian assistance in 2021-22 averaged USD 171.4 million.

DAC Recommendation on Ending Sexual Exploitation, Abuse and Harassment in Development Co-operation and Humanitarian Assistance [OECD/LEGAL/5020]

While acknowledging progress has been made to prevent sexual exploitation, abuse, and harassment (SEAH) and reiterating its zero tolerance for it, Korea also acknowledges that significant challenges remain. Korea promotes human rights-based approaches in the Korean International Cooperation Agency’s (KOICA) business regulation and the Human Rights Management Charter of the Economic Development Cooperation Fund (EDCF) of the Export-Import Bank of Korea (KEXIM). KOICA, the Ministry of Foreign Affairs (MoFA) and the EDCF (KEXIM) revised and/or introduced guidelines for prevention of sexual harassment and sexual violence and have developed manuals for handling incidents; Korea also has indicated that it is stepping up efforts to train staff and partners on preventing SEAH (Government of Korea, 2023[2]). In Uzbekistan, KOICA staff received training on integrity that included preventing SEAH, but this was not yet the case for the EDCF (KEXIM) or, to the best of the team’s knowledge, other agencies that provide grant aid.

KOICA has put in place a sexual misconduct desk and response committee, and EDCF (KEXIM) has a grievance deliberation committee that reviews reported cases. But it is unclear whether any cases have been reported or handled. Fully integrating SEAH in regular staff training and risk assessments to underpin a stronger environment of prevention would also support implementation of the Recommendation.

Korea is engaging proactively in global forums related to SEAH and has deployed a military legal expert to the Office of the Special Coordinator on Improving the UN Response to Sexual Exploitation and Abuse during 2020-23. Korea launched the Action with Women and Peace initiative in 2018 to contribute to the women, peace and security agenda and it hosts an annual International Conference on this initiative. Korea also participates in other international conferences on women, peace and security and provides unrestricted funding to the Global Survivors Fund.

DAC Recommendation on Enabling Civil Society in Development Co-operation and Humanitarian Assistance [OECD/LEGAL/5021]

In 2021, Korea developed an implementation plan for its Policy Framework for Government-Civil Society Partnership with a results framework consisting of 31 tasks and performance indicators (Government of Korea, 2023[2]). As set out in the 2019 Government-CSO Strategy and Implementation Plan, Korea considers civil society organisations (CSOs) as key implementing partners of Korean development co-operation. While its share increased in 2021, civil society received only 2% of Korea’s bilateral ODA (in project support only) compared with 15% on average for DAC countries. To date, Korea does not provide core support to CSOs.

In line with the DAC Recommendation, Korea is encouraged to provide financial support to more diverse civil society actors, including those in partner countries; increase the availability of direct, flexible and predictable support including core support and/or programme-based support to CSOs; work with CSOs to implement mutual capacity building to address CSOs’ vulnerabilities; and support more equitable partnerships between provider countries and/or international CSOs and the partner country CSOs it works with.

Recommendations adopted by the Council under the DAC’s responsibility (jointly with other OECD committees)

Recommendation on Policy Coherence for Sustainable Development [OECD/LEGAL/0381]

Korea’s policy coherence for sustainable development (PCSD) does not yet consider transboundary effects on developing countries. PCSD is governed by the 2022 Framework Act on Sustainable Development1 and its enforcement decree, which contain cross-government commitments to achieving sustainable development. Clauses in the act consider the transboundary effects on developing countries, and the National Council on Sustainable Development, once it is established, will need to work to ensure that government policies consider and work to address the effects of government policies on partner countries. The 2021-40 Fourth Basic Plan for Sustainable Development serves as the basic platform for integrated policy action related to sustainable development. As the lead institution for PCSD, the National Council on Sustainable Development was mandated to evaluate national sustainability every two years. Previously under the Ministry of Environment, the Council will be under the direct oversight of the President's office, reflecting the country’s willingness to attach greater importance to PCSD. However, this Presidential Council on Sustainable Development is yet to be established. Apart from Korea’s contribution to other countries in the form of ODA under the Korean Sustainable Development Goals related to partnerships; peace, justice, and inclusiveness; and conserving the marine ecosystem, transboundary effects of domestic policies are not addressed (Government of Korea, 2020[3]).

Recommendation for Development Co‑operation Actors on Managing the Risk of Corruption [OECD/LEGAL/0431]

Korea has clear anti-corruption guidelines established by KOICA and the EDCF for staff and stakeholders. It is not clear how other grant aid agencies work to manage the risk of corruption in ODA projects.

Since 2019, KOICA has provided anti-corruption training on foreign bribery for employees and for contractors that partner with KOICA. KOICA also has Regulations on Ethical Practice for Executives and Employees, an employee code of conduct, and ethics charter, and senior-level employees are required to sign a pledge of compliance and agreement of integrity. KOICA provides companies with clear information related to anti-corruption and anti-foreign bribery policy at the beginning of bidding and contracting and requires companies to declare that they have no connection with any corruption and foreign bribery cases and to submit the declaration letter of anti-corruption and fair contract pledge letter to KOICA as evidence. KOICA worked in co-operation with the MoFA to make this latter a legal requirement to ensure that companies convicted of corruption are not involved any bidding processes of KOICA (OECD, 2021[4]).

KEXIM (EDCF) has an anti-corruption policy shared with employees and stakeholders. It has implemented semi-annual training for employees on foreign bribery risks and awareness raising, including an overview of the OECD Anti-Bribery Convention, provisions, and recommendations applicable to the EDCF and the relevant internal regulations.

The Recommendation calls for an active and systematic assessment and management of corruption risks. The Board of Audit and Inspection performs ODA audits every two years, the National Assembly conducts audits of Korea’s ODA programme on an annual basis, and the Foreign Affairs Committee makes random inspections. KOICA conducts regular risk assessments and the EDCF undertakes comprehensive risk assessments every three years to detect and monitor areas of weakness and carry out regulation compliance checks. It is unclear how Korea manages for risks that extend beyond the fiduciary dimension (e.g., conflicts of interest, nepotism, reputational risks, etc.).

In 2020, the Financial Action Task Force2 (FATF) conducted an extensive review of Korea’s measure to combat money laundering and the financing of terrorism and proliferation. Korea’s legal framework to combat money laundering and the financing of terrorism and proliferation was assessed as generally sound. However, Korea was urged to strengthen its ability to prosecute money laundering related to tax crimes and corruption and to extend measures to other businesses and professions to further protect its financial sector from abuse. To date, Korea has not made substantive progress in this area.

Recommendation on Environmental Assessment of Development Assistance Projects and Programmes [OECD/LEGAL/0458]

At the project concept proposal phase, Korean implementing agencies conduct an analysis of the possible environmental impact that any future programme would incur. The EDCF relies on the environmental and social impact reports of the partner country. The KOICA environmental and social safeguards must consider the effects of the programming on:

• biodiversity conservation and sustainable management of living natural resources

• land acquisition and involuntary resettlement

• resource efficiency and pollution prevention.

In 2020-21, Korea committed 32.2% of its total bilateral allocable aid (USD 1 billion) in support of the environment and the Rio Conventions (compared with the DAC average of 34.3%), up from the 26% share in 2018-19. To elaborate:

• Five per cent of total bilateral allocable aid (USD 138.4 million) focused on biodiversity (compared with the DAC average of 6.5%), up from 0.4% in 2018-19.

• Eleven per cent of screened bilateral allocable aid focused on environmental issues as a principal objective compared with the DAC average of 11.3%.

• Twenty-six per cent of total bilateral allocable aid (USD 826.4 million) focused on climate change overall (compared with the DAC average of 29%), up from 19.8% in 2018-19. Korea had a greater focus on adaptation (25.8%) than on mitigation (8.3%) in 2020-21.

OECD DAC Declarations

OECD DAC Declaration on a new approach to align development co-operation with the goals of the Paris Agreement on Climate Change [OECD/LEGAL/0466]

Korea announced a commitment to end all public financing for new overseas coal-fired plants and to support the energy transition of countries highly dependent on coal power generation at the 2021 Leaders’ Summit on Climate. The 3rd Mid-term Strategy for International Development Cooperation for 2021-25 includes goals for Korea’s green ODA. After adopting the mid-term strategy in January 2021, the Korean government formulated several development co-operation strategies and policy documents to integrate environmental and climate objectives into development co-operation. The key strategies are the Green New Deal ODA Strategy, the Green EDCF Strategy and the Green New Deal Grants Strategy.

The key provisions and pillars of the Green New Deal ODA Strategy are helping developing countries achieve green transition, facilitating Green New Deal ODA co-operation as a green leader and extending support for expanding partnerships for co-prosperity. The strategy sets a target of increasing the share of Korea’s ODA going to green projects and programmes to more than the average for OECD DAC countries by 2025. In 2021, climate-related ODA increased to a 35% share in line with the Green New Deal ODA Strategy.

Regarding loans, the EDCF’s Green Economic Development Cooperation Fund Strategy establishes targets to triple the volume of ODA loans for green projects by 2025 and double the share of green-related loans by 2025. Korea’s recent USD 300 million pledge to the Green Climate Fund (a 50% increase over its pledge to the first replenishment) was put forth in the Green New Deal Grants Strategy and underscores Korea’s ambition to position itself as a key contributor in climate finance and to work multilaterally.

Korea has further developed several tools to enable the systematic integration of climate considerations into project design and implementation. On grant aid, KOICA has put in place environmental and social safeguards that serve as guidelines for screening environmental and social risks, conducting environmental and social impact assessments, and establishing environmental and social management plans for projects with potential risks. However, there is a lack of clarity on the quality of procedures and safeguards administered by other implementing agencies.

Regarding loans, KEXIM introduced the Safeguard Policy in 2016 followed, in 2021, by the EDCF Climate Change Impact Response System, which requires all projects to conduct a climate risk assessment starting from the feasibility study stage and to devise mitigation measures. The system is currently in a pilot phase and will be fully rolled out and applicable to all projects by 2025.

References

[2] Government of Korea (2023), Self-Assessment of Korea, OECD Publishing, Paris, https://one.oecd.org/document/DCD/DAC/AR(2023)1/26/en/pdf.

[3] Government of Korea (2020), 제4차 지속가능발전 기본계획 202-2040 (Fourth Basic Plan for Sustainable Development 2021-2040), https://www.law.go.kr/%EB%B2%95%EB%A0%B9/%EC%A7%80%EC%86%8D%EA%B0%80%EB%8A%A5%EB%B0%9C%EC%A0%84%20%EA%B8%B0%EB%B3%B8%EB%B2%95/(18708,20220104).

[1] OECD (2022), 2022 Report on the Implementation of the DAC Recommendation on Untying, OECD Publishing, Paris, https://one.oecd.org/document/DCD/DAC(2022)34/FINAL/en/pdf.

[4] OECD (2021), Implementing the OECD Anti-Bribery Convention - Phase 4 Two-year Follow-up Report: Korea, OECD Publishing, Paris, https://www.oecd.org/daf/anti-bribery/korea-phase-4-follow-up-report.pdf.

Notes

← 1.  This act mandates the formulation of basic cross-government strategies for sustainable development every 20 years, with the strategies to be reviewed every five years.

← 2.  The objective of the FATF’s mandate is to protect financial systems and the broader economy from threats of money laundering and the financing of terrorism and proliferation. These efforts strengthen financial sector integrity and contribute to safety and security. In this way, effective implementation of the FATF Standards is important for all countries’ efforts to achieve the Sustainable Development Goals and improve their ability to collect tax revenue, attract foreign investment, safely leverage the benefits of digitalisation, and protect non-profit organisations and civil society from criminal abuse.