No.2 - March 2013

by Asmita Naik

Can the UN Adjust to the Changing Funding Landscape?


Private sources of financing are a growing feature of UN budgets. An evaluation of the private financing of UNDP activities reveals both advantages (e.g., increased resources, more technical expertise, better management) and challenges (e.g., distorted priorities, unhealthy competition, weakened multilateralism).

The past two decades have seen a rapid diversification in the types of actors and funding mechanisms involved in development. Traditionally, core funds—contributions by member states to UN organizations—comprised the bulk of the resources available for UN development programs. Since 1995, however, “non-core” contributions to the UN development organizations (from official and private sources and fund activities in specific sectors and countries) have risen more than five-fold and are now substantially larger than core funds. These non-core funds are channeled through different mechanisms and are increasingly from nongovernmental sources, including philanthropic organizations and the private sector.

This trend is highly likely to continue into the future and raises questions about the nature and purposes of the UN’s future development work.  The partnership with global funds and philanthropic foundations has brought four clear benefits to UNDP: more resources, technical capacity building, enhanced impact, and strengthened management. The most obvious benefit is a substantial increase in resources. While core resources have stagnated, non-core funds doubled from around $2 billion to around $4 billion between 2001 and 2010. As a result, UNDP’s total resources today amount to over $5 billion.

Despite these evident benefits from increased resources, partnerships with non-core funders have brought challenges too. First, funds earmarked for specific purposes may not necessarily meet the most pressing needs at country level. Second, the availability of earmarked funds may detract from the pursuit of UNDP’s core multilateral purposes.  Third, UNDP’s administrative practices can be perceived by outsiders as overly rigid and prone to delays.  Fourth, global funds and philanthropic foundations foster competition among potential grantees.  Fifth, and finally, the link with non-core donors raises fundamental questions about the UN as a sovereign development institution.

The UN’s position cannot be taken for granted, particularly with the emergence of new global organizations. Working with these funds has brought much benefit to the UN’s development work but also carries risks. As these changes are here to stay, it is essential that the UNDP and other vital organizations of the UN system find ways of optimizing the use of these resources without diminishing their core purpose and values.

Asmita Naik is a consultant who specializes in international development and human rights and has worked in the United Nations system for several of its constituent organizations. She was a core member of the evaluation team that carried out the UNDP evaluation carried out by FUNDS, from which this briefing is derived.
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