Regional Public Goods in Official Development Assistance

One of the roles of official development assistance is to promote the delivery of public goods not provided by the market or by recipient governments in the absence of such assistance. This includes the provision of international public goods, a challenge that has attracted growing attention in recent years. The case for international public goods, separable into global and regional public goods, arises from the collective action problems and strong externalities that are associated with such transnational challenges and threats to stability as financial contagion, rising inequality, the spread of communicable diseases, cross-border crime and conflict, or the degradation of shared natural resources. International public goods include the knowledge, standards and rules required to address these challenges, the institutions that monitor and enforce the rules, and the benefits that arise and are shared indiscriminately among countries. The objective of this paper is threefold: to review the demand, and the case, for regional public goods in the light of growing integration; to report on the response of certain international organizations and the system of official development assistance to perceived growth in the demand for these goods; and to analyze the challenges of financing regional public goods. The paper is premised on the notion of complementarity between national and regional policies, the latter being seen as complements to, not substitutes for, the former. The analysis of financing in this paper focuses on activities and benefits that call for funding by the public sector. The paper explores lending practices and the need for grants, and suggests some scope for innovation in the financing of regional public goods.