In the changing landscape of development finance, the strategy for providing financial flows to developing countries needs to be diversified by the income level of partner countries. For middle-income countries, it is more important to expand concessional assistance on tax policy, institutional reform on tax, and tax administration while supporting these partners to construct a mechanism that can fully take advantage of domestic financial resources or remittances as development finance. However, in the case of lower-income countries, lack of capacity is the main challenge and thus it becomes more important to assist them to strengthen the capacity of their human resources and institutions to utilize private finance.
This research suggests that the results of international dialogue on development finance and the necessity to diversify the utilization of development finance according to each country’s capacity level and environment should be incorporated into Korea’s development cooperation policy such as the Country Partnership Strategies (CPS). The Korea’s 3rd CPS, which will be established in 2020, should function as a partnership strategy to link and combine private finance and various public development resources beyond ODA, which will be included in TOSSD. When considering the potential risks that the utilization of private funds may accompany, it will be necessary to establish an ex-ante and ex-post risk management framework. Even in cases where the private sector engages in development projects, it is important to ensure development objectives are met and development effectiveness remains a priority.