Friday, 27 July 2012

Are governments willing to share the aid arena?

By Noshua Watson

On July 5 and 6, the United Nations ECOSOC hosted the Development Cooperation Forum. One of the most interesting sessions was a policy dialogue titled ‘How can development cooperation serve as a catalyst for other sources of development financing?’ Given the continuing entry of new actors into development finance, especially NGOs, foundations and businesses, the session was a welcome discussion.

Representatives from many sectors, government, private and social, believe that the need for development cooperation is being driven by decreasing official development assistance (ODA). At the same time, financing considerations need to include ‘aid exit’. There is a general sense that development finance consists not only of ODA, but many recipients and donors are not ready to move away from ODA.

I agreed with the general theme of the session that the key to generating other funds for development is increasing domestic resources. Representatives from government, NGOs and multilateral organisations said that ODA should be directed at developing local financial sectors, equity markets, bond markets and SMEs. At the national level, implementing policies to reduce corruption and tax avoidance and improve national budget accounting would generate additional domestic funds for development.

The main source of disagreement was over the extent to which new policies in this area are negotiated inter-governmentally rather than between the different types of actors on a bilateral basis. Many countries believe that the presence and activities of philanthropies, companies and NGOs in development finance should be entirely managed by the government.

The solutions seem to lie in the space between the public and private sectors, but these solutions are also complicated. There were a number of calls from NGOs to implement a financial transaction tax, but this was not taken up by representatives from other sectors. The observation that much of the funding from Development Finance Institutions goes to Western multinationals and private equity companies was better received along with the recommendation that development finance needs to be refocused on underfunded areas and developing country enterprises. Another keen observation was that trade barriers can also come in the form of product standards that exclude developing country producers, and are frequently set by the private sector, not governments.

It is clear that aid and trade (and FDI and microfinance) can coexist. But can they cooperate?

Wednesday, 18 July 2012

Politics and legitimacy in Latin America: Some worrying findings

By Carlos Fortin

I was recently involved in the launch in Chile of the latest study on democracy in Latin America. The report, by the United Nations Development Programme, is entitled 'The State of Citizenship' 1.
It focuses on the notion of social citizenship, defined in terms of effective access to the rights contained in the United Nations International Covenant on Economic, Social and Cultural Rights. These include the right of an individual to: 
  • work in just and favourable conditions and to unionise
  • social security, including social insurance, with emphasis on the family, mothers and children
  • an adequate standard of living
  • the enjoyment of the highest attainable standard of physical and mental health
  • education
  • take part in cultural life and enjoy the benefits of scientific progress and its applications.

On those bases, the study develops an Index of Social Citizenship and applies it to the countries of the region to assess progress in social citizenship in the continent.
The conclusions are, on the whole, encouraging. The figures show that there has been:
  • a broadening of the coverage of social protection policies
  • an increase in transfers targeted to poverty alleviation
  • the introduction of innovative forms of social protection for children, the aged and women as well as safety nets for important sections of the labour force
  • the establishment of public institutions and structures for a continuing dialogue with civil society.

There are, however, some worrying findings.

Two opposite trends seem to coexist in the attitudes of the citizenry vis-a-vis the political system. On the one hand, there is ‘a demand for more State’ -  for higher and better public expenditure - and for a more active presence of the public sector in the economy and society; this is coupled with a new activism on the part of civil society, NGOs and grass roots organisations, often through non-conventional forms of political participation.

On the other hand, there is a growing disenchantment with, and distrust of, traditional political institutions and structures.

Figures from a 2010 opinion poll substantiate this dichotomy. When asked whether they think the State can solve the problems of the country, 66.6 per cent of respondents answered it can solve all, most or many of the problems. Similarly, 74.3 per cent of those interviewed felt that the State has the means to solve the problems. However, the response was less positive when asked about levels of confidence in the political parties, legislature and the judiciary:
Latin America:  Do you have confidence in the following? (percentages)

The judiciary
Great confidence
Some confidence
Little confidence
No confidence
Source:  Latinobarometro 2010, available at

The UNDP study neatly summarises the situation saying: ‘we witness a return to the political together with an unresolved legitimacy crisis and a devaluing of politics’. Precisely, I am afraid, the kinds of conditions for the emergence of populist responses which may well endanger the gains in social citizenship.

1   Pinto, A. & Flisfisch, A. (eds)(2011) 'Transformaciones, Logros y Desafíos del Estado en América Latina en el Siglo' ( available in Spanish only), New York: United Nations Development Program

Wednesday, 11 July 2012

Will the recession in the North spread to the South and East?

By John Humphrey

Many developing countries have continued to grow strongly in the past five years, while the US suffered recession and Europe stagnates in the face of deep-seated problems and policy failures, growth rates and many developing countries, including many countries in Africa, have held up much better. In spite of the many dire predictions made in 2008 about the impact of global recession on sub-Saharan Africa, Africa as a whole has continued to grow at historically quite high rates.

This resilience in the face of recession is quite new. Back in the 1990s, a number of developing countries were subject to repeated economic shocks. At the first sight of global turbulence, their economies were hit. Brazil is a good example. In the late 1990s, their economy had a rollercoaster ride. Short-term interest rates doubled in November 1997 following the East Asian crisis. They settle down again at the beginning of 1998, but they almost doubled again during the Russian crisis in May. However, in contrast, the past five years have seen a very different picture. Growth has continued and interest rates have been relatively steady moving upwards and downwards in a largely orderly fashion. Brazil has had a "good" global recession.

Is this all about to change? A recent article on China is but the latest to ask if China is about to experience a hard landing. The problem is not just that demand for Chinese-exported goods in Europe and North America is stagnating. The slowing down of the economy is likely to reveal the consequences of speculative excesses, just as they have in Europe. But also, as the slowdown bites, the consequences of the asset-price bubbles of recent years, particularly in property, will become apparent. Banks will find that they have more bad loans than they had previously cared to admit. Governments will find that they are left with 'white elephants' – perhaps China and Spain can compare notes on regional airports or empty property developments.

How much will this affect economic growth in Africa? The booming trade between China and Africa and the China-driven surge in commodity prices have been factors in African growth, even though this growth reaches far beyond the commodity exporting countries in the region. But the stagnation in Africa's export markets to the North and to the East would be a major challenge to the resilience of African economies.

Thursday, 5 July 2012

Post-2015 MDGs and the private sector: Why can’t we be friends?

By Noshua Watson

Could it be possible to let companies commit to only one MDG?  If so, it might be possible to engage the private sector more in the development of the post-2015 MDG framework.

Today I’m attending the UN Development Cooperation Forum (DCF) in New York talking about these issues. I’m going to the Special Policy Dialogue Roundtable with Foundations on ‘How Does Private Philanthropy Engage with Development Cooperation’.

We recently published an IDS Policy Briefing on Private Foundations, Business and Developing a Post-2015 Framework. The private sector needs to be more involved in the future MDG process because providing global public goods like food security and slowing climate change requires multiple actors; poverty eradication is meaningful to businesses too; and businesses have long been engaged in global agricultural and health initiatives. 

But bringing business into the fold will require better coordination between donors and non-state actors of all kinds, sharing data and avoiding the duplication of effort and common performance standards for achieving development impact. There also need to be means of cooperation on individual MDGs rather than asking participants to commit to the entire post-2015 framework.

In the meantime, we have made four recommendations for businesses that want to engage with the post-2015 MDGs:
  1. Use their influence to strengthen national government systems instead of bypassing them.
  2. Use their local knowledge and market-finding abilities to identify local demand for aid.
  3. Learn from aid agencies’ best practices and avoid duplicating existing development projects. 
  4. Participate in industry associations and global funds for development or collaborate with other actors as part of official aid programmes.