Transcript Aiding development: the way forward

Aiding development:
the way forward
Dutch development policies
reviewed and renewed
Aiding development: the way forward
Content
 Criticique on development cooperation
 Scientific Council for Government Policies




Analytical model
Social or economic focus
Government respons: some considerations
Modernizing development cooperation
Aiding development: criticism 1



Critique started when development
cooperation started: 61 years ago
Critique grew significantly at the turn of the
century.
A closer look: at least 3 categories of criticism
to be distinguished.



legitimacy of aid
effectiveness of aid
efficiency of aid delivery
Aiding development: criticism 2
legitimacy

Aid makes poor countries and poor people
dependent.




Aid ends up in the wrong hands



Financially: the problem of grants
Socio-economically: the beggar problem
Politically: the legitimacy problem
Corruption
Elite capture of aid
Supporting development should be more focused on
our own interest.

Motivation: self interest, shared responsibilities, strategic
benefits.
Aiding development:criticism 3-effectiveness

Aid does not lead to results



MDG’s: too broad and too much a human
development concept
No results framework, no results based
management, weak governance
Pro-development coherence across
governments more important than aid

From trade not aid to aid for trade
Aiding development: criticism 4-efficiency

Aid industry:




too many organisations, lots of bureaucracy
overlapping mandates
division of labour
Non predictability



Intelligence
Step by step with intensive learning
Demands for accountability and results
Aiding development: WRR



WRR stands for Wetenschappelijke Raad
voor het Regeringsbeleid or Scientific Council
for Government Policies.
WRR : independent advisor to the
government on strategic policy issues
January 2010 ‘More ambition, less
pretension’.
Aiding development: WRR
The analysis (1)
WRR redefines development:
“development is almost always defined as a
deliberate acceleration of modernization,
interpreted as the synchronized fourfold
transition of economy, government, political
system and society”.
 Let us consider this model more in depth

Aiding development: WRR
The analysis (2)
Economy
Governance
Politics
Society
Aiding development: WRR
The analysis (3)


The proces of transformation involves each of
the four domains, but in the perception of
WRR the engine of transformation is the
economy
This choice comes back in the advice to
move away from investing in social
development towards economic development
Aiding development: WRR
The analysis (4)


This choice however is cumbersome. Not in
all societies and not in all periods of time, the
economy needs to be the engine of transition.
Path-dependent trajectories can and must be
discerned. Not only for the economy to
catalyze development, but also for the point
of entry of pressure to change.
Aiding development: WRR
The analysis (5)



For this to understand, the binding
constraints approach of Rodrik is of help
This theory defines development as the
subsequent removal of the most pressing
binding constraint to development.
The most pressing binding constraint can be
in any domain.
Aiding development: WRR
The analysis (6)

Where does the pressure to change come
from?




In practice: from outside
Usually in the form of a perceived threat
Usually through a network of elites
A side step: the theory of Douglass North

Primitive states or limited access societies are
held backward because of a deep monopoly of
power and economy by elites
Aiding development: WRR
The analysis (7)

Why should elites want to change?



Because of outside threats
Because of exposure to new sources of wealth
What have we seen happening in practice:



First relieving the monopoly on the economy
Second relieving the monopoly on power
Example: South-Korea
Aiding development: WRR
The analysis (8)



Let us now move back to WRR and Rodrik
Development is about transition; transition
starts from outside; the most pressing binding
constraint will come forward; in practice this
has been the economy.
Thus WRR concludes: economic
development is the way to go.
Aiding development: WRR
The analysis (9)

What is problematic? The fact that most
developing countries are not in a starting
position, but already in transition:




Exposure to the global economy
Exposure to global public goods
Exposure to an international architecture for
problem solving
Exposure to international powerplay
Aiding development: WRR
The analysis (10)





Development is an iterative process, not a linear
process.
Therefore in all 4 domains constraints need to be
solved iteratively
That is why country and context specificity is needed
External influence can help, but usually only where
change is happening.
Therefore donors should link to those struggles for
change, where a difference can be made.
Aiding development: WRR
Social or economic focus (1)




Struggle for change happens where binding
constraints are felt.
In South-Korea we have seen that after initial
restructuring of land to spark off agricultural growth,
government became a binding constraint. Capacity
to deliver was strengthened
At a later stage society became the arena for action,
asking for political change
Democratization emerged as a solution to
reaccelarate economic growth, etc.
Aiding development: WRR
Social or economic focus (2)



The conclusion therefore must be that
development cooperation can not operate
from a blue print scheme. WRR agrees
But this implies that sometimes government,
sometimes economy, sometimes politics and
sometimes society are the arena’s for
effective development cooperation.
With its claim for economic development,
WRR is close to adopting a blue print
approach.
Aiding development: WRR
Social or economic focus (3)

The shift towards economy based on:




80% expenditure towards social sectors
Aid dependency argument
Social sector spending has no structural impact on
development
In fact the spending on social sectors has been
considerable, but in the order of 50%. The mistake
is of a highly technical nature (current price
comparisons, financial commitments in stead of
cash flow comparisons)
Aiding development: WRR
Social or economic focus (4)

Aid dependency is indeed often quite high.
However, 2 remarks:



Economic growth is not matched by higher aid
flows, therefore growth will reduce aid
dependency
Eventhough aid flows went up last decade, aid
depency in developing countries reduced overall
and was consolidated in most specific cases
Tax income in nearly all developing countries of
Dutch development cooperation has gone up as
% of GDP.
Aiding development: WRR
Social or economic focus (5)


Social investments have direct benefits to
economic growth. Education, HIV/AIDS
prevention, general health, clean water
availability all alike. The same is true for
investing in governance capacity.
Finally, WRR neglects a division of labour
already in place during Washington
consensus.
Government response (1)

Yes, the economy is important. A shift to
economic development is warranted. But for
other reasons.


Growth is picking up in poor countries. In sub
Sahara Africa some 17 countries have seen 5%
annual growth over the last 15 years. Other
countries also show positive per capita growth.
More inclusive government policies are needed.
Therefore government should lead social
investment programmes.
Government response (2)



Currently, donors are financing large part of
social sector investments.
Donors shifting towards economic support
and governments focusing more on social
sector investments is a new divison of labour
that needs to be negotiated. That is the aim.
The MDG programme therefore will become
more partner owned.
Government response (3)



Pressure to change is now highly associated
with globalization.
From the analysis it is clear that the issue of
globalization does not only require the
provison of global public goods at
interntaional level, but the combination of
delivering public goods at global, regional,
national and local levels.
The challenge is therefore to operate within
chains of delivery.
Government response (4)


GPG’s are the new talk in town. More
precision is required. As a matter of fact, the
distribution of and acces to GPG’s is usually
the problem
This means that developing countries must
become more active partners in the
multilateral system. Also that system should
become more binding in its commitments.
Government response (5)



Country specificity indeed. Dutch system of
delegated aid management with strong presence at
field level will be continued.
More focus on strengthening the local economy
logically involves also the private sector. If expertise
and added value are recognised by our partners, a
natural involvement of private sector can take place.
Crucial is the knowledge and expertise: it will
become the cornerstone of effective development
policies.
Modernizing Dutch
Development Cooperation (1)



Sub-Sahara Africa is to become the new
growth market in the world economy
To enable growth to contribute to
development, elite capture through
monopolisation of power and economy must
be minimized
This requires foremost dialogue, real political
engagement and more vibrant societal
linkages
Modernizing Dutch
Development Cooperation (2)



None of these issues require hugh sums of
money: knowledge, experise, involvement,
level playing fields will be the themes for the
future development cooperation.
The devlopment investments in future will be
much more private than public.
In this NGO networks and private sector
investments will play a crucial role.
Modernizing Dutch
Development Cooperation (3)




This future prospect is not yet reality
Eventhough development cooperation will change
and will once more become a knowledge intensive
field of policymaking, current investments are still
badly needed.
Change occur, but still fragile. Successes are
considerable in terms of life expectancy, education,
child mortality and economic growth.
This agenda needs persistence!