1. © 2008 German Development Institute 1 1 Aiding Development: The New Donors International Development Studies Lecture Series Dr. Erik Lundsgaarde, Research Fellow, DIE University of Amsterdam September 30, 2010

2. © 2008 German Development Institute 2 2 The ‚New‘ Donor Challenge to Development Cooperation  Growing engagement of new donors comes at a time when traditional (OECD) donors have seemingly reached agreement on goals and best practices in aid provision.  New donors offer additional and alternative source of development finance, casting a spotlight on rationale of providing aid and offering competing assumptions about development priorities.  The new actors bring the potential to launch new types of partnerships and rethink development cooperation, but may also be repeating flaws of traditional development cooperation.

3. © 2008 German Development Institute 3 3 Overview of the Presentation  Emerging State Providers of Development Assistance  General overview of engagement  Challenges and questions for traditional donors  Emerging Non-State Actors (Private Foundations, Corporate Philanthropies)  Description of general giving patterns  Challenges and questions for the donor community

4. © 2008 German Development Institute 4 4 The ‚New‘ State Actors  Who are the ‚new‘ donors?  In general, „non-DAC“ providers of development assistance  European donors (Eastern and Central European countries)  Arab donors (Bilaterals and multilateral funds)  Regional powers (Mexico, South Africa)  Major emerging powers (Brazil, China, India)

5. © 2008 German Development Institute 5 5 Brazilian Development Cooperation  Global aid is on a scale of a smaller OECD donor ($345 to $1275 million)  Geographical focus on Caribbean and Lusophone World (e.g. Haiti, Cape Verde, Timor-Leste)  Emphasis on agriculture and food security; support for peacekeeping  Follows principle of non-intervention (no conditionality), with exceptions  Humanitarian Crisis  Demand from inviting country  Presence of clear UN Mandate

6. © 2008 German Development Institute 6 6 Brazilian Development Cooperation  Organizational Set-up  Development cooperation overseen by Ministry of Foreign Affairs  Foreign affairs ministry assumes coordinating function for diverse actors engaged in international cooperation  Links foreign policy priorities to development needs in partner countries  Commitment to multilateralism and bilateral action  South-South solidarity or promotion of Brazilian interests?

7. © 2008 German Development Institute 7 7 Indian Development Cooperation  Annual aid flows estimated between $500 and $1 billion  Geographical focus on regional neighbourhood (Bangladesh, Himalayas, Afghanistan), and growing presence in Africa  Provides both financial (credit lines) and technical assistance (training programmes), linkages between aid and private investment (e.g. access to Indian technology)  Panscheel/Bandung Principles offer point of orientation  Mutual respect for territory and sovereignty  Mutual non-aggression and non-interference  Equality and mutual benefit

8. © 2008 German Development Institute 8 8 Indian Development Cooperation  Organizational Set-up  Ministry of External Affairs assumes main responsibility  Funding vehicles distributed across a variety of departments  Finance Ministry plays key role in financial assistance  Indian International Development Cooperation Agency founded in 2008  India’s Dual Role as Recipient and Donor  India as a recipient prioritizes multilateral aid  As a donor, India prioritizes bilateral aid  Should OECD countries continue to aid a donor country?

9. © 2008 German Development Institute 9 9 Chinese Development Cooperation: Overview  Has attracted most attention due to scale and global quality of engagement  Aid figures difficult to quantify, but estimated to fall between $1 and $25 billion  Active in regional neighbourhood, but also in Latin America and Africa (e.g. Angola, Nigeria, Ethiopia, Sudan)  Engagement takes variety of forms (technical assistance, loans, debt relief) and covers a variety of sectors (infrastructure, production)  Emphasis on aid as part of package deal (aid, trade, and investment)

10. © 2008 German Development Institute 10 Chinese Development Cooperation: Principles  Eight guiding principles date to 1960s  Aid follows logic of equality and mutual benefit  China respects sovereignty of recipients  Aid comes in the form of concessional loans  Self-reliance rather than dependence on China is ultimate goal  Projects should focus on quick results and investment accumulation  China provides high-quality Chinese equipment  Emphasis on skill transfer to local workers  Experts from China should have same standard of living as locals

11. © 2008 German Development Institute 11 Chinese Development Cooperation: Key Questions  Does Chinese aid support authoritarian regimes (e.g. Sudan, Zimbabwe) or undermine efforts to promote good governance and human rights?  How does infrastructure focus support development needs? (Answer generally positive)  Is the resource-driven focus conducive to long-term development progress?  What role does development assistance play in the trade, aid, investment mix?  Does Chinese engagement offer increased policy space for partner governments or does it create new inequalities?

12. © 2008 German Development Institute 12 Challenges for the Donor Community: Cooperation  Key problem: Proliferation of actors creates new coordination problems  Administrative burden on partner country governments  Duplication of activities  Are priorities complementary or contradictory?  New forums and forms of cooperation  Dialogue at international level (OECD +); Development Cooperation Forum (UN)  Partnerships at field level (trilateral cooperation)  Importance of partner country management of new landscape

13. © 2008 German Development Institute 13 Challenges for the Donor Community: Mutual Learning  How can/should traditional donors rethink development cooperation to emphasize the logic of mutual benefit?  What is the future of the poverty reduction agenda?  Should development assistance adopt a stronger economic rationale?  How to promote increased transparency and evaluation of results?  How can knowledge about development effectiveness be transferred to emerging actors?

14. © 2008 German Development Institute 14 Private Foundations: General Overview  Philanthropic foundations represent large universe of organizations  European estimate: 100,000 public interest foundations  American estimate: 72,000 foundations  Organizational characteristics  Not profit-oriented  Funded by private endowment  Spend a small percentage of endowment annually  Emphasis on local rather than global giving  European estimate: 16 percent of funding to global development in 2007  American estimate: 22 percent internationally in 2007  Recent trends point to increasing interest in international giving

15. © 2008 German Development Institute 15 Perceived Advantages of Foundations  Independence enables greater freedom in assuming risk  Independence from political system makes it possible to invest in politically controversial and neglected areas  Can disburse relatively large amounts of funding with limited bureaucracy  With large endowments, significant long-term commitments are possible

16. © 2008 German Development Institute 16 Leading Foundations in Global Development

17. © 2008 German Development Institute 17 Gates Foundation Giving to Africa: Global Development

18. © 2008 German Development Institute 18 Gates Foundation Giving in Africa: Global Health

19. © 2008 German Development Institute 19 Challenges from Foundations  How can stronger local ownership in implementation of foundation-funded projects be promoted?  Capacity-building for potential grantees at country level  Improve knowledge transfer from the field to private actors, potentially through strengthened multilateral capabilities at country level  How can higher standards of transparency and accountability be introduced?  Need for improved reporting on foundation funding for development; regulatary role of donors at home  Support initiatives to improve quantity and quality of evaluation of impact of foundations and their implementing partners  How can coordination between donors and philanthropic foundations be improved?  Importance of personnel serving as contact point on both sides  Structured dialogue process with major foundation players (e.g. biannual meeting)

20. © 2008 German Development Institute 20 Corporate Philanthropy  Monitored more closely in the United States (Estimate: $6.8 billion in 2007)  Greater internationalization of firms sparks interest in communities where they have operations  Major corporations (Fortune 100) and manufacturing firms are more likely to donate to international programs than small companies and firms in the service sector  Motives for Corporate Giving: Employee morale, Reputational benefits, branding  ‘Known’ giving dominated by health and pharmaceutical companies, but industries engaged in global giving are diverse  Channels for giving vary: in-kind gifts, donations to NGOs, company-run programmes

21. © 2008 German Development Institute 21 Strategic Philanthropy  Philanthropic Efforts of Firms Should be Aligned with the Central Business Goals of the Organization  Giving follows a ‚win-win‘ logic: By focusing on the contextual conditions most important to their industries and strategies, companies ensure that their corporate capabilities will be particularly well-suited to helping grantees create greater value. And by enhancing the value produced by philanthropic efforts in their fields, the companies gain a greater improvement in competitive context (Porter and Kramer 2002).  Lower emphasis on reactive giving (e.g. humanitarian relief), stronger emphasis on deliberate giving  Example: CISCO Networking Academies—600,000 trainees in 160 countries yearly, provides IT training, gains a larger labour pool capable of managing its network systems

22. © 2008 German Development Institute 22 Venture Philanthropy  Basic Idea: Increase the role of corporate actors in managing philanthropic activities directly  Venture capital inspiration: contribution of managerial skills, business acumen + production of social gains  Model emerges as criticism to foundation giving (not results-oriented, limited organizational capacity of grantees, distant relationship between foundation and grantees)  Scale of venture philanthropy: modest. Primarily oriented toward local rather than international non-profits  Global Development Example: Acumen Fund—Invests in for-profit enterprses that seek to improve access to services (water, health, housing, energy). Portfolio $20 million (2006). Challenges: longevity of commitment, success dependent on framework conditions.

23. © 2008 German Development Institute 23 Challenges for Donor Community  How can dispersed projects be integrated into coherent strategies for development?  Importance of donors as knowledge providers about enabling framework conditions  Need to strengthen ‚philanthrocapitalist‘ industry associations to provide focal point for information sharing  How can sustainability of commitment to particular projects be insured?  Public-Private Partnerships as a vehicle for maintaining longer-term commitments  Provision of assistance in assessment of project feasibility at outset  How can demand-driven orientation be promoted?  Normative and regulatory role of donors in encouraging inclusive project design  How can private philanthropists be attracted to more difficult contexts?  Donor programmes can act as magnets for financing

24. © 2008 German Development Institute 24 Concluding Points  New donors are growing in importance, but knowledge about their impact is limited  Relevance of new donors in the development landscape varies by region and by sector  Diversification of giving landscape can provide impetus for increased multilateral coordination at field-level and within OECD donor community  Multiplication of actors creates coordination challenge in global development architecture and possible demand for new forums for cooperation

25. © 2008 German Development Institute 25 Dank u wel! Thank you for your attention! Erik Lundsgaarde Research Fellow German Development Institute erik.lundsgaarde@die-gdi.de