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© 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
© 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.
© 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
© 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)
© 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
© 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?
© 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
© 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?
© 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)
© 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
© 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?
© 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
© 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?
© 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
© 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
© 2008 German Development Institute 16 Leading Foundations in Global Development
© 2008 German Development Institute 17 Gates Foundation Giving to Africa: Global Development
© 2008 German Development Institute 18 Gates Foundation Giving in Africa: Global Health
© 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)
© 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
© 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
© 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.
© 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
© 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
© 2008 German Development Institute 25 Dank u wel! Thank you for your attention! Erik Lundsgaarde Research Fellow German Development Institute firstname.lastname@example.org
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