Evolution of the MDGs: Progress and Problems Terry McKinley Director, Centre for Development Policy & Research School of Oriental and African Studies Presentation at the LIDC Conference, ‘No Goals at Half-Time: What Next for the MDGs?’, 5 November 2008

Outline of Presentation A Short History of the MDGs and their Rationale Progress on Goal 8, the Development Partnership: A. ODA B. Debt Relief C. Trade and Development Current Challenges in light of the Financial Crisis and Projected Economic Downturn

Some MDG Background In September 2000, representatives of 189 countries (and 147 heads of state) met in New York at the U.N. Millennium Summit The agreed binding outcome of the Summit was the Millennium Declaration A U.N. working group later supplemented the Declaration by devising a set of 8 Goals, which were eventually formulated as 21 Targets, which were measured by 60 Indicators Although widely accepted and endorsed, the targets are non-binding on UN member states

Some MDG Background The MDGs are, in a sense, a Global Social Compact, based on mutual accountability Developing countries are held accountable for outcomes, i.e., achievement of targets So rich countries are motivated to provide more support Rich countries are held accountable for providing greater support, i.e., scaling up ODA, providing more debt relief and allowing greater access to their markets So developing countries are motivated to adopt MDG development strategies

Advantages and Disadvantages The MDG framework adopts a broad Human Development approach: hunger, health, education, gender equity, environmental sustainability It accords a greater role to the public sector and public investment in particular (which had been lacking) But ODA is emphasized as a part of a ‘Big Push’, money-centric strategy of development Some advocates regard global goals and targets as uniformly nationally applicable (fostering ambition) A tendency to adopt uniform interventions across countries and stress ‘quick wins’ (e.g., bed nets)

Some Recent History The U.N. Millennium Project, led by Jeffrey Sachs, has been instrumental in the MDG campaign (the Project is now part of UNDP) It presented its report, Investing in Development, as an input into the 2005 U.N. World Summit Countries agreed to adopt ‘comprehensive national development strategies’ to achieve the MDGs (superseding World Bank PRSPs) The dominant priority was to conduct a comprehensive Needs Assessment or costing exercise (determining the scale of additional resources needed to achieve the MDG targets across each sector)

Some Recent History The Costing exercises have tended to dominate early activities at the national level Production of an aggregate ‘development bill’ to attain the MDGs, which external donors are expected to endorse. A tendency to underplay the importance of domestic resource mobilisation (e.g., taxation, savings) Many low-income countries are assumed to be stuck in a ‘poverty trap’ (thus, the need for an external ‘Big Push’. Little real discussion of macroeconomic and structural adjustment policies or posing of economic policy options

Are the MDGs Too Ambitious? At the global level, they were not set to be exceedingly ambitious They cover a long 25-year period (from 1990 to 2015, not from 2000) Targets were set to be realistic, since they were based on trends prior to 1990 But as 2015 draws closer and progress in the 1990s appears to have been too slow, targets do appear to be increasingly ambitious A sharp acceleration of progress is needed but a global economic downturn appears imminent

Progress on Goal #8: The Global Partnership for Development Few targets were set for Goal #8 (because they would have obligated rich countries): General Injunctions: Give more generous ODA for countries committed to poverty reduction: The ODA benchmark of 0.7% of rich-country GNI has remained prominent though not explicitly a target Deal comprehensively with the debt problems of developing countries Develop an open, non-discriminatory trading and financial system

Official Development Assistance Goal of 0.7% of GNI: only Denmark, Luxembourg, the Netherlands, Norway & Sweden The weighted average of the 22 member countries of the DAC of the OECD: 0.28% Only Belgium, Ireland and the UK give at least 0.15-20% of their GNI to Least Developed Countries Aid flows climbed steadily after 1997, a low point, until 2005, but dropped in 2006 & 2007

Recent Declines in ODA

Commitments on Raising ODA The 2002 World Summit on Sustainable Development and the International Conference on Financing for Development called for ‘concrete efforts towards the target of 0.7% of GNI’ G8 leaders at the 2005 Gleneagles Summit committed to 1) providing an extra $50 billion in ODA by 2010 (compared to 2004) and 2) doubling ODA to Africa from $25 billion to $50 billion. US net ODA in real terms fell by almost 10% in 2007, Japan net ODA fell by about 30% and EU-15 net ODA fell by about 6% In 2005-2006 Net ODA remained higher because of debt-relief initiatives for Iraq and Nigeria.

Commitments on Raising ODA The combined pledges of ODA implied an increase from $80 billion in 2004 to $130 billion in 2010. But during 2004-2007 net ODA from DAC members increased annually by half of that amount. So DAC net ODA would have to increase by at least $13 billion a year until 2010 to compensate for early shortfalls (measured in constant 2004 $). Net ODA to Africa would have to increase by over $6 billion a year in order to double by 2010. One positive sign: non-DAC members increased ODA from $1.5 billion in 2000 to $5.1 billion in 2006

Progress on Debt Relief Important progress has been made on debt relief: 23 of the 41 Heavily Indebted Poor Countries (HIPC) had reached the completion point by mid 2008 and 10 others had reached the decision point The average debt-service to export ratio fell from 13% in 2000 to 6.6% in 2006. This has been due, in part, to debt cancellation: HIPC mandated debt reduction to sustainable levels. It had provided about $48 billion debt relief by 2006

Progress on Debt Relief The G-8 Multilateral Debt Relief Initiative in 2005 (World Bank, IMF, ADB and IDB): Provided full debt relief for eligible countries – about $21 billion in relief by 2006 Debt reduction has also been due to an export boom in commodities and increased global growth. But 21 Heavily Indebted Poor Countries are still considered to be at moderate-to-high risk of falling back into debt distress This risk is being heightened by the financial crisis, falling commodity prices and projected falling exports to rich countries

Improved Market Access for Developing-Country Exports There has been little progress on broadening market access The collapse of the WTO Doha Round on Trade and Development The share of rich-country imports from developing countries admitted duty-free increased only marginally between 2000 and 2006 Average tariffs on agricultural products imported into rich countries remained virtually unchanged One factor alleged to be behind the food crisis affecting developing countries has been domestic agricultural subsidies and tariff protection in rich countries Rich-country support to domestic agriculture stood at $372 billion in 2006—more than three times the ODA that they provided to developing countries

Total ODA versus Total Agricultural Support

Confronting Financial Crisis and Recession Assuming a recession in the US and other OECD countries: What will be the effect on developing-country growth, human development and poverty? Example: earlier this year we modelled an imminent US recession and continuing expensive oil and made projections until 2015 The Results for 2008-2015: US yearly growth was -0.2%, W. Europe’s 1.4%, and Japan’s 2.2%

Confronting Financial Crisis and Recession China’s growth was 4.6%, India’s 3% and the rest of developing Asia 4.7% Latin America’s growth was 2.1%, the CIS’s (Russia’s) 2.5% and the Middle East’s 0.7% S. Africa’s growth was 2.9%, low-income African oil exporters 1.5% and low-income African oil importers a negative 1.2%

Confronting Financial Crisis and Recession Hypotheses: Asia will maintain some growth momentum Regions tied closely to the US or reliant on oil exporting will grow much slower (they will also lose most in relative terms) Low-income Africa will suffer the most: negative growth and rising poverty and human deprivation

Maintaining Momentum Against Poverty A campaign to prevent the financial crisis from being used as an excuse to break promises on reducing global poverty On October 17-19, across the globe almost 117 million people in over 2,000 events supported the campaign ‘Stand Up and Take Action against Poverty and for the MDGs’ In response to the ‘bail-out’ of financial institutions, a more redistributive focus is gaining broad support: protect low-income households

Maintaining Momentum Against Poverty The focus should remain on sub-Saharan Africa, where deprivation will be most severe Confronting the ‘trade-offs’ in allocating tighter budgetary resources: Giving the MDGs the highest budget priority Safeguarding gains on health and education Accelerating debt relief Reducing rich-country agricultural support, which would benefit low-income countries

Maintaining Momentum Against Poverty Making ODA more effective: ODA remains greatly fragmented and sectoral The need for more coordination and harmonisation The need for more cross-sectoral, integrated initiatives, which will create synergies and externalities This highlights the potential contribution of LIDC’s work