aiding development: the way forward dutch development policies reviewed and renewed

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 2legitimacy

Aid makes poor countries and poor people dependent. Financially: the problem of grants Socio-economically: the beggar problem Politically: the legitimacy problem

Aid ends up in the wrong hands 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: WRRThe 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


Economy

Governance Politics

Society


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


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.


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.


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


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


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.


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


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: WRRSocial 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.


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.


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)


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.


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.


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.


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.


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.


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


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.


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!

aiding development: the way forward dutch development policies reviewed and renewed

Documents

aiding development

social development

development cooperation

economic development

dutch development policies

wrr wrr

human development concept

legitimacy aid