development cooperation in times of the financial crisis
TRANSCRIPT
Development cooperation in times of the financial crisis
Dawn of a new era?
Challenges of the economic crisisEBC Seminar24.05.2011
Reinhard Schmidbauer
Agenda
I. Official Development Assistance (ODA)i. Net disbursements by biggest donor countriesii. Allocation of ODA among regionsiii. Criticism
II. Remittancesi. Top 20 remittance-recipient countries
III.The Private Sectori. MNC’s and FDIii. Business at the BoPiii. Social Business
IV. Conclusion: Partnership for Development 2
Official Development AssistanceDefinition
Official Development Assistanceis defined as financial flows to developing countries, which…(1) promote economic development and welfare of developing c.(2) are concessional with at least 25% grant element(3) may be bilateral or multilateral
Millennium Development Declarationtime bound targets to address developing worlds most pressing issues 2010 target: 0.51% of GNI 2015 target: 0.70% of GNI
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Total ODA (millions of dollar)
2008 2010 2008 vs. 2010
ODA (% of GNI)
2008 2010 2008 vs. 2010
Total DAC countries 119,781 128,728 8,947 0.30 0.32 0.02
Total EU 70,974 70,150 -824 0.43 0.46 0.03
Australia 2,954 3,849 895 0.32 0.32 0
Canada 4,795 5,132 337 0.33 0.33 0
Japan 9,601 11,045 1,444 0.19 0.20 0.01
Norway 4,006 4,582 576 0.89 1.10 0.21
United States 26,437 30,154 3,717 0.19 0.21 0.02Source: OECD (2011): International Development StatisticsNote: data for 2010 are preliminary
Official Development AssistanceODA net disbursements
Almost all rich nations fail to reach the obligated target!
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Official Development AssistanceAllocation among regions
“ODA is allocated in some strange and arbitrary ways.” UN, 1994
Region ODA per capita (in U.S. $)
GNI per capita (in U.S. $)
GNI per capita ($ PPP)
ODA as share of GNI (%)
Middle East and North Africa 41 3,597 7,911 1.1
Sub-Saharan Africa 53 1,125 2,051 4.9
Latin America and Caribbean 16 7,007 10,286 0.2
East Asia and Pacific 5 3,163 6,026 0.2
South Asia 9 1,107 2,972 0.8
Europe and Central Asia 20 6,793 12,609 0.3Source: World Bank (2011): World Development Indicators
politically motivated does not reflect poor countries needs primarily serves donor countries economic interests
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Official Development AssistanceCriticism
Inflated vs. genuine aid Military support Refugee costs (incl. repatriation) Foreign students costs Debt cancellation Conditional (“tied”) aid
Effects of aid: added about 1 percentage point to annual growth subject to diminishing returns causes “Dutch disease” may strengthen autocratic regimes often subject to embezzlement
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RemittancesTop 10 recipient countries (2009/10)
Jordan
Guyana
Honduras
Samoa
Lebanon
Nepal
Moldova
Lesotho
Tonga
Tajikistan
0 5 10 15 20 25 30 35
16
17
19
22
22
23
23
25
28
35
Top 10 Remittance-Receiving Countries, 2009 (% of GDP)
Nigeria
Spain
Belgium
Bangladesh
Germany
France
Phillipines
Mexico
China
India
0 10 20 30 40 50 60
10
10.210.4
11.1
11.6
15.9
21.3
22.6
51
55
Top 10 Remittance-Receiving Countries, 2010e (US $ billions)
Source: World Bank (2011): WDI 7
The Private SectorMNC and FDI
MNC characteristics: large size worldwide operations centrally controlled by parent companies
Pros: fill savings- and investment-gaps reduce balance of payment deficits government tax revenues knowledge and technology spill-overs
Cons: repatriation of profits tax concessions by host countries crowding-out of local industries widening wage gap
“MNCs present a unique opportunity but may pose serious problems for the developing countries in which they operate (Todaro and Smith 2009).”
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Finance for DevelopmentResource Flows to Developing Countries
19901992
19941996
19982000
20022004
20062008
2010-100
0
100
200
300
400
500
600
700
FDIPortfolio InvestmentRemittancesODABi
llion
s of
US
$
Source: World Bank (2011): WDI
Resource flows to developing countries declined during the financial crisis
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The Private SectorBusiness at the Bottom of the Pyramid
“The real source of market promise is […] the billions of aspiring poor who are joining the market economy for the first time (Prahalad 2002)”.
*based on purchasing power parity in US$Source: Prahalad (2002) 10
The Private SectorSocial Entrepreneurship
Doing good by making profits?
Muhammad YunusSocial Enterprise characteristics: is primarily driven by a social mission generates a profit as a by-product allowing for
financial sustainability creates new models, products and services that
cater directly to social needs
Proof of concept:
….and many more11
Partnership for DevelopmentConcluding remarks Aid alone is unlikely to be able to address the problems of the
bottom billion and is highly overemphasised.
Remittances are an important source of finance for development due to its large size and continuity.
MNCs can play a key role in economic development by marketing the 4 billion people at the bottom of the economic pyramid.
Social Entrepreneurs simultaneously create social and economic value which allows them to sustainably solve social problems.
Alleviation of poverty requires partnerships between public private and civil society organization. 12
Development CooperationThe dawn of a new era
Thank you for your attention!
Any comments or questions?
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