South-South Cooperation and Development Agenda after the Busan High-Level Forum Wonhyuk Lim
Contents Ⅰ. Progress in Aid and Development Agenda - More Aid, Better Aid, and Beyond Aid - Busan Global Partnership for Effective Development Cooperation II. Real Progress on the Ground - Poverty Reduction - Changing International Landscape III. Back to the Basics - Conceptual Framework for Development - Policy Challenges for Development IV. South-South Cooperation and Beyond - North-South vs. South-South Model - Knowledge Sharing and Capacity Development V. Post-2015 Development Agenda
Progress in Aid and Development Agenda More Aid ODA/GNP = 0.7% [Pearson (1969)] Better Aid Paris Principles (2005) Accra Agenda (2008) Beyond Aid (Aid and Beyond) Busan Building Blocks (2011) Aid Effectiveness -Reduce transaction cost in aid delivery and management -Target development impact (results) What is the objective of effectiveness? Is effectiveness possible without capacity development? Development Effectiveness State Effectiveness (Effective Institutions and Policies) Next: Effective Effectiveness???
ODA Commitments and Disbursements
Paris Declaration on Aid Effectiveness (2005) Developing countries will exercise effective leadership over their development policies, strategies, and to coordinate development actions; Donor countries will base their overall support on receiving countries national development strategies, institutions, and procedures; Donor countries will work so that their actions are more harmonized, transparent, and collectively effective; All countries will manage resources and improve decision-making for results; Donor and developing countries pledge that they will be mutually accountable for development results.
Accra Agenda for Action Ownership: Countries have more say over their development processes through wider participation in development policy formulation, stronger leadership on aid co-ordination and more use of country systems for aid delivery. Inclusive partnerships: All partners - including donors in the OECD Development Assistance Committee and developing countries, as well as other donors, foundations and civil society - participate fully. Delivering results: Aid is focused on real and measurable impact on development
Aid Effectiveness 2005-2010 (OECD 2011)
Aid Effectiveness 2005-2010 (OECD 2011)
Aid Effectiveness and Development (Cooperation) Effectiveness Abiding by a particular set of principles/modalities in employing the chosen instruments will improve the effectiveness of these instruments in achieving the chosen objectives. Instruments ODA Philanthropy Knowledge Sharing Investment Trade Actors Countries Int l Organizations CSOs Firms Principles/Modalities Ownership Alignment Harmonization Managing for Results Mutual Accountability Partnership Cooperation (Joint Op.) PBR/Cash on Delivery No Policy Conditionality Holistic Approach Exit Strategy Objectives 1. Poverty Reduction 2. Social Development (Education, Health+) 3. Economic Growth 4. Freedom 5. Happiness/Well-Being 1+2: Millennium Development Goals (MDGs) 2+3: Human Development Index (HDI) The Paris Declaration on Aid Effectiveness (2005) is mainly focused on the delivery and management of ODA.
Busan Global Partnership: Outcome Document Political Preamble Principles: ownership, results, inclusive partnership, and transparency and accountability Recognition of difference and complementarity of SSC Shared principles and differentiated commitments New development partnership to achieve the MDGs Deepening Aid Effectiveness Effective Development Cooperation Post-Busan Implementation Mechanism Enhancing country ownership, results, and accountability (including women, CSOs, parliaments/local governments) Enhancing transparency and predictability Supporting New deal for fragile states Building disaster resilience and reducing vulnerability Effective institutions and policies South-South/Triangular cooperation (knowledge sharing) Private sector participation (aid for trade) Combating corruption and illicit flows Climate change finance Global partnership for effective development cooperation Two track: global-light, country-focused OECD/UNDP joint support for the Busan Partnership Governance arrangements of the Busan Partnership and the global monitoring framework by June 2012
Busan Building Blocks (4 + 4 + 1) for Effective Development Cooperation New Consensus on More Effective Institutions for Development South- South/Triangular Cooperation Expanding and Enhancing Public and Private Cooperation Climate Change Finance Results and Accountability Transparency New Deal for Engagement in Fragile States Managing Diversity and Reducing Fragmentation Busan Joint Action Plan on Gender Equality and Development
Busan Global Partnership: Mission and Governance Ministerial Meeting Focused on implementing the Busan agreements and addressing newly emerging development issues (e.g., post-2015 agenda) Open to all interested stakeholders that endorse the Busan document Meeting every 18-24 months, back-to-back with the existing UN (DCF), OECD high-level meetings Steering Committee Convened two or three times a year in preparation for the ministerial-level meetings (Dec. 2012: London, March 2013: Bali, July 2013: Addis Ababa) Comprised of 18 members: co-chairs (Indonesia, Nigeria, UK), recipients (Bangladesh, Chad, Guatemala, Samoa, Timor-Leste (g7+)), recipientsproviders (Peru), providers (EU, Korea, US), parliamentarians (IPU), private sector (IBLF), CSOs (CPDE), MDBs (WB), UNDP/UNDG, OECD/DAC OECD/UNDP Joint Support Team
Civil society and private sector engagement (2 &3), transparency (4), and gender equality (8) indicators are somewhat new, but they are all process indicators. Can we expect different results this time compared with the aid effectiveness agenda?
Real Progress on the Ground: Poverty Reduction Regional breakdown of number of poor (millions) for the international poverty line of $1.25 a day (PPP, 2005 constant international dollars), 1981-2005 2,000 1,800 1,600 1,400 1,200 1,000 800 600 East Asia and Pacific South Asia Sub-Saharan Africa Others Total 400 200 0 1981 1984 1987 1990 1993 1996 1999 2002 2005 Source: Chen & Ravallion (2008)
Real Progress on the Ground: Poverty Reduction Regional breakdown of the number of poor (millions) for the international poverty line of $1.25 a day vs. Per capita GDP (PPP, 2005 constant international dollars), 1981-2005 1,200 1,000 800 East Asia and Pacific 600 South Asia 400 Sub-Saharan Africa 200 0 Middle East and North Africa Latin America and Caribbean Eastern Europe and Central Asia 0 5,000 10,000 15,000 20,000 25,000 East Asia and Pacific Eastern Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub-Saharan Africa Source: Chen & Ravallion (2008) and WDI
Changing International Landscape: From Divergence to Convergence? Per Capita GDP of Various Regions (in 1990 international Geary-Khamis dollars) [Maddison (2006: 642)] Percent Share of Global GDP (at market exchange rate) 1960 1970 1980 1990 2000 2010 USA 38.32 35.45 25.17 26.23 30.70 23.11 China 4.52 3.16 1.72 1.63 3.72 9.39 Japan 3.26 7.12 9.74 13.95 14.48 8.65 G7 57.52 65.94 61.10 66.13 65.38 50.32 OECD 77.30 79.96 77.70 82.48 81.15 67.82
Two Trends in Global Poverty: The Poor in Middle-Income Countries and Fragile States Share of the World s Poor by Country Category 1990 LICs MICs Fragile 13 1 Stable 80 6 2010 LICs MICs Fragile 23.7 17.1 Stable 10.4 48.8 Source: Andy Sumner (2010), Global Poverty and the New Bottom Billion: What if Three- Quarters of the World s Poor Live in Middle-Income Countries?, Working Paper No. 349 (Brighton: Institute of Development Studies). Geoffrey Gertz and Laurence Chandy (2011), Two Trends in Global Poverty (Washington, DC: Brookings), p.3.
Conceptual Framework for Development: Innovation, Coordination, and Government Externalities Development: Three Externalities Development is conceptualized as the result of synergies between enhanced human capital and new knowledge, involving complementary investments in physical and social capital. The fundamental policy challenge is for the state to work with non-state actors and markets to address innovation and coordination externalities while dealing with governance externalities (e.g., incompetence and corruption). Modern Growth : Three Breakthroughs Emergence of a large group of people who absorb and assimilate knowledge to improve their human capital and in turn use their improved human capital to apply and generate knowledge to raise productivity (Lucas 2009) Expansion of markets and hierarchies to facilitate specialization and coordinate productive activities, through the invisible hand (Smith 1776) and the visible hand (Chandler 1977) Emergence of meritocracy (careers open to talent) and responsive and accountable governance (popular will and checks & balances)
Alternative Development Paradigms Endowment Perspective: Framework Approach (Liberalization) Economies with appropriate endowments (cultural values, institutions, investment climate ) grow. Those lacking such endowments do not. Examples: Protestant ethic, common law, and colonial legacies The state should focus on getting the institutional framework right and then get out of the way. Release market forces and let individuals play the game. Bootstrapping Perspective: Ingredients Approach (Capacity Development) Initiating growth does not require state-of-the-art institutions. The challenge is not so much to get growth to start by adopting big-bang reforms, as it is to sustain it by devising search networks to detect and mitigate constraints as they emerge. The state should facilitate growth by supplying the missing ingredients, which are often characterized by externalities. Retain ownership and progressively develop local capacity. The reinforcement of successful experiments through the feedback mechanism of performancebased rewards can lead to dramatic changes over time. While a regime that facilitates resource mobilization can be effective in a catch-up phase of development, an institutional platform that fosters autonomy, diversity, and experiment is critical to sustained productivity-led growth. * Note: Differences in the two development paradigms largely reflect differences in assumptions about the relative magnitudes of innovation and coordination externalities on the one hand and negative government externalities on the other.
Conceptual Framework for the G20 Seoul Development Consensus Financing and Investing for Development Adding Value Managing Risk Strengthening Overarching Factors International Trade Industrial Upgrading Infrastructure Human Resource Development Macroeconomic Stability Financial Stability Social Cohesion Environmental Sustainability Institutions and Governance Access to Knowledge The key is for a country to retain ownership of its development and progressively expand its capacity to add value and manage risk even as it actively learns from, and engages with, the outside world.
North-South vs. South-South Model North-South Model South-South Model Nature and Objective of Support Development Paradigm Role of Actors Level of Development Conditionality ODA. Stated to be altruistic in nature. Framework Approach One is a donor the other is a recipient (of ODA). Huge difference in the stages of development for donor and recipient. Top down with policy conditionality and little predictability. Development Cooperation. Idea is of mutual benefit and growth. Ingredients Approach Relationship of equality both may be contributing in the process. Both partners are almost at the similar stages of economic development. Request-driven and generally free from conditionality of any kind, especially of political nature.
North-South vs. South-South Model Implementation Process Priority Sectors Adherence to Global Governance Frameworks like Paris Declaration Data, Monitoring and Evaluation North-South Model Takes long through the several layered bureaucratic structures and thus adds to transaction cost. Grant assistance and budget support for social sectors. Donors under the guidelines of Paris Declaration, which they evolved as an instrument for effectiveness. Peer reviewed by OECD/DAC. Data is compiled and periodically released by the national governments and OECD/DAC. South-South Model Quicker and highly decentralized with little implications for transactions costs. Economic and technical cooperation largely focused on projects in infrastructure and productive sector investment, including HRD. Sticks to the confidence of partner countries. No such mechanisms exist except some occasional reporting of data and anecdotal details.
Asian Approaches to Development Cooperation: Main Features Development cooperation rather than aid -No permanent donor / recipient in a long sweep of history -Mutual benefit rather than charity (and lecturing) Own experience of self-sustaining growth and development -Progressive local capacity expansion beyond basic human needs (BHNs): human resource development, industrial upgrading, infrastructure, and international trade -Developmental state: responsive and responsible governance (cf. Asian values debate: Kim Dae-jung vs. Lee Kuan Yew) Focus on experience exchange and knowledge sharing -Development experience and knowledge as a critical ingredient of cooperation programs *Demand from developing countries for practical knowledge and Asian countries credibility from the track record of successful development and lack of imperialistic aggression
Knowledge Sharing in Action, Stage 1: General Infrastructure ( Wikipedia ) KS Forum KS Network Bilateral Regional Multilateral Experts Government Officials Practitioners KS Platform Infrastructure (World Bank) Food Security (United Nations) Growth with Resilience (OECD) Other Pillars Supply of practical knowledge and case studies Quality standards Brokering/Dissemination Funding Demand for development solutions
Knowledge Sharing in Action, Stage 2: Customized Consultation ( Facebook ) Ultimate Outcome Intermediate Outcome Output Development Goal Capacity Development and Institution Building Consultation Report Activities Interviews and Meetings Joint Research Study Tours Seminars Experts Government Officials Practitioners Peer-to-Peer Tacit Knowledge Exchange Empathy / Inspiration Experts Government Officials Practitioners Knowledge Conversion Coalition Building Country Ownership, Cross-Country and Within-Country Interaction, and Pragmatic Recommendations
Lessons and Implications Raised Awareness and Understanding Increased Motivation to Act Knowledge sharing activities are different from financial assistance programs in that knowledge sharing can change the awareness and attitude of key actors. Awareness and attitude changes are at the basis of change, motivating program participants to take action: e.g., Policymaking and Institution-Building Demonstration and Inspiration: Seeing is Believing Sharing timely and relevant policy alternatives Explicit Knowledge Seeing first-hand development process, listening from actual policy makers, visiting industrial sites Tacit Knowledge & Inspiration Visualizing a different future from the present Vision In discussions with those who actually participated in the process of developing Korea s exports, it made us believe that the Dominican Republic could also do it. Seeing was totally different from just reading about it in the literature. We could now clearly see the future of the Dominican Republic. The Dominican Republic can be the Korea of the Caribbean. - Minister Martinez of the DR during an Interview on Evaluation of KSP with the DR
Lessons and Implications Country Ownership A partner country should think for itself and make its own decisions even if it must engage with the outside world to narrow the knowledge and finance gap. Identify local demand and link the program to specific institution building needs. Identify key change agents who are in position to apply the gained knowledge into actual practice. Design the program to promote capacity development and sustain momentum for change and leave the final decision to the partner country. Vertical (Within-Country) and Horizontal (Cross-Country) Interactions Build effective reform partnership by promoting interactions among high-, mid-, and working-level agents and between public and private sectors within a country. Facilitate tacit knowledge exchange and local institution building by promoting peer-to-peer interactions between knowledge partners from two countries. Pragmatic Recommendations Draw from actual experience, as well as theory and comparative perspectives, and incorporate the local context.
Post-2015 Development Agenda: Rationale North-South Aid Model (1990s) Multidimensional Development Model (2010s) In 1990, 80% of the world s poor lived in stable, low-income countries; in 2010, only 10% did, as 66% of the world s poor lived in middle-income countries, and 24% in fragile, low-income countries. In 1990, G7 accounted for 66% of the world s GDP at market exchange rates; in 2010, G7 accounted for 50% of the world s GDP. Methodologically, external aid delivery combined with silo approach dominated global development agenda; local capacity development and holistic approach did not receive sufficient attention. In the 1990s, 40% of world population were city dwellers, with less than 100 million international migrants; by 2050, 70% of the world s population will reside in cities, with 400+ million migrants. The growth rate of the world s aging population jumped from 1.3% in 1997 to 3.5% in 2000; by 2050, 20% of world population will be over 60. The frequency of natural disasters increased five-fold since the 1970s, with estimated annual damages rising from $20 billion in the 1990s to $100 billion in the 2000s. Focus on Poverty Poverty Reduction and Basic Human Development for dignified lives of the Bottom Billion Focus on Development as Freedom Freedoms are not only the primary ends of development, they are also among its principal means. (Amartya Sen)
MDGs and Bellagio One World Goals Current MDGs UNTT Report Inclusive Economic Development Eradicating income poverty & hunger; Reducing inequalities; Ensuring decent work & productive employment Inclusive Social Development Adequate nutrition; Quality education; Reduced mortality & morbidity; Gender equality; Universal access to clean water & sanitation Bellagio One World Goals Environmental Sustainability Protecting biodiversity; Stable climate; Resilience to natural hazards Peace & Security Freedom from violence, conflict and abuse; Conflict-free access to natural resources
UN Post-2015 High-Level Panel Report To be integrated with Sustainable Development Goals (SDGs)