Development Cooperation

1. Prof. dr. Ruerd Ruben
LEI – Wageningen University
Beyond Aid:
Future Perspectives for International
Development Cooperation
AMID Course
November 2015

2. 1. Introduction to ‘Aid to Trade’ reform (ODI Horizon 2025)
- Taking stock
- Rationale of reform
- Outcomes
2. New Agenda for International Cooperation
3. Working groups + presentations
4. Feedback & Outlook
2
Outline

3. ● Modest contribution to economic growth (0.2 %)
● Higher life expectancy & better quality of life
● Increasing school enrollment (boys & girls)
● Reduced incidence of infectious diseases
● Lower infant and mother mortality
● More access to drinking water & sanitation
● Improved public finance management (PFM)
● Reduced debt burden
● Stronger governance
● Higher production & more trade
3
Taking stock: Development Effectiveness

4. Emerging Challenges
• Growing world population & strong urbanization (diet transition)
• New scarcities (water, energy, food, raw materials)
• Concerns about global public goods: climate, diseases, security
• Increased importance of FDI and Remittances (compared to aid)
• Sustainable sourcing and global market outlets
• Decreasing relevance of traditional international organizations
• Emerging economies (BRICS) & Non-traditional donors
• Role of alliances & network in a multi-polar world
4

5. Basic Principles
(1)Differentiation of bilateral relationships
according to welfare level (poverty), growth dynamics (transition), fragility (conflict) and
scale (emerging economies)
(2)Focus resources where Dutch Reputation and Expertise can
contribute to the development of broad and stable mutual relationships
3 pillars: (a) poverty alleviation,
(b) economic development and
(c) global public goods
(3)Selective contribution to multilateral agencies and multi-donor intiatives
+ broadening alliances to bi/tripartite partnerships with non-traditional donors
(4)Multiannual agreements on international cooperation
predictable resource allocations support aid effectiveness and enhance local ownership
(5)Shorter and more efficient cooperation chains
based on demand management, partner contributions and reduced fragmentation
5

6. 1. Poverty Alleviation
Main challenges:
• Global poverty reduction 2010-15: 900  600 million
• Growth benefits poor people in middle income
• Remaining poverty in 16-20 (post)conflict countries
all in sub-Sahara Africa
Policy directions:
• Focus on direct poverty alleviation (~0.3 % GDP)
• Long-term bilateral commitment (10 years)
• Lead donor perspective (Top 4)
• Key areas: food security, SRGR, Peace & Security, Water
• Results-based: payment on delivery
• Open options for targeted budget support
6

7. 2. Economic Cooperation
Main challenges:
• Global sourcing and integrated supply chains
• Emerging markets in Southern countries
• Diversifying Dutch trade and investment pattern
Policy directions:
• Strengthening local entrepreneurship
• Mixed funding and Mezzanine finance
• Different degrees of concessionality
• Reducing fragmentation of support modalities
• Focus on additionality of ODA finance
• Policy coherence for development (trade, tax, migration)
7

8. 3. Global Public Goods
Main challenges:
• Climate change (CO2) & environmental degradation (IPCC)
• Risks of infectious diseases
• Peace & Security (3D)
• Food security & price stability
Policy directions:
• Mainly multilateral approach
• Engagement with Vertical funds (MDTFs)
• New financing mechanisms (target fees, collateral funding, etc.)
• Adaptation in LICs / Mitigation in MICs (1/3 – 2/3)
• New international norms
8

9. Future Aid Architecture
Resources & Finance
• Gradually reduced funding for ‘pure’ poverty alleviation (ODA)
• Economic cooperation mainly with non-ODA funding (PPPs)
• Growing needs for IPG financing
• Global shares 40 – 20 - 40
• Innovative finance mechanisms
Organization
• MinBuza as coordinating ministry
• Thematic cooperation with specialized departments
• Strengthen executive capacity of executive agencies (RVO, FMO, etc)
9

10. Dutch ODA (1960-2010)
10
1960 1970 1980 1990 2000 2010
Asia 3 6 6 7 9 5
Africa 6 6 12 16 17 10
Latin
America
3 2 9 11 5
Europe 2
Total 12 14 27 34 33 15
Reduction of
Partner countries
Dutch aid as % GDP

11. Climate funding (till 2020)
11

12. Structure Dutch International Cooperation
12
0 20 40 60 80 100 120
Poverty Reduction
Economic
Cooperation
Public Goods
ODA
non-ODA
-
500.000,00
1.000.000,00
1.500.000,00
2.000.000,00
2.500.000,00
3.000.000,00
3.500.000,00
4.000.000,00
4.500.000,00
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
International Public Goods
Economic Cooperation
PovertyReduction in Partner
countries

13. New Agenda for International Cooperation
13
1. Aid & trade linkages
2. Economic diplomacy
3. International trade treaties (TTIP, EPAs)
4. Taxation / fiscal harmonization
5. Policy Coherence (migration, trade, fiscal)
6. Global public goods (climate, security)

14. Key questions (What Works Why and Where for Whom)
14
1. WHY : Shifting needs / changing priorities
2. HOW: policy linkages / complementarities
3. WHERE: Sectoral spill-overs + country choice
4. WITH WHOM: Broader multi-agency networks

15. Group assignments
15
1. Relevance: Rationale & motivation
2. Effectiveness: Benefits & Risks
3. Efficiency (resources) & Equity
4. Political constituency

16. 16

17. Aid & trade
17
a) Tied Aid
 excluded by ODA criteria
Inefficiency losses: 20-30% (Jepma, 1990)
b) Recovery Effects
 contracting Dutch enterprises
procurement: 25% (WB); 33% (EOF); 40% (PSD)
c) Reputation effects
 multipliers due to knowledge linkages

18. Aid & Trade
18
LIC
LMIC

19. Trade & Aid (SSA, 1999-2011)
19

20. Aid & Trade
20

21. Aid & Trade linkages
21

22. Economic diplomacy
22
- Large effect of embassy
& high-level missions
- Embassies: 0.06-0.30
trade elasticity effect

23. Trade treaties (TTIP)
23
GTAP model (CERP)

24. Trade treaties (TTIP)
24
Bertelsmann
Foundation

25. TTIP effects
25

26. Taxation & Development
26

27. Food & Nutrition Insecurity & Civil Conflict

28. Fiscal harmoniation
28
Study Weyzig Oxfam Novib SOMO SEO
Dividend flows
& tax avoided
€5.5 bn €6.7 bn
5% = €350 mln
€4.8 bn
4.4% = €200 mln
€2.9 bn
5.1% = €150 mln
Interest flows
& tax avoided
€1.1 bn
5% = €50 mln
€2.5 bn
5% = €100 mln
€3.6 bn
9.6% = €350 mln
Not disclosed
€250 mln
Royalty flows
& tax avoided
€0.4 bn Not included Not included Not disclosed
Total
withholding tax
avoided
€ several hundred
millions
€450 mln €550 mln €400 mln
Data sources
for income
flows
Dividend: DNB
micro data
Interest: debt
security data from
AFM, S&P and
individual
companies
Estimate based on
DNB and CBS
macro figures
Estimate based on
DNB and CBS
macro figures
DNB micro data
Year of income
flows
Dividend: 2007
Interest: 2010
2011 2011 2011
Countries Dividend: low and
middle income
countries
Interest: Indonesia
and Kazachstan
Low and middle
income countries
Low and middle
income countries
Low and lower-
middle income
countries

29. Policy Coherence (SAM)
29
Policy scenarios:
-Fiscal treaties / FDI
-Migration
-EU trade / EPA
-Climate (forest mgt)
10 regions, 47 sectors, 12 population groups

30. Development linkages
30

31. Policy simulations
31
(2006-2012)