Geert Laporte The Next Chapter of Development Cooperation: Challenges and Choices, EDCF Development Finance Seminar, Seoul 6 May 2013

1. The Next Chapter of Development Cooperation:
Challenges and Choices, EDCF Development
Finance Seminar, Seoul 6 May 2013
Geert LAPORTE, Deputy-Director, ECDPM
Development Finance in the
Post-2015 Context

2. 1. ECDPM and the European Report on
Development
2. The changing development context
3. What has been achieved with MDGs?
4. Post 2015: beyond MDGs and beyond aid
5. How to finance development Post 2015?
6. Mobilising different types of development
finance
7. Concluding remarks: key messages for a new
vision on development Post 2015
STRUCTURE OF PRESENTATION
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3. Independent foundation working on EU-Africa
relations for more than 25 years:
1. Non-partisan facilitation of dialogue
2. Practical and policy relevant analysis
3. Linking key players in the EU, Africa, BRICS,
through networks and partnerships
4. Capacity building in Africa to bring more
balance in the partnership
5. ERD + participation in European and African
consultations
ECDPM
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4. European Report on
Development 2013
Post -2015: Global Action for an
Inclusive and Sustainable Future

5. WHY A EUROPEAN REPORT ON DEVELOPMENT?
• Widespread interest in establishing Post 2015 global
development framework
• EU (as largest donor) aims to play key role in debate on
new global agenda (initiator DG Development EC)
• ERD: independent contribution based on research and
consultations by ECDPM, ODI, DIE
• 4 country studies with local partners: Cote d’Ivoire,
Rwanda, Nepal and Peru
• Focus on drivers of global partnership on development:
“money goods, people”
• This presentation: Personal perspectives based on ERD
and other Post 2015 reflections (e.g. Africa)
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6. 1. Major global challenges: climate change, food security,
management of natural resources, fragility and conflict,
terrorism, migration etc.
2. Global financial and economic crisis, particularly affecting EU
3. Declining aid budgets (ODA) but increasing needs for
financial resources to tackle development and global
challenges (e.g climate change adaptation and mitigation)
4. New players in development (BRICS, G-20, private sector,
development foundations,…)
5. A more political vision of development: Busan: “…it is
essential to examine the inter-dependence and coherence of
all public policies – not just development policies…”
THE CHANGING DEVELOPMENT CONTEXT
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7. • MDGs: encouraging international action around a
limited set of goals
• MDGs: significant progress on several targets (MDGs 1-
6 poverty reduction, health and education targets)
• Global partnership for development (MDG 8) less
successful
• MDGs associated with aid, donor agendas and donor-
recipient relations
• Fragile states have done least well
WHAT HAS BEEN ACHIEVED WITH MDGs?
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8. 1. Tackle root causes of poverty and inequality in a more
inclusive and sustainable manner
2. Focus on transformative agenda for development :
economic, social and environmental structural change
3. National ownership is crucial to succeed
4. Development effectiveness not just aid effectiveness
(extend action to areas important to development:
trade, migration, climate, financial regulation = PCD)
5. Involve new players (South-South cooperation)
OVERALL: need for a more political and economic
governance vision of development Post 2015 + bolder
global collective action!
POST 2015: BROADENING THE VISION ON
DEVELOPMENT BEYOND MDGs AND BEYOND AID
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9. • Decreasing ODA since 2011 - ‘surpassed ’ by other (private) financial
flows to developing countries
ODA: $130 billion
Remittances: $450 billion
Foreign Direct Investment (FDI): 1500 $ billion (FDI in Africa: + 27%
between 2010 and 2011)
Africa: 400 billion $ export revenue from gas, oil, mining, etc (2012)
• Increasing focus in the development debate on policy coherence for
development ("development friendliness" of non-aid policies), South-
South cooperation, on the developing country's policies (domestic
resource mobilisation, taxation,…) and less on the quality and
effectiveness of aid.
• Challenge: increase overall domestic and external development finance
and make it more effective
HOW TO FINANCE AMBITIOUS DEVELOPMENT
AGENDA POST 2015?
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10. • Volume: how high is the level of resources
that can be raised?
• Predictability: how sensitive are the financial
flows to fluctuations?
• Policy space: how much room for manoeuvre
does the financial flow give?
• Development focus: to what extent do the
different financial flows contribute to
development?
MOBILISING DEVELOPMENT FINANCE: WHAT IS
KEY FOR DEVELOPING COUNTRIES?
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11. • Private financial flows have overtaken
official aid since 2000
• ODA is now less than 10% for all
developing countries (but still very
important for LICs)
• Private financial flows are selective and
are concentrated in a few resource-rich
countries (only 3% reaches LICs!)
THE REDUCED WEIGHT OF AID AS SOURCE OF
DEVELOPMENT FINANCE
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12. • Foreign Direct investment (FDI)
• South-South Cooperation (SSC)
• Remittances
• Domestic resource mobilisation through
taxation
• Innovative financing for development
• New roles for ODA
DIVERSIFYING TYPES OF DEVELOPMENT
FINANCE (private and public)
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13. • FDI moves to places with highest returns
• Potential indirect development benefits: physical
infrastructure, local skills development, transfer of
technology,…
• Increasing role of BRICS, filling the void left by OECD
investors because of financial crisis and risk aversion
• Drawbacks BRICS (Chinese) investment: support to
undemocratic leadership, lack of job creation, drain on
natural resources,…
• African LICs with high dependence of few commodities and
few natural resources do not benefit (enough)
• Need to direct FDI to productivity & diversification economy
FOREIGN DIRECT INVESTMENT
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14. • Emerging economies: US$ 15 billion in aid (US$50
billion by 2025)- creation of aid agencies in BRICS
• Other non-ODA components of SSC: loans, grants,
investments, trade and technical cooperation
• SSC focus on infrastructure and productive sectors
(complementing traditional donors who focus on
social sectors)
• SSC = seemingly less interference & conditionalities
than ODA… but also strongly motivated by
economic and political considerations (extraction of
natural resources)
SOUTH-SOUTH COOPERATION (SSC)
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15. • Migrants from “South” to “North” + 85%
in past two decades
• Important source of development
finance (3 x total ODA)
• Increases far higher in MICs (with high
number of citizens living abroad) than in
LICs
REMITTANCES
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16. • Taxation: key in the Post 2015 debate because of huge
potential for development finance
• Tax performance has improved in past 20 years
• Equitable tax system can generate better governance and
state-society relations (ownership)
• Taxation= substantial policy space for developing country
because less interference, less volatility and less
dependence on external players/donors
• Problems of political commitment and capacity to levy taxes,
+ narrow tax basis (heavy reliance on receipts from natural
resources)
• Does ODA reduce the incentives for governments to raise
taxes?
DOMESTIC RESOURCE MOBILISATION (taxation)
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17. • Mobilise capital through public-private
partnerships (blending as a mix of grants and
non-grant sources)
• International solidarity levies (e.g. taxes on
air tickets)
• Taxes on financial transactions (Tobin tax)
• Fight against illicit capital flight
INNOVATIVE FINANCING FOR DEVELOPMENT
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18. • In volume much smaller than other flows
(but still primary source of revenue for LICs)
• Increasing pressure for results in a context of
declining budgets
• For some, ODA did create addiction and
dependence (“free money does not provide
incentives for reform”)
• For others still a major catalytic role (e.g.
increase public sector revenue & knowledge
transfer on taxation)
IS THERE STILL A ROLE FOR AID (ODA)?
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19. 1. Ambitious Post 2015 agenda requires global action and
major increases in development finance.
2. Need for differentiated mix of approaches: development
finance should target the poorest in the most marginalised
and vulnerable economies
3. Ownership and responsibilities of developing countries is
key: less reliance on ODA, more focus on domestic
resource mobilisation+ increase of “non-ODA” flows
4. ODA could be a trigger IF redirected towards strategic
reform (e.g. the basic capacities to generate and re-
distribute own revenues- to date less than 1%!)
5. Wealthy countries: invest in improving “development
friendliness” of policies (PCD)
CONCLUDING REMARKS: KEY MESSAGES FOR A
NEW VISION ON DEVELOPMENT
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20. Thank you!
www.ecdpm.org
Geert Laporte
gl@ecdpm.org
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