Foreign Aid

This week a team from the International Monetary Fund is in Cairo yet again, attempting to reach agreement with the Egyptian government on a $4.8 billion loan to plug Egypt’s increasingly serious external financing gap and budget deficit. Egypt’s foreign currency reserves—in precipitous decline as the Central Bank continues to prop up the exchange rate in efforts to avoid skyrocketing costs for wheat and other staple imports—have dropped from more than $36 billion in early 2011 to less than $14 billion at the end of March.  Egypt’s budget deficit now stands at nearly 11 percent of GDP. The sticking point in the loan negotiations is the IMF’s insistence that the Egyptian government slash fuel subsidies and replace them with better-targeted social protections for vulnerable groups and a more progressive tax structure. The IMF summarized in November that “fiscal reforms are a key pillar under the [proposed $4.8 billion dollar loan] program. The [Egyptian] authorities plan to reduce wasteful expenditures, including by reforming energy subsidies and better targeting them to vulnerable groups. At the same time, the authorities intend to raise revenues through tax reforms, including by increasing the progressivity of income taxation and by broadening the general sales tax (GST) to become a full-fledged value added tax (VAT).” Costly energy subsidies are a significant drain on the government’s purse, unfairly help the rich at the expense of the poor, and put the country on a growth path that is environmentally (as well as fiscally) unsustainable. Energy subsidies amount to almost 21 percent of Egypt’s total budget every year—more than US$24 billion annually and approximately 12 percent of the country’s total GDP. The dangerous external financing gap and budget deficit could be nearly erased just by eliminating fuel subsidies. Although energy subsidies were initially intended to help the poor, the rich benefit disproportionately, because they consume a larger share of the subsidized energy. According to a recent African Development Bank report on Egypt, “the top 40 percent of the population enjoy about 60 percent of the energy subsidies while the bottom 40 percent receive about 25 percent of these subsidies.  These differences are more drastic in the urban sector where the top 40 percent of the population receive about 75 percent of energy subsidy benefits, and more than 90 percent of gasoline subsidies.” In short, Egypt’s fuel subsidies are a reverse Robin Hood transfer from the poor to the rich. The subsidies also trap Egypt on a path of environmentally unsustainable growth, with severe long-term consequences for the environment. Artificially low energy prices lead to excessive energy consumption, as Egyptians choose to use artificially cheap fuel instead of switching to more sustainable renewable alternatives like wind and solar, or improving energy efficiency. Of course, eliminating energy subsidies will indeed hurt the poor in the short-term. The most vulnerable can barely get by day-to-day now, and rely on energy subsidies to provide a cushion for survival. Fuel subsidies therefore would need to be replaced immediately and transparently with targeted cash transfers to the poor. This move from fuel subsidies to targeted cash transfers is exactly what the IMF is demanding as a condition of its loan package. Unsurprisingly, entrenched elites in Egypt who now benefit from the generalized energy subsidies are resisting fiercely, and playing on populist fears and rhetoric to mobilize broader public opposition. Is the IMF now on the side of social justice and environmental sustainability in Egypt?

Emerging Voices features regular contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Paul Callan, Jasmin Blak, and Andria Thomas of Dalberg Global Development Advisors. Callan is Dalberg’s Global Operating Partner and leads the firm’s Strategy and Performance practice; Blak and Thomas are based in Dalberg’s Washington, DC, office. In the article, a follow-up from their post on Chinese foreign aid and investment last week, they highlight characteristics of aid flows from other important emerging donors. The first blog in this series addressed the attention given to Chinese foreign assistance. Yet China is only one of several emerging donor countries that are providing an increasingly significant contribution to development aid. Official Development Assistance (ODA) from China is estimated at $2 billion annually, whereas Saudi Arabia gave over $5 billion in 2011, and South Korea and Turkey gave $1.3 billion each. Many emerging donors give more ODA as a share of Gross National Income (GNI) than China’s 0.04 percent, including Hungary (0.11 percent), Poland (0.08 percent), and the United Arab Emirates (UAE—0.22 percent). The changing landscape of foreign aid will be driven as much or more by other emerging donors as by China alone. It is therefore important to understand the broader set of emerging donor countries. Which are the emerging donor countries? At Dalberg, we define this group of countries as those which: Have become substantial donors within the last 20 years; Are not part of the OECD’s Development Assistance Committee (OECD-DAC) or have only joined it in the past decade; and Received aid and/or other development assistance themselves in the recent past (and may still be doing so). With this definition, emerging donors include a wide range of countries, including the likes of Brazil, India, South Africa, Saudi Arabia, UAE, Hungary, Poland, Turkey, and South Korea, as well as China. Emerging donor contributions have quintupled in the last five years; overall, they account for an estimated 7-10 percent of global aid flows from donor countries. In contrast with traditional OECD-DAC donors whose aid volumes are expected to stagnate in the medium term, aid from emerging donors is projected to double in the next five years, which means they could contribute close to 20 percent of total donor funding by 2020. Emerging donors employ approaches to providing aid that are sometimes quite different from those of traditional donors. But, just as there are differences between traditional donors, there are also differences between emerging donors. Let’s look at some of the features of emerging donor development aid in more detail: Expert advice and in-kind contributions. Many emerging donors feel that their greatest contributions can come from non-monetary support in the form of shared expertise from their own development. Some donors also feel that in-kind contributions mitigate the risk of funds being misused by recipient countries. Brazilian aid focuses heavily on providing “made in Brazil” solutions, especially in health, agriculture, and education. South Korea strongly believes that its aid should share experiences from South Korea’s own development and has invested in multiple large-scale advisory programs such as the South Korea International Cooperation Agency (KOICA)’s International Cooperation Center and the Knowledge Sharing Program of the Ministry of Strategy and Finance. India has partnered with the African Union to create the Pan-African e-Network, Africa’s largest long-distance education and tele-medicine initiative. The Indian government is providing in-kind investments totaling $125 million over five years to set-up the system and transfer knowledge to local implementers. Explicit prioritization of national interests. Many emerging donors are not shy about saying that their development assistance is linked to national interests, including economic cooperation, promotion of regional stability, religious or cultural ties, and commercial opportunities. For example, “mutual benefit” or “win-win” economic development cooperation is a central tenet of Chinese and Indian assistance and characterizes India’s cooperation with many African countries. Prioritizing regional stability is another common motivating factor. For example, the majority of India’s aid supports infrastructure projects in neighboring countries such as Nepal, Bhutan, and Afghanistan, where India recently became the fifth-largest aid donor. Saudi Arabia and Turkey direct their aid primarily to fellow majority-Muslim countries. For example, Turkey provided assistance to Egypt following the Arab uprisings and over $500 million in public and private aid to famine-hit Somalis in 2011. However, some emerging donors, especially some Eastern European countries and South Korea (which joined the OECD-DAC in 2010), emphasize “altruistic” objectives and look to the Nordic countries as role models. Thus, motivations vary significantly among emerging donors, and there is no clear divide between traditional and emerging donors because both groups include donors with more altruistic and more national-interest-focused objectives. Cooperation with traditional donors. Emerging donors as a group are enthusiastic about cooperation with each other and with traditional donors. Triangular cooperation initiatives, which normally partner a traditional donor from OECD-DAC with an emerging donor and a beneficiary developing country, are becoming common. In 2011 and 2012, India both received advice from Brazil on enhancing its social protection scheme in Delhi and provided information technology and outsourcing expertise to eight African countries in partnership with the World Bank. In Brazil, trilateral projects represent one-fifth of the total technical cooperation projects. For example, Brazil is working with Mozambique and the United States in a triangular cooperation focused on sharing the successes of the Brazilian response to the AIDS epidemic to enhance the strategy and execution of Mozambique’s own AIDS response. Though China has in the past been accused of prioritizing unilateral development cooperation, it is increasing its collaboration with other donors, especially through triangular cooperation arrangements as well as its recent partnership with the World Bank to promote global economic governance and development. In this short post, we have touched upon a few features of emerging donors. But, as a whole, they are not understood very well. As their aid becomes increasingly important to recipient countries, development policymakers and practitioners will need to understand emerging donors – as a group and individually – much better.

Emerging Voices features regular contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Paul Callan, Jasmin Blak, and Andria Thomas of Dalberg Global Development Advisors. Callan is Dalberg’s Global Operating Partner and leads the firm’s Strategy and Performance practice; Blak and Thomas are based in Dalberg’s Washington, DC, office. In the article, they analyze China’s foreign aid and investment in the developing world and advocate more accurate reporting to enable better comparisons of Chinese financial flows to those from traditional donor countries. China has significantly expanded aid to and investment in developing countries in recent years. This expansion has been the subject of much debate, with many development scholars and policymakers seeking to understand how Chinese foreign assistance compares with that of “traditional” OECD donors. However, many analyses compare Official Development Assistance (ODA) from traditional donors to a more varied collection of financial tools employed by China. These apples-to-oranges comparisons sometimes give an inaccurate picture of the global aid and investment landscape. A more careful analysis shows that while China gives relatively little ODA, its broader foreign assistance flows already match or exceed those from the United States and other OECD countries. ODA–defined by the OECD to include grants, interest-free loans, and concessional loans–is the most frequently cited metric for foreign aid. China does not give much aid by this measure: its ODA was estimated to be $2 billion in 2010, which equates to 0.04 percent of its Gross National Income (GNI). By comparison, U.S. ODA was $30 billion in 2010, equivalent to 0.21 percent of GNI, and all members of the OECD’s Development Assistance Committee (OECD-DAC)—the main group of traditional donors—gave $128 billion in ODA in 2010. Why, then, is China viewed as a significant donor? To understand, we need to look at other types of government assistance and at private sector funding flows. Official assistance can be defined more broadly by adding to ODA a range of funds outside the OECD’s definition, such as export credits, natural-resource-backed lines of credit, subsidies for private investment, and mixed credits (combined concessional and market-rate loans). These are called Other Official Flows (OOF) by the OECD-DAC. OOF are usually distinguished from ODA by traditional donors because of concerns about the development implications of strings frequently attached to OOF arrangements, such as tying the funds to the use of products and services from the donor country. China’s export credits and other types of OOF are larger than its ODA. Chinese OOF to Africa alone are estimated to have been about $5 to 6 billion in 2007. The United States and other OECD-DAC countries also provide various forms of OOF, but at a scale far below that of China. Annual U.S. OOF to all developing countries, net of repayments, never exceeded $1 billion during the period 2005 to 2010. To take one example, the Export-Import Bank of the United States (Ex-Im Bank) authorized just under $10 billion in loans and other financing to Africa during the last eight years, during which time its Chinese counterpart (EXIM) is reported to have authorized $38 billion for the continent. Foreign Direct Investments (FDI) are private financial flows that count as neither ODA nor OOF. In China’s case, however, FDI is relevant to the discussion of foreign aid because state-owned companies likely account for a substantial proportion of FDI, making it harder to distinguish between public and private flows. For example, the single largest direct Chinese investment in Africa to date is the $5 billion purchase by the state-owned Industrial and Commercial Bank of China Ltd. of a 20 percent stake in South Africa’s Standard Bank in 2008. In all, China’s FDI to developing countries was estimated to be approximately $17 billion in 2010, representing an FDI to GNI ratio of 0.30 percent, roughly equal to the United States’. Looking at Sub-Saharan Africa specifically, China’s FDI to GNI ratio is greater than that of the United States, though its absolute number is slightly less ($12.7 billion in 2007 to 2011 versus $16.6 billion). Some of the confusion in the conversation about aid and investment stems from differences in philosophy. The Chinese government explicitly considers other developing countries to be business partners more than aid recipients in its economic diplomacy strategy. Consequently, the foreign assistance described in the government’s 2011 “China’s Foreign Aid” white paper and 2006 “African Policy” paper outlines many forms of non-ODA finance that China considers cooperative, including export buyer’s credits, preferential trade relationships, and support for Chinese firms investing in developing countries. OECD-DAC members, by contrast, distinguish clearly between monies that they consider aid to developing countries (and the poor within them), and other flows related to commerce. As China and other emerging donors come to contribute more to developing countries, it would be beneficial to have more accurate and consistent reporting across all donors. Comparable reporting standards could draw from both OECD definitions and emerging donor conventions, such as the Chinese practice of treating only the reduction in interest on concessional loans (rather than the whole loan) as ODA. More consistent data would enable developing countries and international development actors to better understand the nature of financial flows to their economies, and consequently to design better policies to harness these flows. The next post in this series will examine aid and other financial flows from emerging donors outside China.

Last month, the Council on Foreign Relations introduced a new feature, Ask CFR Experts, that invites the public to submit questions to CFR scholars. In today’s answer, CFR’s Terra Lawson-Remer proposes ways for international organizations to bolster civil society groups in developing countries. As she explains:   ...supporting civil society from the outside is riddled with danger. When international actors get involved in the domestic affairs of other countries they risk upsetting complex power dynamics and promoting autocrats. This meddling can also incite a backlash against perceived imperialism.   Previous questions and answers have addressed such topics as Mexico’s drug cartels, the health effects of climate change, challenges facing the Democratic Republic of the Congo, and U.S. assistance to Egypt. You can find the whole series here. We welcome your questions, especially those about the development issues discussed on the Development Channel. Submit a question via this form.  

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Julie Fisher, a current associate and retired program officer of the Kettering Foundation whose book, Importing Democracy: The Role of NGOs in South Africa, Tajikstan and Argentina, will be released by the end of March. Here, she discusses how democratization NGOs can bolster civil society and government accountability by strengthening a country’s loyal opposition. In a classic study written over forty years ago, Ghita Ionescu, a political scientist, and Isabel de Madariaga, a historian, described loyal opposition as “the most advanced and institutionalized form of political conflict.” Loyal opposition unites support for a democratic constitution and political system with opposition to a particular political regime. Most scholars tie loyal opposition to political parties. In many developing countries, however, democratization NGOs promote new and different forms of opposition. Because democratization NGOs are afraid of losing their nonpartisan image, these forms are not tied to political parties. Indeed, democratization NGOs sometimes become a part of the opposition themselves. Although this may not build loyal opposition in the traditional sense, it does contribute to policy dialogue and push governments to become more accountable to their citizens. On the other hand, political parties are too often the orphans of the democratization movement. Building deeper democracies will ultimately require this to change. One way that democratization NGOs become part of a loyal opposition is to join or organize a coalition on socioeconomic issues of interest to other NGOs. In South Africa, democratization NGOs were leaders in a civil society coalition called the Treatment Action Campaign that successfully sued the government over its failure to prevent mother-child transmission of HIV through antiretroviral drugs. Since the South African legal system is strong and independent of the executive, this decision also reinforced government accountability, conformity to the constitution, the right of judicial review, and children’s rights. Another example comes from Tajikistan, where the League of Women Lawyers provided a draft law and space for public discussions about human trafficking to Dubai. The league organized a wide coalition of NGOs that successfully promoted an anti-trafficking law. Advocacy related to political and legal processes is often even more visible at the provincial or municipal level. With support from national democratization NGOs and forty citizen monitors of the city council in Rosario, Argentina, an NGO called Ejercicio Ciudadano (Citizen Practice) cooperated with the city in creating a transparency agreement that NGOs in six other provinces subsequently adopted. In Tajikistan, a democratization NGO called Jahan teaches local police about human rights. When I asked how they were able to do this given Tajikistan’s authoritarian government, Shahlo Juraeva, the director of Jahan, explained that the regime “doesn’t want trouble at the municipal level.” Democratization NGOs also strengthen local civil society through their support for political dialogue. In Argentina, Fundacion Ciudad (City Foundation) uses public deliberation to build ties between NGOs and community organizations. In a poor neighborhood in Buenos Aires province, a series of eight deliberative forums co-sponsored by Fundacion Ciudad and a local community library led to a program employing local teenagers to pick up garbage on a daily basis. Once citizens decided to launch the effort, the provincial government cleaned up a huge backlog of garbage and provided financial support. The garbage company provided the teens with gloves and uniforms. The success of Fundacion Ciudad suggests that democratization NGOs could help create a stronger loyal opposition by enlisting ordinary citizens who belong to community organizations. Democratization NGOs that join coalitions could also do more to educate their NGO partners about the political process and invite them to join political networks. While a loyal opposition based on civil society is clearly a step forward from autocratic rule, further democratic progress may depend on political parties. Parties are a vital part of the democratic process, but many struggle with small constituencies or leadership based on individual personalities. This privileges narrow ideologies and personal loyalties over policy proposals that address the concerns of citizens. To deal with these pitfalls, democratization NGOs need to overcome their fear of being labeled partisan. NGOs could strengthen their existing efforts to build a loyal opposition by, for example, hosting multiparty workshops with a focus on constituency building. Strategic networking among NGOs would help build this missing piece of the democratization puzzle: stronger political parties.

Last week, CFR senior fellow Thomas Bollyky published an Expert Brief analyzing the impact of the new Global Burden of Disease (GBD) Study, which measures levels of disease and other health phenomena around the world. He argues that while the study is unlikely to shift the priorities of health donors, GBD data can provide useful guidance as countries grapple with the growing threat of noncommunicable diseases. As he writes: The fundamental challenge in this emerging era of global health will be better governance and accountability for... health spending and its efficiency, not newer medicines. The GBD study has a critical role to play in addressing that challenge. You can read the full Expert Brief here.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Amit Chandra, an emergency physician and global health specialist who recently completed a two year post as faculty at the University of Botswana School of Medicine. Here, he assesses changes in the global health landscape and urges efforts to build overall health systems alongside disease-specific initiatives. Today, people in the world live longer than ever before. The 2010 Global Burden of Disease study published in December’s issue of the Lancet demonstrates that improved access to vaccinations, sanitation, and medical care is making a significant impact on communicable diseases, child mortality, and maternal health. Along with these added years of life, however, are alarming increases in the burden of noncommunicable diseases and injuries. Meeting these challenges while sustaining past progress will require a change in the way health aid is coordinated and implemented. So-called “vertical” programs, which target particular diseases or outbreaks, must be accompanied by “horizontal” efforts focused on the development and coordination of overall health systems. The latest Global Burden of Disease data appear to reflect a success story, proof of an expected epidemiological transition from diseases of poverty to diseases of old age and consumption, including heart disease, strokes, diabetes, and cancer. Expanding vaccination campaigns have made inroads against measles, polio, and other ills. Access to lifesaving antiretroviral drugs to treat HIV has skyrocketed, fueled largely by international aid, leading to a 33 percent reduction in AIDS-related deaths in Africa over the past six years. Malaria, though still a leading cause of death, is being targeted with more effective drugs and strategies. The horizon for countries at the vanguard of this transition, however, is far from clear. Many nations in sub-Saharan Africa, for example, continue to face high burdens of HIV and other infectious diseases along with the rising rates of the noncommunicable diseases that come with longer life spans. While past success in global health has been driven by disease-focused initiatives like the Global Fund and the President’s Emergency Plan for AIDS Relief, the challenge now is to reform health sectors and integrate disease-focused programs, like HIV care and malaria control, into effective national primary and preventive care systems that address chronic diseases and acute needs. Instead of facing each day as a new crisis, health sector managers must develop the capacity to predict and analyze shortcomings, devise solutions, and implement them without relying on external partners. This will require a culture of accountability and changes in organizational practices, human resource models, and supply logistics. Developing this health infrastructure is far more difficult than combating diseases in isolation. Health system development will require training and retaining health managers, expanding access to primary and acute care, and widening the scope of disease prevention to include health promotion. International donors often work parallel to dysfunctional national health systems, filling gaps themselves and hiring away elite public employees to focus on specific health challenges. They can instead assist the public sector with health management, logistical skills, and research training. By developing these capacities, national health systems will be able to devise locally relevant health promotion strategies, retain doctors and nurses in the public sector, and provide rational and consistent medical care. Rwanda has recently been highlighted as a success story in this regard. Over the past decade, it has used international aid to finance and expand access to a primary care-focused national health system, relying on locally elected community health workers and a national health insurance scheme. These coordination challenges, however, are stretching many countries’ health and management capabilities. Over the past two years, public sector doctors in four African nations (Botswana, Kenya, Tanzania, and Nigeria) have gone on strike with devastating consequences for patients who depend on government hospitals. Although low pay was a common complaint, doctors also cited frustrations over outdated and malfunctioning equipment and inconsistent availability of medications and supplies. Traffic accidents sharply illustrate what is needed to build health systems that can deliver quality care. Accident victims in much of sub-Saharan Africa are usually transported by Good Samaritans in the absence of paramedics and ambulances, and they often face critical delays before receiving care. Once they arrive at a health facility, their care may be compromised by shortages of blood products and medical supplies as well as practitioners lacking training in trauma care. This makes accidents deadlier than they need to be. Reforming health systems to prevent and treat injuries requires high-level coordination both within the health sector and between branches of government dealing with public health, law enforcement, and transportation. These authorities must develop systems of pre-hospital care so accident victims can be transported to health facilities and receive life-saving treatment en route. Doctors and nurses must be trained in trauma and acute care. Referral criteria must be designed to transfer the most critically injured patients to centers with qualified surgeons and advanced equipment. Finally, managers must ensure that facilities maintain adequate medical supplies. Police and transportation authorities can also do their part to create and enforce safe driving practices and improve vehicle and road safety technology. By focusing attention on health systems infrastructure, countries in Sub-Saharan Africa and across the developing world will be able to build on the successes of disease-focused initiatives while providing integrated and reliable care for the future. International aid can assist this process by rewarding and reinforcing progress towards achieving quantifiable targets--so-called "results-based financing." For developing nations and donors alike, building state capacity to deliver effective and efficient health services will be the central challenge of global health over the coming years.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Wolfgang Fengler, the lead economist in the World Bank’s Nairobi office. Here, he addresses the question of how development aid can remain relevant and effective in a changing Africa. Africa’s emergence is the new consensus. For the second time in just a few months, a major international journal has run a cover illustrating newfound optimism about the continent. After The Economist’s mea culpa (correcting its previous assessment of a “hopeless continent”), Time magazine just re-ran an earlier title: “Africa Rising.” This is no fluke: Africa’s economies are growing and the continent is much wealthier today than it ever was–even though, collectively, it remains the poorest on the planet. Many African nations (twenty-two to be precise) have already reached middle income country (so-called MIC) status and more will do so by 2025. Today, Africa includes a diverse mix of countries, ranging from the poorest in the world to the fastest growing; from war-torn countries to vibrant democracies; from oil-cursed economies to ICT champions, and the list goes on. This has important implications for the aid architecture. Until now, Africa was at the center of global aid attention. But what if Africa continues to grow strongly and steadily? What will be the role of international partners (often called “donors”) in this new configuration? Is aid becoming obsolete? I don’t think so, rather the opposite! Many Africans still experience deep poverty. The challenge is so huge that ten years of moderately strong growth are just a down payment in the fight against poverty. Today, some 400 million Africans (roughly 40 percent of the total population) still live on $1 a day or less. Newfound wealth means little to them if it is not equitably spread out. Some countries are becoming richer, often as a result of oil discoveries, with very little change in the lives of “average” citizens. Fundamentally, a country’s development outlook has not changed if the poor remain neglected. What is new, however, is that these MICs no longer need aid money to fill development gaps. They have enough internal resources. Yet they still need assistance in designing programs that help them spend their new resources efficiently, especially if they wish to target the poor. Aid programs, if designed well, can help do precisely this. Kenya is a perfect illustration of this new aid reality. Today, Kenya’s budget is roughly $12 billion, about 30 percent of the country’s GDP. This is one of the highest shares in Africa, making the state the biggest player in the economy. Donors are small players in comparison. Aid to Kenya is around $1.5 billion (amounting to a little over 10 percent of total expenditures), of which only half is reflected in the budget. Bilateral partners like the United States and China still prefer to implement their programs outside of government systems; likewise, new players, especially NGOs, typically choose to execute their programs directly (rather than through the administration). So what needs to change in the way aid is being delivered? How can it not only remain relevant but also become even more effective than in the past? First, we need to acknowledge (and celebrate!) the demise of the old North-South paradigm.  With Asia’s emergence--and China’s spectacular turnaround--former recipients of aid are now new donors. The previous system, with rich countries in the North supporting poor countries in the South through government-to-government and multilateral relationships, is changing rapidly. Today, relationships are much more complex and varied, and there is a host of new players on the pitch. Second, aid will increasingly focus on transferring knowledge rather than money. No matter how significantly some donors may scale up their financial commitments, aid money will remain small compared to domestic resources in recipient countries. If current trends continue, almost all of today’s stable low-income countries will reach MIC status by 2025. Going forward, “traditional aid” (of the bricks and mortar type) will focus increasingly on emergencies and fragile states. In others, transferring know-how and skills will be the name of the game. Third, innovation and support to country systems will drive the impact of future aid. By 2025, even Africa will have a majority of MICs. But as countries climb up the income ladder, they will face new and more complex policy challenges. In order not to get stuck in the “Middle Income Trap,” African countries will need to innovate, including in traditional sectors, such as education, health, or transport. The resources will be there but the challenge will be to ensure services are actually delivered and at good quality. In these countries, aid should move from building monuments (schools, clinics, and roads) to improving the machine room (the systems through which education, health, and transport are provided). Simply put: If we continue to equate aid with money only, then it will become obsolete in most countries over the next decade or two–except perhaps in fragile states. However, it will remain indispensable if focused on transferring the knowledge countries need to catch up and compete with each other. Wolfgang Fengler also blogs on the World Bank’s Africa Can... End Poverty blog.

What does the election mean for U.S. foreign aid? Question of the Week posts review important questions and controversies in global development by providing background information and links to a full spectrum of analysis and opinion. Today’s post explores the prospects for U.S. foreign aid in President Obama’s second term. With President Barack Obama reelected for a second term, there is a presumption of continuity for the administration’s foreign assistance policies and programs. For initiatives that have only recently gotten underway—the structural reorganization of parts of USAID, for instance—there are now four more years to see things through. However, the administration faces an evolving environment for foreign assistance and development, with factors ranging from the likelihood of a new Secretary of State who will want to put his or her mark on the development agenda, to Congressional calls for significant cuts in spending. The rise of aid from the BRICs and others raises new questions about the U.S. development approach, as do the changing characteristics of poverty itself: most people who live on less than $2 a day now reside in middle-income countries. Amid this backdrop, the Development Channel looks at continuity and change in five areas of U.S. policy. The Foreign Aid Budget While some twenty-one U.S. government agencies—ranging from the Department of Agriculture to the Department of Justice—are involved in carrying out foreign assistance, the major ones are the State Department, USAID, and the Millennium Challenge Corporation. Together, these agencies take up about one percent of President Obama’s requested FY 2013 federal budget, with a joint total of approximately $52.5 billion. Depending on exactly what is counted, the request for the State Department and USAID is slightly higher than the 2012 level, while the request for the Millennium Challenge Corporation remains the same. Foreign assistance, a perennial political target, will face even greater resistance than usual as discussions over America’s debt heat up in the coming months and years. “While the president’s 2013 budget shows a slight increase from 2012 levels,  foreign affairs spending will continue to be under a high degree of scrutiny going  forward and will often be pitted against cuts in domestic programs,” argues a report from the Center for Global Development. Turbulence and uncertainty in transitioning countries in the Middle East has also caused some in Congress to push for cuts to foreign assistance. Aid to Egypt and Libya has recently faced opposition for reasons including the attack on the U.S. consulate in Benghazi and the breach of the U.S. embassy in Egypt, Egypt’s arrest of American NGO workers, and more. Moreover, just as a drawdown of U.S. efforts in Iraq is resulting in decreased foreign assistance funding there—slightly over $1 billion in FY 2010 compared to almost $8 billion in FY 2005, for example—a decline in spending seems likely for Afghanistan in the coming years. Foreign assistance to Afghanistan in FY 2010 was over $4.6 billion, more than 10 percent of total foreign assistance. Other foreign aid challenges are even more immediate. If sequestration occurs as part of the “fiscal cliff,” budget cuts will also affect foreign assistance. The Office of Management and Budget report on the sequestration estimates that the Millennium Challenge Corporation would lose about $74 million while USAID would lose about $469 million. This loss would affect development assistance, disaster relief, and operating expenses, for example. Administrative Reform of U.S. Foreign Assistance Agencies Reform of the foreign assistance agencies is a major component of the Obama administration’s foreign assistance agenda.  In 2009, Secretary Clinton initiated the Quadrennial Diplomacy and Development Review (QDDR), a State Department and USAID initiative to better coordinate the work between agencies, integrate diplomacy and development into the national security agenda, and improve organizational and administrative functioning. The QDDR aims to “reestablish USAID as the world’s premier development agency” by measures such as bolstering strategic planning, attracting certain kinds of expertise, and moving the organization away from its reliance on U.S.-based contractors. One product of the QDDR process is USAID Forward, a “reform agenda” focused on enhancing partnerships with local organizations, promoting innovation, and “strengthening [USAID’s] capacity to deliver results,” including by boosting staff. Another four years under the same president will likely give these nascent reforms more time to evolve. Commentary on the QDDR and USAID Forward has been mixed. Some observers have criticized the process for outlining a weak role for the administrator of USAID and for failing to address inter-departmental coordination in policy toward fragile states. Others have praised the lifting of the requirement that USAID buy aid products from American companies. Still others (including CFR’s Laurie Garrett) have wondered about the administration’s reorganization of global health programs, contrary to the QDDR’s recommendations. Open Data Initiatives The Obama administration has placed an enhanced emphasis on aid transparency, another priority identified in the QDDR, pledging in 2010 to develop an online platform accessible to the public that shows data on U.S. foreign assistance spending by agency, by country, and by other categories. So far, just a few agencies have provided data to the Foreign Assistance Dashboard, but over twenty are due to participate eventually. Experts like the Center for Global Development’s Sarah Jane Staats note the potential tension between open data and “ongoing government bureaucracy concerns about security, data consistency, and control over interpretation.” However, Staats and others also point to initial positive consequences of the data release, including USAID’s success in crowdsourcing a data processing task at no cost. Trade and the U.S. Relationship with Africa Many analysts have complained that President Obama has ignored sub-Saharan Africa, which he visited just once during his first term. Mwangi Kimyeni of the Brookings Institution, for example, praises President Obama’s launch of Feed the Future and the Global Climate Change Initiative, but says the president has broken little new ground. One area where a second term could have a bigger impact on Africa is trade. Last June the administration released the Strategy for Sub-Saharan Africa, which, as blogger Tom Murphy suggests, emphasizes “trade over aid.” John Norris of the Center for American Progress, who described the strategy as “sensible and bland,” also makes the point  that President Obama’s earlier “request for expedited authority from Congress to consolidate and reform the six U.S. trade promotion agencies and create a one-stop-shop for American businesses looking to do more business abroad probably would have more impact on Africa than any other region.” But, Norris, says, the request is mired in partisan conflict. Public-Private Partnerships Partnerships—whether with nonprofits, companies, or foundations—have become an important part of U.S. foreign assistance. The QDDR identifies public-private and other partnerships as part of a strategy for the United States to engage with countries’ civil societies, as opposed to only state-level actors. As Ambassador Elizabeth Bagley, the Special Representative for Global Partnerships, explains it, “[Partnerships] can mean everything from working with General Mills on food security issues or MTV on documentaries, music videos, and public service announcements on sex trafficking through the MTV EXIT (End Exploitation and Trafficking) campaign that has reached audiences across Europe and Asia.” Other examples include the State Department’s Global Alliance for Clean Cookstoves, which brings together “public, private, and non-profit partners to help overcome the market barriers that currently impede the production, deployment, and use of clean cookstoves in the developing world.” USAID is also partnering up. Since 2001, according to Administrator Rajiv Shah, “USAID has joined forces with over 3,000 organizations in more than 1,000 partnerships…On average we have leveraged $4 for every $1 of USAID funding.” One notable example is the New Alliance, an initiative to bolster food security and nutrition in Africa in partnership with several private firms. Public-private partnerships in the context of U.S. development agencies attract both praise and criticism. Interestingly, one of the most comprehensive recent commentaries comes from U.S. Navy Admiral James Stavridis and his senior advisor for private-public partnerships, Evelyn Farkas. While noting that partnerships can bring resources and expertise, they argue that they sometimes let private companies, not the government, “set priorities.” They add that joint projects are sometimes chosen because they are easily done, not because they are needed or effective. What do you think? What is the future of U.S. foreign assistance funding? Are U.S. development agencies using public-private partnerships effectively? Will trade with Africa become a greater priority for the Obama administration during the second term? Let us know your thoughts in the comments section below, and stay tuned for future Question of the Week posts.

Emerging Voices features regular contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Richard Dowden, the director of the Royal African Society and author of Africa: Altered States, Ordinary Miracles. Here, he discusses the work of the World Bank and the International Monetary Fund in Africa--and how history will evaluate their role. I feel sorry for the World Bank and the International Monetary Fund. In the 1990s they were masters of the world. The end of the Cold War proved that free market capitalism had won out over state-controlled socialism, and the Bank and the Fund were given the role of liberalizing the world’s markets and ushering in an era of prosperity and peace. Traveling to the capitals of Africa in that period I met bright young World Bank men (the era of equality had not yet broken), missionaries of monetarism bearing the bible of free market prosperity. Many, like all zealots, believed that the greater the pain, the greater the gain. Hundreds of thousands of state employees were thrown out of work when government spending was slashed and life savings were wiped out when currencies sank like stones after being “floated.” The men from the Bank, however, dismissed these as inevitable side effects of essential change. The rulers of these formerly one-party states, of course, had access to hard currency so they bought up privatized state companies and state land. Many used their wealth to form new political parties and hold onto power. They became the owners of their countries as well as rulers. But this was politics—not in the brief of the Bank or the Fund. When Western countries pushed for political liberalization including multiparty elections, some dictators lost power but many were able to use their wealth and position to win the votes. Hardly surprisingly, with little to lose, the discontents found weapons and started rebellions. By the end of the 1990s, twenty-six of Africa’s fifty-two countries had suffered civil wars. Nor did the Washington Consensus—as the policy of the Bank and the Fund was called at that time—deliver prosperity in Africa. When Africa’s growth rates did begin to change dramatically around 2000 the main driver was not Western policy but the engagement of the East. China’s need for raw materials took its companies to Africa where the Chinese state made secret deals with presidents to obtain the minerals they needed. In parts of Africa where Europeans and Americans now feared to tread, Chinese involvement gave African economies a huge boost. From about 2000, along with mobile technology, the Chinese engagement made African economies start to grow again. African presidents liked the Chinese because they did not lecture them about human rights and free speech as Western governments did. And the Chinese delivered highly visible new infrastructure projects: airports, roads, parliament buildings—and the occasional presidential palace. At last African governments had an alternative partner and could use the Chinese—and later India, Brazil, Russia, and other countries—to push back against Western political pressure, including the dictates of the Bank and the Fund. Even the most pro-Western governments now had wiggle room. The smartest rulers maintained good relations with West and East. Yoweri Museveni in Uganda, Paul Kagame in Rwanda, and Meles Zenawi in Ethiopia encouraged Chinese engagement but bought into the West’s agenda just enough to make themselves strategically indispensable. They got themselves into the position where Washington and London and Paris needed them as much as they needed Western support. Around this time Western development fashion changed. The big infrastructure project gave way to the human development approach. Instead of funding glossy new roads and massive dams, the Bank funded less visible programs in health and education. The money was channeled through governments, which of course claimed the credit for themselves. It may be that economic historians will demonstrate that the Bank and the Fund did help lay the foundations of Africa’s economic revival. But in the minds of most people it was China. At the same time China was also making goods such as radios, watches, shoes, and clothes that Africans could afford. So most Africans see China, not the Bank and the Fund, as the catalyst of their prosperity. The Bank and the Fund are still associated in the minds of most people with the bad times of the 1990s. And now that there are alternative sources of funding and investment, the Bretton Woods Institutions no longer have a monopoly on economic ideology or control. Yet they still have huge resources and influence. The recent spurt of economic growth in Africa may not have done much for the poor, so the question the institutions face now is how to develop a new policy to help those left behind.

How should the next set of global development goals be chosen? Question of the Week posts review important questions and controversies in global development by providing background information and links to a full spectrum of analysis and opinion. Today’s post explores the process to determine what will replace the Millennium Development Goals after 2015. Even as efforts to achieve the current Millennium Development Goals (MDGs) continue, the process of figuring out what a new set of global goals should look like when the MDGs expire in 2015 is already underway. The next goals could significantly influence global development priorities and spending, just as the MDGs have. Consequently, many involved with or affected by the global development agenda feel that the stakes are high and are pushing for their perspectives to be included. And unlike the original process for determining the MDGs—a top-down endeavor involving relatively few people—the post 2015-process is larger, more complex, and at least potentially more inclusive. As 2015 approaches, the question of the future global development agenda is increasingly visible. During the UN General Assembly opening this September, Secretary-General Ban Ki-moon addressed the 26-member High-Level Panel that will advise him on the future of global goals. “The MDGs have helped us to conceive of and work towards a world of justice and potential for all. Our next development agenda must accelerate progress on this urgent task. It must be just as concrete, just as inspiring, and even more ambitious,” he said. The group’s recommendations will be presented before the UN General Assembly in 2013. The High-Level Panel includes heads of state, civil society leaders, academics, and others from around the globe. David Cameron, the prime minister of the United Kingdom, Ellen Johnson Sirleaf, the president of Liberia, and Susilo Bambang Yudhoyono, the president of Indonesia, are the chairs of the panel. Nonetheless, some say that the panel insufficiently incorporates the perspectives of those actually living in poverty. “…we are extremely concerned that there are no grassroots organizations represented on the High Level Panel, such as women’s associations, farmers cooperatives, indigenous groups, workers or organizations of the impoverished represented,” a large coalition of civil society organizations organized around the post-2015 agenda argued in response to the panel’s makeup. The panel has an important role—sifting through the wide variety of opinions and perspectives that will come before it. As Clair Melamed of the UK Overseas Development Institute (ODI) explains, “…the panel’s job is to prioritize between the 101 good ideas that are out there, and to tell a story explaining the decisions they have made which is convincing enough to persuade others that it’s the right way to go.” Indeed, the panel can draw from some 50 country-level consultations about what should come after 2015; the UN argues that “the consultations will seek to ensure that the vision of the world we want to live in takes into account the perspectives from a broad base of civil society, marginalized groups, and others previously left out of discussions on development priorities.” Thematic consultations on topics like governance and health—bringing in civil society, policy perspectives, and more—are also underway. When it comes to taking the perspectives of the United Nations’ many organizations into account, a UN System Task Team “brings together senior experts from over 50 UN entities and international organizations” and has recently released a report with broad recommendations. Meanwhile, the World We Want Campaign, a collaboration between civil society and the United Nations, seeks to encourage ordinary people to participate in the post-2015 process, whether online or through the consultations. In addition to these official processes, nonprofits and others are spreading information and campaigning around post-2015 issues. To name two of the major initiatives, the ODI produces scholarship on the future of the MDGs and runs post2015.org, a site dedicated to tracking debate and research on this issue. Another organization, Beyond 2015, comprises over 380 civil society groups and aims to “create a civil society consensus around a minimum standard of legitimacy for a post-2015 framework, both in terms of the process and the framework itself.” Within the United Nations frameworks and beyond them, there is no lack of opinion, knowledge, and strong beliefs about what should come after 2015. As for issues generating particular interest, sustainability will likely play an important role in the post-2015 goals. Several processes organized around sustainable development are already in place. The Rio + 20 conference that took place this summer called for a working group to develop a set of sustainable development goals (SDGs) that will be brought to the UN General Assembly in 2013. Also, the Sustainable Solutions Development Network (SSDN) is a UN initiative that will advise the High-Level Panel on sustainable development. Headed by development economist Jeffrey Sachs, the Special Adviser to the Secretary-General on the Millennium Development Goals, the SSDN seeks to leverage the expertise of centers of scientific knowledge like universities on issues of sustainability. Although the ultimate relationship between sustainability and the next set of global development goals remains to be seen, there are already some areas of overlap. But will all of these processes ensure that diverse perspectives are actually included in future development goals? Some observers are skeptical. Here on the Development Channel, Ben Leo of the antipoverty organization ONE commends the UN’s and other organizations’ drive for inclusiveness in the post-2015 process. But he adds, “…there remains a very real risk of not capturing the most critical voices–those of the world’s poorest citizens.” Looking at all the processes in place to include more perspectives, Harvard’s Alicia Ely Yamin asks, “…in the cacophony of competing voices, how can we be sure the wielders of power are really listening to the diverse views of men and women who live in poverty or face exclusion along different axes of identity?” It is uncertain how the various elements of the post-2015 process will ultimately shape the development agenda. However, this may be one instance where form matters nearly as much as substance. In a survey of 104 civil society representatives from 27 developing countries, “86 percent agreed that the process of deciding a new framework would be as important as the framework itself. They stressed the need for an open, participative process, including poor citizens in developing countries.” Today’s communications and other technologies allow an unprecedented range of voices to participate in the global conversation. The challenge will be conducting a process that is inclusive yet efficient and that can produce a coherent and compelling set of new development goals. What do you think? Is the post-2015 process sufficiently inclusive? Will world leaders take into account diverse civil society perspectives? What role should sustainability play in the next set of goals? Let us know your thoughts in the comments section below, and stay tuned for future Question of the Week posts.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Rolph van der Hoeven, professor of employment and development economics at the International Institute of Social Studies at Erasmus University. He outlines changes in the global landscape since the adoption of the Millennium Development Goals and calls for a new social contract to guide the next set of development aims. One of the most important trends since the launch of the MDGs has been the rapid growth of large developing countries like China, India, and Brazil. Ironically it was not their growth, but instead the 2008 financial crisis, that forced the G8 to accept the G20, where these developing countries are represented, as a central forum for global financial governance. But this new representation of emerging power should not be limited to financial structures. In the post-2015 development agenda, traditional OECD donors cannot be in the driver’s seat anymore. The post-2015 agenda has to be a common undertaking by all countries and people in the world, for several reasons, as I explain in a recent background paper. The MDGs were set as global targets. Unexpectedly, this has made them much easier to achieve due to the performance of a very few large, fast-growing countries. In fact, about three-quarters of the poor now live in middle-income countries, as various large countries that were low-income in 2000 have now “graduated” into middle-income status. These developments have important implications on how to shape both the instruments and the targets of global poverty reduction. For most of the world’s poor, traditional development assistance has become irrelevant. Poor households in middle-income countries would benefit most from more equitable income distribution, improved access to social services, good jobs, and a well-functioning rights-based system that gives them access to government services and labor rights. It is important to ensure that the poor in middle-income countries can exercise their right to a greater share of the proceeds from the broader development of their societies. Clearly, a post-2015 system has to come to grips with issues of human development—economic, social, and cultural—and labor rights as well as with issues of inequality and redistribution. To do so, a new development agenda must take account of the changing geopolitical landscape, the increasing diversity of developing countries, and the radically different development patterns of the countries where the global poor live. This implies a need to give much more attention to development at the national level. More global attention to national issues could also help to strengthen the special position of the least developed countries and the poor living in them. Furthermore, the crisis of 2008 and the current challenges of reducing public and private debt make it amply clear that protecting the poor and the socially disadvantaged in industrialized countries has also become a serious social and political problem. MDG targets should therefore be considered for all countries, including the developed ones. Growing economic interconnectedness is creating hardships in developed countries, especially among workers displaced by outsourcing. It would be politically unwise to ignore this in a post-2015 system.  Moreover, having targets for all countries would express better than does the current MDG system that all countries in today’s global world share a continuing responsibility for sustainable prosperity. A post-2015 development agenda should therefore take the form of a global social contract in which the least developed countries would be guaranteed development aid and other concessional resources to achieve poverty reduction and inclusion in the world economy. At the same time, people in all economies (industrialized, emerging, and least developed) would be able to exercise economic, social, and labor rights to gain a better share in national development outcomes. They would also be guaranteed minimum safeguards for social protection during economic downturns. The best way for countries to create such a social contract would be to renew the social contract that all countries agreed to through the Millennium Declaration in 2000, which is based on such fundamental values as freedom, equality, solidarity, tolerance, respect for the environment, and shared responsibility. Governments should also strengthen their own accountability and that of international organizations through new or improved mechanisms in which citizens of the world can freely express their opinions. One might argue that a global social contract overloads the post-2015 development agenda, undoing the main strength of the current MDGs: their simplicity. However, as shown by global responses to recent crises in finance, nutrition, and the environment, simplicity compromises effectiveness. Indeed, traditional development aid interventions, as conceived by the MDGs, often do not provide an effective response to global challenges. Nor do they enable large numbers of the poor to move out of poverty in a changing world. A post-2015 system therefore needs to confront new challenges, which should be put in the context of promoting human development for the poor during economic crises and more favorable times as well.

This is a guest post by Ashley Harden, research associate in CFR’s Women and Foreign Policy Program. She examines efforts to integrate gender concerns into development programs, arguing that the United States and international actors must do more to put their commitments to gender equality into practice. It’s the end of September and New York is abuzz with diplomats, foreign dignitaries, and U.S. foreign policy leaders in town for the opening of the 2012 United Nations General Assembly, the Clinton Global Initiative, and many other high-profile events. While issues of food security, public health, and international diplomacy are being discussed, several meetings have focused on the economic and international development ramifications of gender inequality. As Daniel W. Yohannes, chief executive officer of the Millennium Challenge Corporation (MCC), noted at an event this week, “strong societies depend on gender equality and women’s empowerment.” Given the widely recognized connection between growth, gender equity, and poverty reduction, international institutions and several arms of the U.S. government have attempted to integrate gender into their institutional policies and development practices (a strategy known as “gender mainstreaming”). However, it is unclear whether these mechanisms are effective, and there remains a gap between rhetoric, policy, and implementation. Almost two years ago, the U.S. State Department released the Quadrennial Diplomacy and Development Review (QDDR), a plan to reform the State Department and the U.S. Agency for International Development (USAID) to address structural and financial shortcomings. The QDDR offers a “blueprint” for U.S. diplomacy efforts that positions development, women’s empowerment, and human rights as central components of any successful national security strategy. However, the implementation of this vision has been difficult. As CFR Senior Fellow Isobel Coleman explains, “reforming a bureaucracy is never easy” and large policy shifts are challenging to orchestrate. Anthony Cordesman of the Center for Strategic & International Studies argues that that the QDDR is “filled with concepts rather than tangible plans.” Adding to the challenge is the issue of funding for international development and aid efforts in an era of U.S. fiscal austerity. In 2011, the White House released the U.S. National Action Plan on Women, Peace, and Security, which affirmed the connection between gender equality and conflict prevention. The plan strives to advance women’s inclusion in decision-making processes related to conflict prevention, peace, and reconstruction. But in practice, U.S. officials have been inconsistent in their commitment to this policy. In Afghanistan, women have largely been absent from the peacebuildng and peacekeeping process. Despite a recognition of the importance of Afghan women’s participation in reconstruction and reconciliation, they were absent from talks at the Chicago NATO summit this May, and relegated to a “shadow summit” instead. As CFR Fellow Gayle Tzemach Lemmon writes, Afghan women fear that in the rush to exit the country, the United States could allow the hard-fought gains made for women over the years to be dismantled during peace negotiations with the Taliban. Moreover, members of the Obama administration have wavered in their commitment, and even been quoted as likening U.S. projects for Afghan women to "pet rocks." This year, USAID introduced a Gender Equality and Female Empowerment Policy. The goal of the policy is to integrate “gender equality and female empowerment into the very DNA” of USAID’s work. Additionally, the MCC, an independent U.S. foreign aid agency, has added gender to its country-selection criteria. To even be considered for an MCC grant, aspiring partner countries must receive an acceptable score on MCC’s gender equality indicators, and they must be willing to incorporate gender into all phases of their MCC compacts, as the agency’s grants are known. All MCC compacts also have “Gender Integration Guidelines.” Grant recipients are provided with gender-specialist consultants to help design programs aimed at facilitating equitable growth, whether they focus on power sector reform (as in Malawi) or improvements in water supply and sanitation (as in Zambia). The MCC comes closer than other U.S. agencies to enforcing accountability for gender commitments. If gender equality outcomes are not being met, financial disbursements to partner countries can be suspended. (In fact, this may happen if a country performs poorly on any of MCC’s eligibility indicators, including civil liberties, voice and accountability, rule of law, trade policy, public health, and education, among others.) However, these gender mainstreaming efforts, while admirable, are not enough. As Virginia Seitz, senior director and practice leader for social and gender assessment at MCC, argued at this week’s event, in order to move beyond commitments, “resources, capacity, leadership, and accountability” must also exist. The time is ripe to capitalize on the momentum of these policies and start to move from promise to reality. Given the overwhelming evidence on the importance of women’s empowerment and gender equality, the United States and the international community have the responsibility to ensure that outcomes are met and gender commitments do not stagnate in policy limbo.

What impact have the Millennium Development Goals had, and what should follow them after they expire? Question of the Week posts review important questions and controversies in global development by providing background information and links to a full spectrum of analysis and opinion. Today’s post explores debates over the Millennium Development Goals, their track record, and their future. With 2015 rapidly approaching, governments, NGOs, and multilateral organizations are increasingly focusing on the legacy of the Millennium Development Goals (MDGs)—and what should follow them after they expire that year. Secretary-General Ban Ki-moon of the United Nations (UN) recently appointed a high-level panel to help craft a post-2015 agenda, and a range of processes and proposals are already on the table. Participants and observers are debating the MDGs’ impact and how a future set of global development aspirations might better promote opportunities for the world’s poor. Indeed, questions over the ability of the international community to adequately fund existing MDGs featured prominently at the UN General Assembly last week. The MDGs arose from the Millennium Declaration, a sweeping document adopted by 189 world leaders in 2000. The declaration’s language on bolstering development and reducing global poverty led in 2001 to the Millennium Development Goals, a series of measurable objectives for poverty reduction, improvements in health and education, and other steps. The goals’ importance may lie in their form as much as their substance. “It is important to note that all these goals, and their subsidiary targets and benchmarks, were expressed and signed up to in some form by major member states in the years before 2000. But these pledges always suffered from a lack of momentum, petered out, or went largely unnoticed,” former UN Secretary-General Kofi Annan writes. The MDGs comprise eight goals: “Eradicate extreme poverty and hunger”  “Achieve universal primary education”  “Promote gender equality and empower women”  “Reduce child mortality”  “Improve maternal health”  “Combat HIV/AIDS, malaria, and other diseases,”  “Ensure environmental sustainability”  “Develop a global partnership for development” The goals are measured by 21 targets and 60 indicators. For instance, one of three targets measuring the first goal is to “halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day.” In turn, one of four indicators measuring that target is the percentage of the population that lives on less than $1 a day. What headway has been made on these goals? As 2015 approaches, the results are mixed. On the one hand, specific signs of progress are clear. “The target of reducing extreme poverty by half has been reached five years ahead of the 2015 deadline, as has the target of halving the proportion of people who lack dependable access to improved sources of drinking water,” explains Ban Ki-moon in a report. He also praises progress on gender parity in primary school enrollment, slum conditions, and reducing child and maternal mortality. However, progress in many other areas is less certain, and it has been uneven among regions and countries. For instance, while the target for “access to improved drinking water sources” has been slightly exceeded globally (89 percent of the global population now has access, just over the 88 percent target), this is hardly the case everywhere. “Only 61 percent of the people in sub-Saharan Africa have access to improved water supply sources compared with 90 percent or more in Latin America and the Caribbean, Northern Africa, and large parts of Asia,” report the WHO and UNICEF. In November 2011, the United Nations Development Group (UNDG) put forth an “MDG Acceleration Framework,” noting that “many countries are likely to miss some MDGs and associated targets unless they make urgent additional efforts and take corrective action.” Arguably, the MDGs have had an influence beyond specific outcomes by altering conversations about international development. “The MDGs have become the standard reference point around which international debates on development revolve. They are used as a proxy to judge progress in tackling global poverty,” says Sakiko Fukuda-Parr of the New School, mentioning how international organizations, economists, nonprofits, the media, and others incorporate the MDGs into their work. “Political leaders make speeches defending policy initiatives with the warning: ‘without such and such action the MDGs will not be achieved,’” she writes. A big question is how the MDGs will be realized, a matter of both funding and policy. Much of the funding for MDG-related efforts comes from official development assistance (ODA)—donor countries’ aid to multilateral institutions and developing countries. In the MDG framework, ODA is not only a means to an end: it is also a target to be reached in itself. Goal 8 is to “Develop a global partnership for development,” and one of the targets to reach this goal “includes…more generous ODA for countries committed to poverty reduction.” The official 2012 UN report on the Millennium Development Goals reports that net aid in 2011 fell in real terms from 2010, though. And donors generally fail to meet the longstanding UN objective of sending 0.7 percent of their gross national income to ODA. In 2011, for instance, the principal donors gave a combined total of 0.31 percent. At the same time, critics of the focus on ODA argue that rich country policies regarding trade, investment, and private capital flows have a far more significant impact on development outcomes in emerging economies than does foreign aid, yet the world’s major economies have so far failed to ink any major agreements in these areas that would put achieving the MDGs at the center of the agenda. Indeed, the coming expiration of the MDGs in 2015 is sparking significant discussion about the policies that have—and have not—led to successful development and antipoverty outcomes. Civil society actors, scholars, activists, and others are trying to make their voices heard about what the MDGs have accomplished and what should come after them. Various individuals and groups are seeking to address not just poverty but also sustainability in any successor goals, to include more perspectives from the global South in the goal formulation process, to better address poverty in urban areas, and more. On the Development Channel, Alicia Ely Yamin of the Harvard School of Public Health recently expressed concerns about ensuring civil society participation in the post-2015 process, for example. What do you think? Is progress in poverty reduction more a result of MDG-inspired programs or of economic growth that would have occurred anyway? Did the goals lead to substantive policy shifts within governments and multilateral institutions, or did these institutions simply adopt rhetorical changes to satisfy the donor community? Should donor countries contribute more to the MDGs, and should Goal 8 be included in the next set of development goals? What should a future set of goals—and the process to define them—look like? As 2015 approaches, these are some of the most pressing questions in global development, and ones that the Development Channel will continue to explore in the coming weeks. Let us know your thoughts in the comments section below.

Question of the Week posts review important questions and controversies in global development by providing background information and links to a full spectrum of analysis and opinion. Today’s post tackles the debate over randomized controlled trials (RCTs), which have emerged as an important tool for measuring the success of development interventions. International donors have spent well over $2 trillion in development assistance over the past five decades, but there remains significant uncertainty about what works and doesn’t work to reduce poverty and grow economies. Some scholars even argue that development aid makes life worse, not better, for poor people in the global south. And in an increasingly tight fiscal environment, governments and the public understandably want accountability to ensure that scarce dollars are making measurable impacts. In this context, randomized controlled trials (RCTs)—a statistical tool adapted from biological and medical research—have become a prominent though controversial tool for evaluating aid effectiveness. How does a randomized controlled trial work? In a RCT, a test group receives an intervention (say, a free insecticide-treated bed net or a new way of receiving payments by mobile phone) while a control group does not. Members of each group are randomly selected so as to make both groups statistically identical and representative of the larger population. In theory, then, the only difference between the two is whether or not they receive the intervention. Outcomes of interest (such as participants’ income or health status) can then be compared to evaluate the intervention’s impact. Supporters believe that RCTs can provide precise and rigorous findings about what works in development—findings unavailable through other types of evaluations. This can prevent governments and non-profits from spending aid dollars on ineffective interventions. "The experimental approach is something different and potentially transformative: it not only produces relatively clear-cut evidence that is hard to ignore, but also forces economists to engage development problems where they play out,” write Rachel Glennerster and Michael Kremer of Harvard University and J-PAL, an MIT-based network of researchers who use RCTs to evaluate international development. RCTs have also attracted substantial criticism. One challenge, known as the “external validity problem,” is whether findings from a trial in one context will be true elsewhere. Different countries, of course, have different political environments, economic systems, poverty levels, and more—and these factors can all contribute to the success or failure of antipoverty interventions. As NYU economist Bill Easterly points out, “If you find that using flipcharts in classrooms raises test scores in one experiment, does that mean that aid agencies should buy flipcharts for every school in the world? Context matters–the effect of flipcharts depends on the existing educational level of students and teachers, availability of other educational methods, and about a thousand other things.” RCT results can be generalized in medicine because all humans are biologically comparable, some argue, but comparisons are more problematic in the realm of human behavior. Responding to the external validity problem, proponents of RCTs argue that the collective results of these trials provide invaluable knowledge about how humans behave and which antipoverty interventions work. “…we have accumulated enough knowledge in some domains (primary education, for example), that we are beginning to have a broad systemic view of problems and solutions…” explains MIT economist Esther Duflo, a co-founder of J-PAL. More damningly, some critics also argue that RCTs are simply unable to answer many of the biggest questions in the foreign assistance debate. “What would be the effects of disbursing $1-1.5 billion of foreign aid to Pakistan?” asks Arvind Subramanian, a senior fellow at the Center for Global Development. “RCTs do not, and cannot, have anything to say on the matter—not only because of their narrow focus and applicability, and hence non-generalizability, but also because they cannot speak to macroeconomic effects.” Likewise, it would be nearly impossible to randomly test the impact of major development investments like roads, ports, and telecommunications infrastructure. Indeed, even the most dedicated supporters of RCTs do not argue that these trials can answer every question. “…a common misperception directed at advocates of RCTs is that we suggest that they can and should be conducted on every program…” writes Dean Karlan, professor of economics at Yale and founder of Innovations for Poverty Action, a non-profit focused on evaluating development projects through RCTs. Another major question surrounding RCTs is ethics. Ethical guidelines for medical RCTs involving human subjects are often well-developed, with participants aware that they are participating in an experiment and that they may receive either a medicine or a placebo. Test subjects in antipoverty RCTs, by contrast, might not be told of their participation in an experiment. Critics point to this lack of informed consent as an important issue. Additionally, some argue is that it is unethical for researchers to withhold potentially lifesaving interventions from randomly selected subjects when they could distribute these interventions more broadly. “If we don’t know who needs the treatment and what it will do—as long as it does no harm—then deliberately withholding that treatment for the purpose of an experiment seems ethically harmless. But the randomistas surely exaggerate our ignorance about the efficacy of the things we do in the name of fighting poverty. We know that de-worming tablets (say) work almost always,” says Martin Ravallion, acting chief economist of the World Bank. At their best, RCTs can provide important information about many kinds of programs that can improve the lives of the world’s poorest people. However, as such scholars as Harvard professor Dani Rodrik have pointed out, RCTs are not a “one size fits all” evaluative tool. In the future, governments, international organizations, and non-profits could conceivably require RCTs for their projects, and funding could come to depend on RCT results. While this can help ensure efficacy and accountability in many cases, it is important to ensure that important investments in areas unsuitable for RCTs are not ignored. What do you think about the benefits and drawbacks of randomized controlled trials? What are the best ways to measure the success of development projects? Let us know in the comments below, and stay tuned for new Question of the Week posts soon.