MICs and the future of development cooperation

2. MICs and the future of development cooperation Jonathan Glennie Senior research fellow Seoul, 13-15 May 2013

3. The MIC category in a changing international context • Implications for international development cooperation: 2 scenarios

4. ) • The MIC category in a changing international context

5. Human development and income/capita (Hans Rosling)

6. Arbitrary (and stingy) cut-off points “Is it not time for these arcane income thresholds for ‘graduating’ from ‘low-income’ status to be laid to rest?” Martin Ravallion, Director, Development Research Group, The World Bank

7. Countries graduating to MIC status since 2000(There are now only about 30 LICs left)

8. Historically, progression has not been linear

9. Annual world GDP (PPP) growth rate (3-year moving average)

10. The end of poverty? (Source: World Bank)

11. Where do poor people live?(Sumner A, “Another bottom billion”, 2010)

12. Poverty is persistent in fragile states (Kharas and Rogerson, “Horizon 2025”, 2012)

13. Aid from MICs is about $15bn and rising (plus much non-monetised)

14. SSC and private funds are complementing traditional “aid”

15. Post 2015 = Sustainable development (Green D. From Poverty to Power, Oxfam, 2012)

16. An expanding set of objectives “Development only really begins when extreme poverty is eradicated.” Adolf Kloke-Lesch, former managing director at GIZ, Germany

17. 2. Implications for development cooperation

18. Development cooperationFinancial and non-financial (Glennie J, “From Poverty Eradication to Sustainable Development”, 2012)

19. Recap • New context (power and poverty) • New actors/flows (public and private) • New challenges (planetary limits)

20. Scenario 1: Traditional viewAid declines in the medium term “There is basically no role for international development cooperation in middle income countries.” Paul Collier, author of “The Bottom Billion” • Half of remaining LICs likely to “graduate” in next ten years, leaving only fragile states(and making MIC category even less useful) • MICs will graduate from grants towards loans and blended finance, private flows • Normal trading relations emerge between countries • Aid becomes history

21. Scenario 2: Challenging orthodoxyA transformation in international public finance • Orthodox definitions of poverty are narrow, the MIC category is arbitrary; global inequalities are still vast; most poor people today live in middle income countries • International presence (incl. civil society) can prove crucial for incentivising the kind of progress necessary in MICs • Sustainable Development and Global Public Goods emerge as the major framing theories of the 21stcentury – MICs need to develop more sustainably = more expensive • “Non-traditional” sources of development finance continue to proliferate including: South-South Cooperation; Innovative sources (taxes); Private funds “the evaluation [of aid to Colombia] found that in certain fields – such as the environment, institutional strengthening, and productive system support, as well as problems related to the struggle against inequality, internal displacement and human rights violations – the selective use of aid financing, expertise and shared experience was ‘a determining factor in achieving better development results’” (Wood et al, 2011) “What is relevant is not so much the direct effect of the amount of resources channelled by aid, but the role that international cooperation may play in modifying the framework of incentives in which agents operate.” Jose Antonio Alonso, Complutense

22. The vast majority of poor people continue to live in Low Aid Countries (Glennie J, What if ¾ of the world’s poor live (and have always lived) in Low Aid Countries”, 2012)

23. 10 most poor-populous countries

24. Aid to MICs is likely to be increasingly effective (VFM) (Glennie J, “The role of aid to MICs, 2011) Effectiveness

25. A global public sector: mutual benefit, mutual cost

26. Thanks for listening. odi.org.uk