Road from Accra to Busan: A Korean Perspective

1. Prepared for The 2nd Regional Meeting on Aid Effectiveness, Hosted by the African Development Bank (Tunis, November 4-5, 2010) Road from Accra to Busan: A Korean Perspective Oh-Seok Hyun President Korea Development Institute

2. Contents I. Development Assistance Debate: What really works for development? Aid Effectiveness Framework: Paris Declaration of 2005 Millennium Development Goals Beyond 2015 East Asia’s Development Experience II. Fourth High-Level Forum on Aid Effectiveness Significance for the Global Community and Korea Key Institutions and Milestones Linkages with the G20 Development Agenda Role of the African Regional Meeting

3. Development Assistance Debate: What really works for development? “Our generation’s challenge is to help the poorest of the poor to escape the misery of extreme poverty so that they may begin their own ascent up the ladder of economic development…. Aid has received a bad press in recent years, but for utterly the wrong reasons. Aid is too little to solve the problems at hand, excessively directed toward the salaries of consultants from donor countries rather than investments in recipient countries.” – Jeffrey Sachs (2005), The End of Poverty: Economic Possibilities for Our Time “Aid cannot achieve the end of poverty. Only homegrown development based on the dynamism of individuals and firms in free markets can do that.” – William Easterly (2006), The White Man’s Burden: Why the West's efforts to aid the rest have done so much ill and so little good “The notion that aid can alleviate systemic poverty, and has done so, is a myth. Millions in Africa are poorer today because of aid; misery and poverty have not ended but have increased.... With aid’s help, corruption fosters corruption, nations quickly descend into a vicious cycle of aid. Foreign aid props up corrupt governments—providing them with freely usable cash. These corrupt governments interfere with the rule of law, the establishment of transparent civil institutions and the protection of civil liberties, making both domestic and foreign investment in poor countries unattractive.” – Dambisa Moyo (2009), Dead Aid: Why Aid is Not Working and How there is a Better Way for Africa

4. Aid Effectiveness Framework: Paris Declaration of 2005 • Developing countries will exercise effective leadership over their development policies, strategies, and to coordinate development actions; • Donor countries will base their overall support on receiving countries’ national development strategies, institutions, and procedures; • Donor countries will work so that their actions are more harmonized, transparent, and collectively effective; • All countries will manage resources and improve decision-making for results; • Donor and developing countries pledge that they will be mutually accountable for development results.

5. Millennium Development Goals (2000: 1990-2015) Breakthroughs -Recognition of Poverty • Statement of Good Intentions • Establishment of Global Partnership Limitations • Driven by Donors • Focused on Basic Human Needs • Insufficient to Generate Self-Sustaining Growth Methodological Features • Simplicity and Measurability • Focus on Ends rather than Means: Relieve Symptoms vs. Causes • No Regard for Different Initial Conditions • Different Levels of Abstraction

6. East Asia’s Development Experience: Generating and Sustaining Growth Source: Ohno (2009: 8) Basic education, health, and stability are important for growth and vice versa. Integration into a regional or international production network can bring in much needed investment and know-how. However, to sustain growth and overcome the middle-income trap, a country must progressively develop its own capabilities to add value and respond to shocks. A country must address innovation and coordination externalities in technical/engineering education and vocational training, R&D, industrial clusters, and infrastructure. It should also strengthen prudential regulation and risk management before embarking on full-fledged capital-account liberalization.

7. East Asia’s Development Experience: Moving along and Shifting up the Value Chain Many developing countries started out in the assembly & production segment of the value chain, using their comparative advantage in labor-intensive manufacturing (e.g., textiles). Some have managed to move to higher value-added segments along the value chain (e.g., R&D and marketing) as well as shift up to higher value-added sectors (e.g., machinery & equipment). Others have not.

8. Fourth High-Level Forum (HLF 4): Significance for the Global Community and Korea Fourth High-Level Forum on Aid Effectiveness (Busan, November 29-December 1, 2011) Significance for the Global Community • Stock-taking and evaluation upon the conclusion of the 5-year process on aid effectiveness since the Paris Declaration of 2005 • Development partnership dialogue on major issues: ownership and domestic accountability, country-driven capacity development, fragmentation and unpredictability of aid, policy conditionality, multilateral development governance, South-South and triangular cooperation • Search for future agenda: from aid effectiveness to development effectiveness? • Link with the MDGs on aid quality framework Significance for Korea • First major opportunity to shape the agenda for a high-level meeting on aid effectiveness as its host and the newest member of the OECD Development Assistance Committee (DAC) • Synergy with the G20 development agenda put forth by Korea in 2010 • Contribution to global development based on Korea’s own development experience

9. Fourth High-Level Forum (HLF 4): Key Institutions and Milestones Institutions • Working Party on Aid Effectiveness (WP-EFF): 3+ Plenary Meetings before HLF4 • WP-EFF Executive Committee (ExCom): 5+ Meetings before HLF4 • Clusters and Workstreams: deliverables and timelines Key Evidence and Input (draft to be delivered to the WP-EFF ExCom by July 2011) • Monitoring Report: Survey on Monitoring the Paris Declaration and the HLF Progress Report • Report of the Phase II of the Evaluation of the Paris Declaration • Key Findings and Recommendations Negotiation Process for HLF4 (timebound and starting after mid-2011) • Evidence-based • Transparent and comprehensive • Linked to key international conferences (e.g., UN, Donor Coordination Forum (DCF), MDGs, G20 meetings)

10. Linkages with the G20 Development Agenda: Focus on Growth and Resilience

11. Role of the African Regional Meeting Korea’s Focus in Its Consultation Activities for the G20 • Sustained high-level commitment • Systematic and structured approach • Effective feedback mechanism Input for Agenda Development • In consultations with African leaders, Korean government officials were sharply reminded of the skepticism it met from donors and multilateral development banks in the 1960s when it proposed to build the Seoul-Busan express way or to create POSCO. They were told Africans also wanted to be empowered to choose their priorities for the future—infrastructure, skill accumulation, private investment—and not just the basic needs of their present. • Having chosen the hard path of self-sustaining growth itself, Korea could not choose an easy way out for the G20’s development agenda—picking one silo issue for aid, creating a donor fund, moving on after the photo opportunity. Incorporating the results from its consultation activities, Korea worked with the UN, World Bank, regional development banks and other agencies to build a new consensus around a framework for strong, resilient and inclusive growth. Dialogue with Africa on Aid Effectiveness • Active participation in stock-taking and evaluation • Frank and fulsome exchanges of ideas • Constructive and forward-looking recommendations