Financing Development - Bridging the gap between Donors

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<ul><li><p>WBG Financing Development From Billions to Trillions to Actions </p><p>The course on Financing Development organised by the World Bank Group has been very helpful to understand the widening perspectives for mobilising domestic and international resources in a comprehensive and integrated manner for financing programmes / projects across the development ladder in the world. This note tries to underline some key aspects of the prospects and challenges making financing development more effective for the least developed and developing countries. While this course has focused mainly on the supply side of financing development i.e. in the bilateral and multilateral development aids perspective, this small article will attempt to visit the subject in the development aids recipients viewpoint. This may contribute to bridging the existing communication and performance gap between the two blocks, which is necessary for promoting seamless development partnerships.. </p><p>The year 2015 will remain memorable in the history of mankind. In September, all the nations of world were united to accept the Sustainable Development Goals (SDG) as a powerful political tool to reshape our unsustainable world into a more clean, just and equitable home for our present and future generations. The Addis Ababa Conference on Financing Development in Addis Ababa has unlocked the immense potential of leveraging the existing financial resources such as the Official Development Aids, the Diaspora Remittances, Domestic and International public, private and institutional sector resources mobilisation to generate innovative and adaptive financing for development priorities of the vulnerable and developing countries through the coordinated effort of Multilateral Development Banks. Also, the current COP 21 Conference has started on right footing and some positive outcomes are expected to hold global warming below 1.5 C, as 2C will chaotic for Small Island Developing States (SIDS) and to make provision for fair and equitable financing for climate adaptation and mitigation action plans in countries which have contributed the least to this global issue Some countries are eagerly awaited to disclose their nationally intended commitments (NIC) to reduce GHG emissions within the prescribed limits. This note attempts to assess the propensity of the bilateral and multilateral donors and development aid agencies to meet the development of least developed and developing countries of the world. </p><p>In a nutshell, the missing cogs of the political economy in developing countries to foster sustainable development are i) weak conducive enabling environment to mobilise domestic public and private resources and expertise to invest in the economic and social sectors; ii) Mismatch in the existing financial mechanisms to cater for long term infrastructural development; iii) lack of good governance, which is key factor to ensure transparency, accountability and fairness so as to curtail corruption and malpractices and iii) Vulnerability to internal and external political, economic and environmental shocks. It is found that political will is important, but not sufficient to drive sustainable development. Most of the developing countries already have strong regulatory and policy frameworks that have not been enforced due to weaknesses in the institutions, lack of genuine social dialogue to usurp ownership amongst the stakeholders (absence of policy communication and marketing) and short of financial and technical resources. The MDB have performed a diagnostic analysis of the prevailing situation in most of the developing countries and the crust of the challenges is to develop appropriate Strategic Action Plans (SAP) that could be implemented amidst underlying uncertainties / risks. They have the financial power to can make financing and risks assurance less expensive for those countries. Interestingly, last year ADB has launched a private investment banking agency, Africa50 to bridge the gap of infrastructure financing in Africa. It is equipped with world class technical and financial expertise to prepare national and trans-boundary projects in Energy, Transportation and the social sectors and to mobilise resources for their financing. </p><p>Nobel Prize-winning economist Joseph Stiglitz had hoped to spur conversations and action </p><p>around three things while in Addis Ababas, third International Conference on Financing for </p><p>Development. The first was for all development stakeholders to have a big change in mindset. </p><p>He reiterated the need to broaden the perspective of ODA and development finance to find ways </p><p>to unlock various sources of funding. The second was for developed countries to realize they </p></li><li><p>WBG Financing Development From Billions to Trillions to Actions </p><p>have a responsibility that goes beyond delivering aid; they have to do no harm. </p><p>Unfortunately, Stiglitz believes they are failing at that responsibility by avoiding the debate on </p><p>the International Commission for the Reform of International Corporate Taxation. </p><p>A report recently published by AidData1 has analyzed the results of a survey of some 6750 policy makers and development practitioners in 126 low and middle-income countries have ranked over 100 bilateral and multilateral development aid agencies, civil society organisations and think tanks to i) the usefulness of their advice, ii) their agenda-setting influence and iii) their helpfulness during the implementation of reforms. It is found that that host governments view the advice of multilateral and bilateral development partners as most useful. The multilaterals were also leading on the two criteria agenda setting influence and supports during the implementation of reforms. </p><p>The WB and IMF were among the top 15 multilateral development partners in all the 3 performance measures. The health-focused multilateral giants Gavi, the Vaccine Alliance and the Global Fund to Fight AIDS, Tuberculosis and Malaria were also among the top runners. The Caribbean Development Bank (CBD), which does not rank high in terms of financial weight with an average annual development finance commitment of $194 million). This proves that host governments do look at factors beyond financial contributions when assessing the performance of development partners. </p><p>. </p><p>Frequency of communication and Performance </p><p>The majority of development partners with high rankings tend to do well in more than one category. Aside from the five partners that ranked within the top 15 in all three categories, there were 10 more that received top marks for at least two. </p><p>This report concluded that the provision of useful policy advice seems to serve as an entry point for development partner influence during the agenda-setting stage of the policymaking process. </p><p> 1 AidData was formed in 2009 through the merger of two existing programs: Project-Level Aid (PLAID) and Accessible Information on Development Activities (AiDA). PLAID, begun in 2003, was a joint effort between the College of William and Mary and Brigham Young University. It aimed to create a database of development finance activities with granular activity and purpose coding and as much descriptive detail as possible at the project level, for use in the research community. AiDA was established in 2001 by Development Gateway to serve as a current, timely registry of aid activities to improve aid coordination and effectiveness </p><p></p></li><li><p>WBG Financing Development From Billions to Trillions to Actions </p><p>Once partners get a seat at the table while reform priorities are being established, they are also more likely to be heavily involved in the implementation of these reforms. </p><p>The study found that the extensiveness of a host government officials work history with a specific partner was directly proportional to how favorably the official would rate that partners policy advice. This correlation sheds some light on why respondents rated multilaterals and DAC bilaterals much higher than they did non-DAC bilaterals. </p><p>How the highest development aid contributors rank. </p><p>Money isnt everything </p><p>Surprisingly, financial contributions of development partners did not factor much into whether or not their developing country counterparts viewed them favorably. While money seemed to win larger suppliers of international development finance some influence, it did not make their development advice appear much more useful. On the other hand, a few of the development partners that ranked in the bottom 10 for average annual commitments such as New Zealand, Luxembourg, CDB and Taiwan scored high in one, two or all three of the performance measures. While large multilaterals like the World Bank were able to convert their large international development budgets into agenda-setting influence, some of the larger DAC bilateral partners were not, ranking lower than some of the smaller DAC bilaterals. </p><p>The study also found that development partners influence on reform is dependent on the support of the host countrys president or prime minister, raising the question of whether partners should redirect their advice and aid toward governments that exhibit greater buy-in. Alignment with host country priorities is a good predictor of whether it will be able to influence government reforms. Smaller DAC bilaterals Finland, Luxembourg and Austria have shown impressive performance partly because they put the country ownership principle at the core of their work. </p><p>A focus on technical assistance appears to negatively affect all three development partner performance measures. While this type of support can be useful for capacity building in low- and middle-income countries, it is often delivered without contextual understanding and in ways that lack flexibility and responsiveness compromising the country ownership needed to solve problems on the ground, according to the report. </p><p>The above findings can be useful in improving the relationship between the multilateral and bilateral development aids suppliers and the development aid recipients so as to promote more effective and efficient flow of development finance. </p></li></ul>