Tuesday, April 07, 2009

ÖFSE on New Private and State Donors

A recent Working Paper (pdf in German) of the Austrian Development Research Institute (ÖFSE) looks at the discourse on the 'New Donors' in development cooperation and assesses the impact of these new private and state actors on the global aid and governance system.

While the traditional (Western based) donors refer to the OECD indicators to describe and legitimize their aid, new donors have a rather different attitude towards these standards. This is ranking from a more or less loose reference (i.e. new European Member states or Israel) to clear opposition (i.e. China, India or Russia) to what is seen as a Western dominated system.

This is even amplified by their unclear role in the global aid and governance system. China or India, the biggest new state donors, both still have to deal with severe internal development problems while at the same time acting as donors in Asia and Africa. Additionally these countries can no longer be ignored by global governance arrangements taking into account their rise as global economic players. Combining cheap labor with a high investment in R&D they also show new success strategies for economic development. Last but not least the connection of economic interests with development programs poses additional challenges for the traditional aid system.

This makes it difficult to analyse the real impact of the new actors. Nonetheless the authors predict that the OECD paradigm regarding the definitions, categories and practices of aid can no longer be maintained in the future without taking into account the new donors' activities.

The paper also looks at the increasing private engagement in development. According to the World Bank private foundations contributed 5 to 7 Billion $-US in 2006 compared to 104 Billion $-US ODA. However, considering the stagnating public aid figures and the growing private investments there is a great awareness of these private activities.

The authors see the political and economic independence with a possibility for long-term engagement, the willingness to take higher risks compared to state actors, and the professionalization of private donors as rather positive. Their low experience in the field, their tendency to combine aid with public relations strategies can be seen as a challenge for the future. Furthermore the paper criticizes that money is not always spend were most needed which might have a negative influence on policy prioritisation in aid-dependent countries. This can result in a withdraw of resources from one sector in support of the sector prioritized by the private donor (i.e. personnel from basic health care to HIV/AIDS).

The authors conclude that more research is needed to assess the real impact of new private and state donors on the global development agenda.

By Martin Behrens

See also EADI's EDC2020 project on the New Drivers in Development Cooperation