Development in Transition

The European Union as a development superpower

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By Ambassador Dr Mohan Kumar, Chairman, RIS, Dean/Professor, Jindal Global University, Sonipat, India, Former Indian Ambassador to France1

It is a truism that the European Union (EU) welcomes, prefers and supports a multipolar world; a strategic world view that is fully shared by its partners like India. More fundamentally, it is in the interest of the EU and its like-minded partners to ensure that the international order is not underpinned by a G2 system of government where the rules are essentially shaped by the US and China. This, however, entails the EU being strong enough to occupy an independent pole in the multipolar system. The EU is not quite there yet, but its friends and partners will certainly wish this to occur, sooner rather than later.

The other strategic dictum that is worth noting is this: a multipolar world is scarcely possible without a multipolar Asia. And a multipolar Asia is not necessarily a given; it needs to be ensured with collective action based on an agreed set of rules. It is my view that the EU has an important role in ensuring that Asia remains multipolar.

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The growing role of the private sector in development co-operation: challenges for global governance

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By André de Mello e Souza, Researcher, Institute for Applied Economic Research (IPEA), Brazil

Global development is increasingly being seen as reliant on the private sector, both for its financing and project implementation1. As Development Assistance Committee (DAC) members attempt to redistribute the burden of sponsoring initiatives abroad, they tend to shift this burden to profit-seeking corporations, while counting the funds provided to trigger investments by such corporations as part of their conceded Official Development Assistance (ODA)2. In so doing, they are also responding to the perceived dearth of resources from multilateral sources, especially the UN. Additionally, by engaging the private sector they enable and incentivise their own corporations to compete with those from China in developing countries where Chinese economic presence is deeply felt. 

However, the engagement of the private sector in development co-operation efforts and its treatment as an integral sponsor of such co-operation overseas is not limited to traditional donors, but can also be seen among Southern providers, especially those from Asia. Most notably, the concept of ‘Development Compact’, championed by India, grants the private sector a privileged position in international development co-operation across five different levels, namely, trade and investment; technology; skills upgrade; lines of credit and grants.

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What is Development in Transition? A blog compilation

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A country’s level of development and its level of income are often seen as synonymous. Many, thus, understand development as poorer countries “catching up” with richer ones. Once the poorer countries catch up, they cease to be “developing” and become “developed”. A closer look, however, reveals a different story. First, development is more complex than getting from A to B: it is a continuous and never-ending process that is even reversible. It follows a wide diversity of pathways depending on a country’s specific geography and history. Second, the emergence of the Sustainable Development Goals (SDGs) reflects the fact that development has multiple economic, social and environmental dimensions, beyond income. Moreover, and as the COVID-19 crisis has illustrated all too well, shocks have become increasingly global in our hyper-connected world, reflecting the interdependence amongst national, regional and international levels.

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International co-operation practices and frameworks have not always recognised the multidimensional nature of development and the changing global context. We need a new approach to international co-operation and development, within a multilateral system that is able to take on increasingly shared global challenges whilst accounting for countries’ domestic realities and citizens demands. The global community must also support the design of national development strategies that are aligned with global goals and respond to the origins of increasing discontent. For several years now, the Development Centre has been pushing this paradigm shift forward through its work on Development in Transition (DiT), gathering countries at all levels of development around the same table and across a diverse range of policy communities, recognising the multidimensional and complex nature of development. A central premise of our work is that economic growth is not a good measure of human wellbeing and development. We need multidimensional indicators that enable us to measure what we treasure – people’s wellbeing and the health of our planet – beyond GDP.

The pandemic has exacerbated pre-existing inequalities and vulnerabilities among and within countries, exposing the flaws of a multilateral system that had already failed to address these issues after the global financial crisis of 2007-2008. We need a new model consisting in strategies and reforms that go beyond reconstruction and rebuilding, focusing instead on transforming globalisation and renewing the efforts and tools of our multilateral system to benefit the many rather than the few. We need to fundamentally rethink how countries – at all levels of development – interact with one another to design better policies, practices and partnerships adapted to the changing global landscape.

This compilation gathers a selection of blogs contributing to the Development in Transition framework since its emergence to lessons that we can begin to draw from the pandemic. The first blog sets the foundations of the approach, outlining the new metrics, partnerships and tools to shift from top-down, donor-recipient ties to inclusive co-operation among equals, reflecting the current global landscape. The second part of this compilation looks at the issue of graduation, demonstrating that the trajectories of developing countries are far from guaranteed linear paths. As countries are sometimes “rushed to graduate” from aid based on their GDP per capita, and despite still facing significant vulnerabilities, they are confronted with an array of challenges that can erode and even reverse hard-won development gains. The authors depict these challenges and offer solutions – through both national efforts and international support – to prevent countries from falling into the so-called “middle-income trap”. In the third part, the authors focus on the COVID-19 crisis, and its catalyst effect, exposing the failures of the multilateral system to respond to a crisis on a planetary scale and accelerating the need to reform and shift towards new sustainable and inclusive development models that strengthen
countries’ and communities’ resilience against systemic shocks, driven by principles of solidarity and co-responsibility among and between developed and developing countries.

Mario Pezzini
Director of the OECD Development Centre & Special Advisor to the OECD Secretary General on Development

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Revisiting knowledge for development

Development Matters Development in Transition, Reviving multilateralism

By Pierre Jacquet, President, Global Development Network

Beyond the short term costs and challenges of the COVID-19 pandemic for developing countries, this post takes a more long-term view, starting from a less discussed lesson of COVID-19, namely, how it has revealed a deficient culture of dealing with uncertainty and the role of science in society. The pandemic has shown both that ignoring science endangers lives and that scientists typically disagree on the best course of action. Science reveals true knowledge, but knowledge always remains incomplete: it therefore cannot deliver a blueprint for action, but it informs decisions under uncertainty and risk mitigation. The real potential of scientific knowledge is in interpretation and judgment. This has important implications for the knowledge-for-development agenda.  

Since about a quarter of a century, when former World Bank President James Wolfensohn labelled the Bank a “knowledge bank”, the idea that development strategies and practices need to mobilise sound knowledge has become a driver of development aid thinking. However, the subsequent knowledge-for-development programme has erred. This is not due to development research itself: it has become a vibrant segment in research departments in the best universities of the developed world and has improved our understanding of development challenges and productively shaped international debate and development policy thinking. Moreover, with the rise of experimental work and random control trials, it has also hosted a much-heralded advance in empirical work. But the knowledge for development agenda has ignored and even compounded three issues which, taken together, doom its effectiveness.

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Transitions in development: the European Green Deal and Latin America

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By José Antonio Sanahuja, Director, Fundación Carolina, Spain, Special Advisor for Latin America and the Caribbean to the High Representative of the European Union for Foreign Affairs and Security Policy

The response to COVID-19, the ecological transition and strategic autonomy are the three driving forces of the European Union’s (EU) broad transformative programme. This programme involves deep changes in its own social and economic development model and in its relationship with the world. It is a short-term reaction to a pandemic that has fast become a systemic crisis. But it is also the EU’s long-term response to an international context of globalisation in crisis and challenges to the international order. The future of EU-Latin America relations will be deeply affected by these transformations.  

For the EU, as for Latin America, the pandemic is a catalyst for change. This time the reaction has been quite different in terms of monetary or fiscal measures compared to the self-destructive cycle of austerity adopted in the European debt crisis. Following an immediate response from the European Central Bank, the council adopted a first range of modest financial support measures. But in July 2020 the European Council agreed on an unprecedented package of 1.8 trillion euro, including the new 2021-27 budget and the “Next Generation” recovery programme. The programme involves linking budget, new common taxes and Eurobonds, paving the way to a common treasury. Therefore, this agreement is an important federal step forward, that just six months earlier would have been unbelievable. Beyond its macroeconomic and fiscal impact, these investment instruments will also push the EU towards an ambitious shift in its development model.

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Regional Comprehensive Economic Partnership: why should it involve the excluded LDCs?

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By Mustafizur Rahman, Distinguished Fellow, Centre for Policy Dialogue (CPD)

The world’s largest trading bloc, the Regional Comprehensive Economic Partnership (RCEP), was signed in November 2020, counting 15 Asian member countries. Should the excluded countries, more specifically the low income and least developed countries (LDCs) of Asia, be worried about this development?

In recent years, the number of regional trading arrangements of various types, dealing with trade in goods or services or both, has been on the rise. 305 regional trade arrangements are already in force and the World Trade Organisation has been notified of another 496 currently under negotiation. However, the RCEP stands out for several reasons. The ten original members of the ASEAN Free Trade Area (Brunei, Indonesia, Philippines, Cambodia, Singapore, Lao PDR, Malaysia, Myanmar, Thailand and Vietnam) have now joined hands with five of the six countries with which ASEAN had bilateral free trade areas – China, Japan, South Korea, Australia and New Zealand. India opted out at the last moment, but the door has been kept open.

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Middle-income countries should not be rushed to graduate

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By Otaviano Canuto, Senior Fellow at the Policy Centre for the New South, Non-Resident Senior Fellow at Brookings Institution, and Former Vice President at the World Bank; Matheus Cavallari, Senior Advisor and Tiago Ribeiro dos Santos, Advisor at the Board of Executive Directors of the World Bank Group. Opinions here are their own. The authors wrote chapter 12 of the recent book: Alonso, J.A. & Ocampo, J.A. (eds.), Trapped in the Middle? Developmental Challenges for Middle-Income Countries, Oxford University Press, 2020

Salvador, Bahia, Brazil

Many donor countries seem eager to see middle-income countries (MICs) “master out” and graduate to a non-client status in multilateral development institutions before fully achieving their development potential. We argue that such institutions can still significantly contribute to the sustainable development of MICs, while also seizing many benefits from this relationship (Middle income countries and multilateral development banks: traps on the way to graduation).  

Multilateral development banks operate in two main ways: regular lending and concessional finance. Regular lending uses interest rates close to market levels and relies on multilateral development banks’ wealth of knowledge to create attractive projects for MICs. Concessional finance on the other hand, is attractive for low-income countries, not only because of the banks’ knowledge, but also because it is much more financially favourable, offering low interest rates or grants.

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Can middle income countries rise up to their citizens’ expectations?

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By Mario Pezzini, Director of the OECD Development Centre and Special Advisor to the OECD Secretary General on Development[i]

A call for a new social contract

Despite significant economic growth over the past years, middle-income countries (MICs) face increasingly complex challenges related to, among others, a growing demand from their new and still vulnerable middle-classes. As middle-classes have grown in recent decades, so have citizens’ aspirations and demands for quality public goods, better services and a more responsive and transparent state. More educated, better informed, and more connected than ever before, citizens are asking for more voice in public decisions. In parallel, growing aspirations confronted with chronic vulnerability of middle-classes tend to generate frustration and, more and more frequently, social turbulence. Discontent has been erupting for several years in many of these countries, going back to the Arab Spring, with recent examples like Lebanon, and some Latin American countries, including high-income countries like Chile. Today, challenges are exacerbated as the COVID-19 crisis pushes members of the middle class who had previously escaped extreme poverty, back into it. Governments seem increasingly incapable of understanding how people perceive their quality of life.

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Beyond vested interests: Reforming international co-operation post COVID-19

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By Imme Scholz, Deputy Director of the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) and Deputy Chair of the German Council for Sustainable Development[i]

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

The world is now in the eighth month of the COVID-19 pandemic. When this was written, the highest daily infection rates were recorded in India, the US and Brazil, while the highest death rates (per 100,000 inhabitants) were registered in Europe and the Americas. Africa so far has not turned into a hotspot of the disease – good news that is attributed to effective public health workers and Africa’s young population. The COVID-19 pandemic has laid bare weaknesses and blind spots in societies, economies and policies worldwide. Notably that public services the world over take too long to understand their new responsibilities under changed circumstances and as a result act too slowly, at the expense of the most vulnerable. For example, infection and death rates are high in OECD countries despite good health care systems. And insufficient digital infrastructure and access in public administrations, schools and households, exacerbated by social inequalities, affect access to education in Germany or in Latin American countries alike.

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COVID-19: A game changer for the Global South and international co-operation?

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By Debapriya Bhattacharya, Chair, Southern Voice and Distinguished Fellow, Centre for Policy Dialogue (CPD), and Sarah Sabin Khan, Senior Research Associate, CPD

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

In a short but seemingly never-ending time span, the COVID-19 crisis has propelled governments into the dilemma of balancing the response to immediate health, economic and social fallouts, with long-term recovery. Some remain vigorously engaged in saving lives. Others are seesawing between loosening restrictions and enforcing new ones to prevent a second wave. Countries from the Global South are among the worst affected by the pandemic. This is due to both their weak pre-crisis conditions as well as their disadvantaged position in global governance. There is a broad consensus that things will not and cannot go back to the way they were before. A “new normal” will emerge in terms of how governments, producers, businesses, consumers and other economic agents conduct themselves. This will be also true for global governance structures and the conventionally dialectical relationship between the North and the South.  

In this context, pessimistic views and optimistic outlooks on the post-COVID world confront one another. 

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