More than money: Optimising philanthropy’s potential to fast-track development

By Bathylle Missika (Acting) Head of Policy Dialogue Division, OECD Development Centre

The Sustainable Development Goals (SDGs) have such scale and complexity that they require governments to strengthen co-operation with a broad range of development actors. Foundations, among others, may play a role both in financing development as well as in designing and implementing innovative projects. On the one hand, North-South flows from foundations based in OECD countries alone have grown almost tenfold in less than a decade, from USD 3 billion in 2003 to USD 29.7 billion in 2013.[i]  The 2012 assets of the Bill and Melinda Gates Foundation, The J. Paul Getty Trust and the Ford Foundation equal the GDPs of Panama, Mongolia and Mauritius, respectively. On the other hand, foundations also have a non-financial value as last July’s Financing for Development Conference in Addis Ababa recognised. That conference was a turning point in thinking about foundations as more than mere ATMs for development.

Foundations have the potential to fast-track development; the momentum now is on how and with whom to do so. Realising such potential is neither a given nor a clearly defined pathway. Are foundations stepping up to the challenge? Are they applying their capacity to innovate further? Are they moving at the same pace? If and when they do act, how can foundations significantly make a difference in the post-2015 agenda?

To start, a growing number of catalytic, venture or enterprise-based foundations are focusing on achieving impact and broad scale that far outlive the benefits of short-term, ad hoc grant-making. The Shell Foundation, for example, transformed its model to focus on cost-effective approaches to deliver sustainable impact at scale and measure such impact on the ground. Among its many projects, the foundation is helping create a market for clean cook stoves in India by working across the supply chain and exploring new distribution models. Other innovative approaches are starting to flourish. Randomised controlled trials are increasingly being discussed in the philanthropic sector as an alternative way to assess impact.[ii] The UBS Optimus Foundation used them to explore how causal relationships inform development outcomes in the context of the Children and Violence Evaluation Challenge Fund in Uganda.[iii] 

However, despite recent efforts towards more accountability and monitoring, evaluating philanthropic impact remains a tall order for the whole sector. While foundations have the resources and ambition to design innovative programmes to achieve social change across a range of development issues, doing so often requires replacing their cherished autonomy with solid partnerships across sectors. No organisation, no matter how powerful, can single-handedly bring about true social impact, argues Larry McGill of the Foundation Center. Thus, as McGill points out, unless foundations are only interested in local, short-term change, they need a collective, macro perspective that looks at changing entire systems. Some encouraging efforts are already visible. For example, Novartis Foundation joined forces in a multi-stakeholder coalition with Columbia University’s Earth Institute, the Millennium Promise, the Ghana Ministry of Health and Communications, Airtel and Ericsson to transform health services for Ghana’s poorest. Mobile technology will allow doctors and nurses to see more patients, while reducing transport times and costs.

Unfortunately, only a handful of such initiatives exist so far. How can they be replicated more broadly across the development galaxy? The OECD Development Centre’s Global Network of Foundations Working for Development (netFWD) is working with foundations to answer this question. netFWD is taking the lead in the Accelerating Impact 2030 initiative, which will be launched at the Ford Foundation later this week on the margins of the United Nations General Assembly. This initiative provides foundations with tools, data and a space to share lessons on how to sustain impact at scale and play their part in achieving the SDGs at the local level.

Only then will the true potential of foundations fully blossom, well beyond the money.


[i] OECD DAC statistics. Figures are in real terms.

 [ii] Originating in the medical sector, randomised controlled trials in their most basic form are experiments in which people are allocated randomly into an experiment or control group, with the only expected difference between the groups being the intervention they receive or do not receive.

[iii] Bandiera et al. (2012), Empowering Adolescent Girls: Evidence from a Randomized Control Trial in Uganda, World Bank, Washington DC,http://econ.lse.ac.uk/staff/rburgess/wp/ELA.pdf

 


This article should not be reported as representing the official views of the OECD, the OECD Development Centre or of their member countries. The opinions expressed and arguments employed are those of the author.

How to make the SDGs walk the talk about gender equality and women’s empowerment

By Keiko Nowacka, Gender coordinator at the OECD Development Centre

This September, the world will adopt a new development framework: the Sustainable Development Goals (SDGs) that aim to “transform our world by 2030.”  Gender equality and women’s empowerment feature as a stand-alone goal (SDG5) and are integrated through many of the other goals (e.g. SDG1, 3, 5, 10, 11). By 2030, the SDGs aim to ensure that “every woman and girl enjoys full gender equality” (paragraph 15) through ambitious and comprehensive targets missed in the Millennium Development Goals. Focus now includes unpaid care, violence against women, early marriage and women’s political participation. It is no exaggeration to say that the SDGs boast unprecedented potential for dramatically challenging and changing the status quo of gender equality. Continue reading

How to continue the shifting wealth momentum

By Carl Dahlman, Head of the Thematic Division and Head of Global Development Research at the OECD Development Centre and Martin Wermelinger, Economist at the OECD Development Centre

Strong growth over much of the past decade has substantially boosted developing countries’ share of the global economy and accelerated per capita income convergence with richer countries. We call this process “shifting wealth.” However, productivity is still lagging and growth is too low to allow continued convergence. Low productivity also challenges more inclusive and sustainable development. This blog argues that developing countries have many opportunities to boost productivity.

Non-OECD countries’ weight in the global economy is today above that of OECD countries in terms of purchasing power parity, a measure of what money will buy in different countries. This is remarkable especially since their share stood at around 40% just 15 years ago. This change in relative economic size of developing versus developed countries is being led by the BRIICS, particularly China and India. Together, these two countries account for almost one quarter of global GDP.

Non-OECD countries already surpass OECD countries in share of global GDP

fig1.PGD

Despite the momentum towards convergence, several lower middle-income countries, such as India, Indonesia and Vietnam, and countries in the upper middle-income bracket, such as Brazil, Colombia, Hungary, Mexico and South Africa, would fail to converge with the average OECD income level by 2050, given their average growth rates since 2010. In fact, the growth differential between OECD and non-OECD countries has narrowed dramatically relative to the pre-2008/09 crisis period. Their challenge is deepened by the recent slowdown in China, where rapid growth has up to now benefited its neighbours and suppliers, in particular natural-resource exporters.

Growth slowdowns can be associated with significant slowdowns in productivity growth. Over the past decade, productivity growth made only a marginal contribution to economic growth in many middle-income countries. It was also insufficient to significantly reduce the very large gap in productivity with advanced countries. In Brazil, Mexico and Turkey, the gap even widened. In contrast, China recorded impressive growth in productivity: around 10% annually in labour productivity in manufacturing and services.

“So, how can countries boost productivity?”

Factors associated with moving up the value chain, expanding inclusive and environmentally sustainable development and promoting effective governance are all part of the strategic mix to drive structural reforms and boost productivity. This mix includes:

Diversifying continuously into higher value-added market segments in agriculture, industry and services:Diversification is particularly important in middle-income countries that are seeing rising wages as well as those rich in natural resources.

Innovating by using global knowledge and developing domestic capabilities: Middle-income countries have significant room for technological catch-up. Besides better integrating in the global trading system and tapping foreign knowledge through trade and foreign direct investment, countries also need to develop capabilities to innovate new products and processes to better suit their own needs. This can be done by licencing technology; obtaining technology, designs, production and management assistance from foreign buyers, consulting firms and technical experts; learning from foreign education and training; copying and reverse engineering products and services; and undertaking domestic R&D.

Developing skills: In many middle-income countries, improvements in educational attainment and deeper integration into value chains have often been insufficient to ensure the competitiveness of the labour force. This suggests that education policies need continuously to adapt the supply of skills to the economy’s changing needs.

Reforming product and financial markets: In many middle-income countries, the development of competitive, innovative businesses is often constrained by an inadequate regulatory environment.

Fostering competitive service sectors: The domestic service sector can grow to meet the demand of the growing “middle classes.” Increased use of services, like engineering, R&D or marketing services, also improves the competitiveness of manufacturing. Moreover, some knowledge- and information-intensive services, such as ICT, and business services can help to improve the efficiency of the economy and can be themselves a source of export earnings. Emerging digital services such as big data analytics and the Internet of things are likely to have game-changing impact on inclusive and sustainable growth.

Growing inclusively: Development challenges are about much more than just economic growth. Many emerging and developing economies have been capable of reducing poverty over the last two decades. At the same time, however, income inequality is increasing in many of these economies. Moreover, the Arab Spring and rising social tensions in other developing economies make clear that social cohesion and equality of opportunity to more broadly share the benefits of economic opportunity deserve greater attention. This also requires identifying regional competitive edges and increasingly tailoring public services to local needs. For example, productive employment and firms can emerge in any region provided they nurture environments conducive to entrepreneurship.

Investing in “greener” growth: The problems of environmental damage caused by growth also raise issues of environmental sustainability. Diversifying into less energy-intensive sectors and adopting energy-efficient technologies would reduce vulnerability to fluctuations in energy prices and changes in regulations and preferences.

Developing capable and effective governments: Better training of government officials and improved coordination across government ministries are essential to ensure effective planning and implementation. Bold changes in strategies may be politically difficult and costly, though less so than no change. Effective communication strategies and the right timing and sequencing are critical to obtain support by multiple stakeholders to implement reforms. China’s rapid rise had been in large part due to its determined, target-oriented government with a vision to address changing economic challenges. It made bold reforms that were possible through effective organisations and procedures to implement the necessary steps. Other countries with more democratically-organised governments need to engage in effective consultations with key stakeholders to build support for necessary reforms and to develop capabilities to implement those reforms.

“Though “shifting wealth” has become more complicated, it can continue.”

A current period of low commodity prices, a slowdown in China as the global growth engine and political turbulences in larger emerging economies mean that other developing countries can today less easily free-ride on the bandwagon to global convergence. Yet, developing countries have a number of practical opportunities to tap their own strengths to advance structural reforms and boost productivity and inclusive, sustainable development.