The Puzzles and Contradictions of
Development Policy and Finance….
…and what it means for international
‘donorship’ and governance
Kanni Wignaraja
UN RC/UNDP REP, ZAMBIA
September, 2013,
Changing Reality – Global Rebalancing?
• Increasing Number of ‘mixed picture’ Middle Income Countries [MICs]…
• In 1950, Brazil, China and India together represented 10% of global output; while
six traditional economic leaders of the world accounted for more than 50%
• By 2050, Brazil, China and India will together account for 40% of global output,
surpassing the projected combined production of the same Northern bloc.
• Today, the combined GDP of eight major developing countries – Argentina, Brazil,
China, India, Indonesia, Mexico, South Africa, Turkey equals GDP of the U.S.
• The South is indeed Rising, and dramatically, but not all of it is rising together.
What global and local tensions, and how are we addressing them?
Expansion of the Middle Class – Myth or Reality?
Growing Middle Class
Growing Inequality
•Over a billion people still live in
•By 2030, the South will account for
80% of the global middle class with two extreme poverty (< $1.25)
•Zambia - a very small middle class
thirds in Asia-Pacific region
(with Gini at an alarming 0.65)
•By 2030, the South will account for
70% of the global total consumption
expenditure
Contrasting and Confusing Development:
with Africa as Illustration
Economic Growth Story
Human Development Story
•Robust and resilient economic
growth rates (overall annual growth
rates averaging 5.2 %)
•75% of SSA countries are in the low
human development group
•Second fastest growing region,
globally
•Very high inequality accounting for
an average loss of human
development of 35%
•Economic growth accompanied by
falling inflation rates, from average
inflation rates of 22% in the 1990s to
around 8% in 2010
•Over 25% or close to 218 million
people in Africa are undernourished
•Rising annual labour productivity
rates of around 2.7%
•150,000 women in Africa continue to
die at childbirth each year
•Trade between Africa and the rest of
the world increased 200 % between
2000 and 2010
•12 out of 100 children in Africa die
before their fifth birthday
•Reduced external debt and budget
deficits – sound macro economic
management
•A third of children in Africa between
the ages of 5 and 14 are child
labourers
What Makes for this Puzzling Scenario of
Global Convergence with Local Divergence
• Is it fundamentals or legacy?
• Is it the nature and capacity of leaders and
institutions?
• Is it world demand for copper/oil/minerals?
• Is it the peace dividend?
• Is it knowledge and technology driven leap-frogging?
So what works for more just, balanced and
sustainable progress?
Inequality holding back MDGs &
Poverty Reduction?
Brazil, China, India dramatically
reduced proportion of income poor
enabling global MDG 1 target met.
But every point of growth in Brazil
cuts poverty at 5 times rate in India
In Vietnam, rural poverty was
reduced from 66% in 1993 to 45%
in 1998, with lower levels of
inequality
Ghana, Ethiopia significantly
reduced both inequality and
poverty
Making Big HD Strides
Afghanistan, Timor-Leste, Burma,
Angola, Ethiopia, Mauritius,
Rwanda, Uganda, Sierra Leone,
DRC, Liberia, Rwanda, Mali,
Tanzania, Burundi, Mozambique,
Niger
What Triggers a Different Development?
Mix of Policy Choices?
•Pragmatic Development Policies
with special measures
•Strategic vision and leadership
•Opening up trade, technology and
investment, with internal with strong
institutional capacity to
manage/prosper in global market
•Sustained investments in human
development outcomes (education,
health, nutrition, water/sanitation)
•Social security schemes not as addon, but as human capital and social
cohesion investment
•The capacity to deliver development
programmes
A Few Illustrations
•Brazil’s emphasis on labour market
reforms & expanding education
access and quality has helped it
achieve four of its MDGs
•Mexico’s poverty reduction efforts
through innovative cash transfers
has reduced extreme poverty from
18% in 2000 to 9.8 % in 2012
•Turkey’s ‘healthcare for all’ policy
and financing specifically targeted
poor households
•Use of affordable technology and
investing in R&D and innovation
has industry and services sector in
India. By 2011, 8 of the world’s
biggest corporations on the Fortune
500 list were from India.
Where is ODA in this picture?
• “Traditional” ODA has declined for a second consecutive year, falling
4%, down to $125.9 billion from $134 billion in 2011.
• 16 of the 25 DAC members decreased their assistance. The ODA from
DAC donors to SSA fell for the first time since 2007, with assistance
totalling $26.2 billion in 2012, a decline of 7.9 % [in real terms].
• Bilateral ODA to LDCs fell 12.8 % , and multilateral and
humanitarian aid fell by about 6 % and 11 % respectively.
• Up and down trends, and what are we counting?
Source: OECD DAC
The Changing Face of ODA
• More ODA flows to MICs today, including in Africa.
• New ODA instruments gaining ground: Global
Funds, Climate Change facilities, blended packages
• Grants from private voluntary agencies was $30.6
billion in 2011, with US agencies accounting for
$23.3 billion of this total
• In 2011, Saudi Arabia’s assistance was $5.1 billion;
Turkey’s $1.3 billion. Brazil, China, India, South
Africa and Venezuela do not report contribution as
“ODA” but is significant.
• Bilateral ODA increased slightly [1% in 2012].
Several countries, including EU members, increased
aid in 2012 ; some met the UN target of 0.7 per cent
Source: OECD DAC
How do we Address the Contradictions? take Zambia
Focus has been on Economic growth
•Eight years of robust and resilient
economic growth (7.3% in 2012)
•Forecasted for average annual growth
rate of 7.8% between 2014 and 2018
(IMF)
•Amongst top 10 fastest growing
economies in Africa
•Economic growth accompanied by a
fall in inflation rates (single digit)
•Exports of goods and services rose by
an annual average of 11% between 2001
and 2011
•Non-traditional exports have
quadrupled from US$392 million in
2003 to US$1,608 million in 2011
Focus must also be on Human
Development
•Ranks 163 out of 187 in HDI
•52 % of the population is under the
age of 18 and the life expectancy is
49.4 years
•High fertility rate (7%), and 38
women die every month during
pregnancy or child birth
•Very high inequality, with income
gini-coefficient at 0.65, and Gender
Inequality Index 0.623
•Women are 11% in parliament
•42% live in extreme poverty (rural)
•Primary school drop out rate is 47 %.
Two-thirds of those in primary do not
complete secondary school
Shifting Patterns in Development Finance
• Is Africa financing Africa’s development - countries with full access to
int’l financial markets from 3 in 1990, to 10 in 2012 and will be 19 by 2014;
Zambia’s first sovereign bond (2012) for $750m
• Blended public-private sector investment - Net capital inflows to Africa
from annual average of US$ 9b (1983 – 1990) to US$100b (2008-2011)
• South-south flows on the rise - China’s rapidly growing investments; total
dev financing by South Africa to Africa today surpasses 0.7% of GNI
• New instruments – Vertical Global Funds; social innovation/hedge funds;
BRICs Currency Stabilization Fund ($100b); South Africa Renaissance Fund.
And ODA? To target the gaps; seed innovation; invest in
national capacities
focus on the Inequality and
Rights agenda to get to the MDGs and Human Dev
A New Era of International Governance
Converting growth to be more poverty reducing, by reducing extreme
inequality and addressing injustice needs governance that enables…..
•…a more just Distribution: MDGs Acceleration and Post-2015
Development Agenda underpinned by equality, justice, human rights
•…Inclusion: Increased civil society engagement with rising voice and
expectations
•….Broader Alliances: The ‘Rising South’ in both multi-lateral and
bilateral groupings and cooperation (shared interest to partner)
•….Joined-up Agendas: can we connect the dots between climate change,
humanitarian, trade, political, economic and human dev realities to
better address global and local vulnerabilities and shocks?
Going that tough Last Mile……
THANK YOU