Aiding Development: The New Donors
International Development Studies Lecture Series
Dr. Erik Lundsgaarde, Research Fellow, DIE
University of Amsterdam
September 30, 2010
© 2008 German Development Institute
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The ‚New‘ Donor Challenge to Development Cooperation
 Growing engagement of new donors comes at a time when
traditional (OECD) donors have seemingly reached agreement on
goals and best practices in aid provision.
 New donors offer additional and alternative source of development
finance, casting a spotlight on rationale of providing aid and
offering competing assumptions about development priorities.
 The new actors bring the potential to launch new types of
partnerships and rethink development cooperation, but may also be
repeating flaws of traditional development cooperation.
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Overview of the Presentation
 Emerging State Providers of Development Assistance
 General overview of engagement
 Challenges and questions for traditional donors
 Emerging Non-State Actors (Private Foundations, Corporate
Philanthropies)
 Description of general giving patterns
 Challenges and questions for the donor community
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The ‚New‘ State Actors
 Who
are the ‚new‘ donors?
 In general, „non-DAC“ providers of development assistance
 European donors (Eastern and Central European countries)
 Arab donors (Bilaterals and multilateral funds)
 Regional powers (Mexico, South Africa)
 Major emerging powers (Brazil, China, India)
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Brazilian Development Cooperation
 Global aid is on a scale of a smaller OECD donor ($345 to $1275
million)
 Geographical focus on Caribbean and Lusophone World (e.g. Haiti,
Cape Verde, Timor-Leste)
 Emphasis on agriculture and food security; support for
peacekeeping
 Follows principle of non-intervention (no conditionality), with
exceptions
 Humanitarian Crisis
 Demand from inviting country
 Presence of clear UN Mandate
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Brazilian Development Cooperation
 Organizational Set-up
 Development cooperation overseen by Ministry of Foreign
Affairs
 Foreign affairs ministry assumes coordinating function for
diverse actors engaged in international cooperation
 Links foreign policy priorities to development needs in partner
countries
 Commitment to multilateralism and bilateral action
 South-South solidarity or promotion of Brazilian interests?
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Indian Development Cooperation
 Annual
aid flows estimated between $500 and $1 billion
 Geographical focus on regional neighbourhood (Bangladesh,
Himalayas, Afghanistan), and growing presence in Africa
 Provides both financial (credit lines) and technical assistance
(training programmes), linkages between aid and private investment
(e.g. access to Indian technology)
 Panscheel/Bandung Principles offer point of orientation
 Mutual respect for territory and sovereignty
 Mutual non-aggression and non-interference
 Equality and mutual benefit
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Indian Development Cooperation
 Organizational Set-up
 Ministry of External Affairs assumes main responsibility
 Funding vehicles distributed across a variety of departments
 Finance Ministry plays key role in financial assistance
 Indian International Development Cooperation Agency founded
in 2008
 India’s Dual Role as Recipient and Donor
 India as a recipient prioritizes multilateral aid
 As a donor, India prioritizes bilateral aid
 Should OECD countries continue to aid a donor country?
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Chinese Development Cooperation: Overview
 Has attracted most attention due to scale and global quality of
engagement
 Aid figures difficult to quantify, but estimated to fall between $1
and $25 billion
 Active in regional neighbourhood, but also in Latin America and
Africa (e.g. Angola, Nigeria, Ethiopia, Sudan)
 Engagement takes variety of forms (technical assistance, loans, debt
relief) and covers a variety of sectors (infrastructure, production)
 Emphasis on aid as part of package deal (aid, trade, and
investment)
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Chinese Development Cooperation: Principles

Eight guiding principles date to 1960s
 Aid follows logic of equality and mutual benefit
 China respects sovereignty of recipients
 Aid comes in the form of concessional loans
 Self-reliance rather than dependence on China is ultimate goal
 Projects should focus on quick results and investment accumulation
 China provides high-quality Chinese equipment
 Emphasis on skill transfer to local workers
 Experts from China should have same standard of living as locals
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Chinese Development Cooperation: Key Questions
 Does
Chinese aid support authoritarian regimes (e.g. Sudan,
Zimbabwe) or undermine efforts to promote good governance and
human rights?
 How does infrastructure focus support development needs?
(Answer generally positive)
 Is the resource-driven focus conducive to long-term development
progress?
 What role does development assistance play in the trade, aid,
investment mix?
 Does Chinese engagement offer increased policy space for partner
governments or does it create new inequalities?
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Challenges for the Donor Community: Cooperation
Key problem: Proliferation of actors creates new coordination
problems

 Administrative burden on partner country governments
 Duplication of activities
 Are priorities complementary or contradictory?
 New forums and forms of cooperation
 Dialogue at international level (OECD +); Development Cooperation Forum
(UN)
 Partnerships at field level (trilateral cooperation)
 Importance of partner country management of new landscape
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Challenges for the Donor Community: Mutual Learning
How can/should traditional donors rethink development cooperation
to emphasize the logic of mutual benefit?
 What
is the future of the poverty reduction agenda?
 Should development assistance adopt a stronger economic
rationale?
 How to promote increased transparency and evaluation of results?
 How can knowledge about development effectiveness be transferred
to emerging actors?
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Private Foundations: General Overview
Philanthropic foundations represent large universe of organizations
 European estimate: 100,000 public interest foundations
 American estimate: 72,000 foundations
 Organizational characteristics
 Not profit-oriented
 Funded by private endowment
 Spend a small percentage of endowment annually
 Emphasis on local rather than global giving
 European estimate: 16 percent of funding to global development in 2007
 American estimate: 22 percent internationally in 2007
 Recent trends point to increasing interest in international giving
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Perceived Advantages of Foundations
 Independence
enables greater freedom in assuming risk
 Independence from political system makes it possible to invest in
politically controversial and neglected areas
 Can
disburse relatively large amounts of funding with limited
bureaucracy
 With large endowments, significant long-term commitments are
possible
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Leading Foundations in Global Development
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Gates Foundation Giving to Africa: Global Development
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Gates Foundation Giving in Africa: Global Health
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Challenges from Foundations
How can stronger local ownership in implementation of foundation-funded projects be
promoted?
 Capacity-building for potential grantees at country level
 Improve knowledge transfer from the field to private actors, potentially through
strengthened multilateral capabilities at country level
How can higher standards of transparency and accountability be introduced?
 Need for improved reporting on foundation funding for development; regulatary role
of donors at home
 Support initiatives to improve quantity and quality of evaluation of impact of
foundations and their implementing partners
How can coordination between donors and philanthropic foundations be improved?
 Importance of personnel serving as contact point on both sides
 Structured dialogue process with major foundation players (e.g. biannual meeting)
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Corporate Philanthropy
Monitored more closely in the United States (Estimate: $6.8 billion in 2007)
 Greater internationalization of firms sparks interest in communities where they
have operations
 Major corporations (Fortune 100) and manufacturing firms are more likely to
donate to international programs than small companies and firms in the service
sector
 Motives for Corporate Giving: Employee morale, Reputational benefits, branding
 ‘Known’ giving dominated by health and pharmaceutical companies, but
industries engaged in global giving are diverse
 Channels for giving vary: in-kind gifts, donations to NGOs, company-run
programmes
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Strategic Philanthropy
Philanthropic Efforts of Firms Should be Aligned with the Central Business Goals
of the Organization
Giving follows a ‚win-win‘ logic:
By focusing on the contextual conditions most important to their industries and
strategies, companies ensure that their corporate capabilities will be particularly
well-suited to helping grantees create greater value. And by enhancing the value
produced by philanthropic efforts in their fields, the companies gain a greater
improvement in competitive context (Porter and Kramer 2002).
 Lower emphasis on reactive giving (e.g. humanitarian relief), stronger emphasis
on deliberate giving
 Example: CISCO Networking Academies—600,000 trainees in 160 countries
yearly, provides IT training, gains a larger labour pool capable of managing its
network systems
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Venture Philanthropy
 Basic Idea: Increase the role of corporate actors in managing philanthropic
activities directly
Venture capital inspiration: contribution of managerial skills, business acumen +
production of social gains
Model emerges as criticism to foundation giving (not results-oriented, limited
organizational capacity of grantees, distant relationship between foundation and
grantees)
Scale of venture philanthropy: modest. Primarily oriented toward local rather than
international non-profits
 Global Development Example: Acumen Fund—Invests in for-profit enterprses
that seek to improve access to services (water, health, housing, energy). Portfolio
$20 million (2006). Challenges: longevity of commitment, success dependent on
framework conditions.
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Challenges for Donor Community
How can dispersed projects be integrated into coherent strategies for development?
 Importance of donors as knowledge providers about enabling framework conditions
 Need to strengthen ‚philanthrocapitalist‘ industry associations to provide focal point
for information sharing
 How can sustainability of commitment to particular projects be insured?
 Public-Private Partnerships as a vehicle for maintaining longer-term commitments
 Provision of assistance in assessment of project feasibility at outset
 How can demand-driven orientation be promoted?
 Normative and regulatory role of donors in encouraging inclusive project design
 How can private philanthropists be attracted to more difficult contexts?
 Donor programmes can act as magnets for financing
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Concluding Points
 New
donors are growing in importance, but knowledge about their
impact is limited
 Relevance of new donors in the development landscape varies by
region and by sector
 Diversification of giving landscape can provide impetus for
increased multilateral coordination at field-level and within OECD
donor community
 Multiplication of actors creates coordination challenge in global
development architecture and possible demand for new forums for
cooperation
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Dank u wel!
Thank you for your attention!
Erik Lundsgaarde
Research Fellow
German Development Institute
erik.lundsgaarde@die-gdi.de
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