Shifting Players in the Aid Game: The Old Boys Club and the New Kids on the Block
The global shift in power and influence is having potentially transformative effects on the nature of multilateral development assistance. Emerging countries such as Brazil, Russia, India, China and South Africa (the BRICS), once recipients of international aid, are increasingly being recognized as donors.1 The increasing influence of non-state actors is also injecting a new dynamism in the global aid system. At the same time, the multilateral development system is also fraught with challenges including coordination costs, donor fetishes, vested interests, lack of funding commitments and disappointing results on goals. In June 2011, over 220 participants and 40 experts gathered at the North-South Institute Conference on the “Future of Multilateral Development Cooperation in a Changing Global Order” to discuss the shifting dynamic of the current international aid system as a result of these new players and persistent challenges.
The Old Boys Club: Traditional Multilateral Institutions and Agreements
In general, the international aid system has been largely dominated by the Development Assistance Committee (DAC), which includes 24 countries, with the World Bank, International Monetary Fund and United Nations Development Programme participating as observers. Member countries at present do not include any of the BRICS countries. The most recent agreements to come out of DAC have been the Paris Declaration on Aid Effectiveness and Accra Agenda for Action, which outline the dominant approach to multilateral aid. Emerging countries have been skeptical on the effectiveness of the Paris Declaration and although there is general agreement on the principles2 themselves, they have diverging perspectives on how these principles are implemented.
The New Kids on the Block: The Growing Influence of Emerging and Non-State Players
As economies of the BRICS grow and become more prosperous, they are finding their own ways of engaging developing countries to pursue common objectives. On one hand, the way emerging countries like China approach development aid may not be that fundamentally different from traditional donors.3 On the other, emerging countries largely see themselves as part of the developing group of countries. Their development approach is based on lessons learned as recipients of multilateral aid, and includes principles such as mutual benefits, non-conditionality, non-interference and joint diplomacy. They are less concerned with a paradigm shift, recognizing that current multilateral development institutions will have difficulty changing practices due to vested interests by member states. While some emerging countries are implicated in the current multilateral system, it remains unclear how this relationship will develop in the future.4
New actors in development assistance are emerging beyond traditional multilateral institutions, countries and non-governmental organizations (NGOs). These include foundations, social enterprises, celebrities, sub-national governments and sovereign wealth funds, among others. Remittances from emigrants back to their home countries are 2.2 times higher than aid flows, some mega NGOs have larger budgets than some smaller OECD countries5, and the powers of social networking platforms are increasingly being harnessed for the greater good (e.g. micro-lending platforms such as Kiva). Private companies also have a local and long-term presence in developing countries and an ability to influence development dynamics. While this may provide a disproportionate amount of power to private enterprise, impact investment strategies are increasingly being used, which support businesses able to generate financial returns as well as meet social and/or environmental objectives.
Shifting Aid Paradigms: What lies ahead for development assistance?
As emerging donors increasingly enter the international aid space, characteristics of a new dynamic are developing:
- Flexible approaches to multilateralism involving state and non-state actors: “minilateralism”, regionalism and/or informal multilateralism that may involve a limited number of countries and/or nimble and interest-based groups solving specific problems and sharing knowledge and best practices.
- A global compact that incorporates flexible, differentiated and self-identified responsibilities and that takes into account differing norms and values. It is insufficient to infer that emerging countries will take on international development “responsibilities” as defined by the West.
- The G-20 may emerge as the dominant global institution. However, although it has clout on financial matters, its effectiveness as an institution is yet unproven. Nevertheless, steps have been taken to place international development on the G-20 agenda.
- A global governance network to complement governance institutions may be in order through the use of collaborative technologies and the inclusion of a variety of actors.
Some argue that the world is witnessing a shift in traditional multilateralism led by “the usual suspects” to one where emerging powers will play a larger role. Emerging donors are adding to the pool of funding and development experience. They also have little stake in existing multilateral institutions, so setting-up their own structures (likely regional) is probable. If traditional donors and the multilateral aid system are to remain relevant they need to embrace this new reality and view it as an opportunity rather than a threat. For Canada, this will involve rethinking its current role in the existing multilateral aid paradigm. Some pertinent policy questions may include:
- What has been the impact of Canadian aid overseas and how can it be improved? In this regard, what development lessons can emerging countries share regarding poverty reduction and managing aid? What is Canada’s role in ensuring that multilateral institutions adapt to take into account these best practices?
- How can Canada develop mutually-reinforcing partnerships with emerging aid donors, including state and non-state actors?
- If a new aid system surfaces based on emerging players’ principles of non-conditionality and non-interference, how will issues such as the insufficient adherence to social and environmental standards be handled? How will Canada reconcile these issues with its own values, norms and national priorities?
1 Although often referred to as ‘new donors’, most emerging countries are not new to development assistance. See: Whose Aid? Whose Influence? China, emerging donors and the silent revolution in development assistance (Woods, 2008).
2 The five Paris Declaration principles include: 1. Ownership: Recipients set their own national development strategies; 2. Alignment: Donor countries support national objectives and use local systems; 3. Harmonisation: Donors streamline in-country efforts to avoid duplication;4. Results: Coordinated efforts undertaken on achieving and measuring results; 5. Mutual accountability: Donors and partners are accountable for development results.
3 New Donors and Old Practices: Does the Rise of China Challenge Aid Effectiveness? (de Haan and Warmerdam).
4 The UNDP currently receives a large portion of Brazil’s development budget, largely due to a domestic law indicating that development funding must go through a third-party organization. There is movement to alter this law, raising future uncertainty regarding Brazil’s existing relationship with multilateral institutions.