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Symposium 2013

Proposal - Beyond development aid: novel international cooperation approaches with emerging economies

The Challenge

Around 960 million poor people – more than 70 per cent of the world’s poor – now live in middleincome countries (MICs). This is a dramatic shift from just two decades ago, when more than 90 per ...

Around 960 million poor people – more than 70 per cent of the world’s poor – now live in middleincome countries (MICs). This is a dramatic shift from just two decades ago, when more than 90 per cent of poor people lived in low-income countries. It has been brought about by rapid economic growth in a number of populous countries, such as Brazil, China, India, Indonesia and Nigeria. While they have graduated from low-income status, these countries still have substantial poor populations left behind by the growth process.

Summary of proposal: “Engage with emerging economies through novel international cooperation approaches based on global knowledge sharing and mutual interest, linked with support to national reform initiatives.”

When people talk about middle income countries, or emerging economies, they often do so with awe: fortunes being made, hundreds of millions lifted out of poverty, the West’s economic and political dominance being challenged. Negative headlines on emerging economies are equally mind-boggling: severe environmental and social challenges, increasing inequality, and the bottom billion who have not been lifted out of poverty yet. In any case, the overall picture is one of economically and - increasingly - politically powerful nations which can and should take care of themselves. Unsurprisingly, an increasing number of people and politicians among so-called traditional donors demand that “aid money” to emerging economies should be stopped altogether and that development cooperation with those countries should be ceased.

However, the real picture is a very different and much more complex one; and rather than ceasing cooperation altogether, novel approaches to international cooperation with those countries are needed.

I would like to raise three key points in this respect.

First, the challenges middle income countries face to join the ranks of developed economies are still humongous.

Second, while middle income countries are not alike, their challenges are often similar.

Third, we need to change our understanding of what it means to work among and with middle income countries. New modes of international cooperation are needed. In this novel approach, the focus is on jointly tackling common challenges, both global and country-specific ones. What matters is mutual interest on a level playing field – it is no longer a donor-recipient relationship.

Let me elaborate on each of these points in turn.

The “new bottom billion” aren’t just about poverty reduction. They are a synonym for the challenges emerging economies still face in moving to advanced economy status, including economic, social and environmental aspects. As the example of China shows, it is difficult enough to attain economic growth and lift millions out of income poverty, but the real challenge starts when growth is to be designed socially inclusive and environmentally sustainable. Furthermore, the problems these countries face matter not just to them but they have repercussions for the global community as a whole. For that reason alone, cooperation with emerging economies is here to stay.

Despite the many undoubted underlying differences between, say India, Brazil and Nigeria, there are many challenges these countries share, not only among themselves, but also with many developed economies. Think youth unemployment and jobless growth, think ageing society and growing inequality – to name but a few. There are many reform experiences, recent and historical, big and small, successful and unsuccessful, which are worth sharing.  Brazil’s well-known conditional cash-transfer system, the bolsa familia, is just one of them. But there are other, less well-known examples that are worth learning from, too – such as the introduction of a social security card for those previously without access to such services in India – an initiative that has been supported by the organization I work for, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (commonly known as German international cooperation agency). In addition, reform experiences and initiatives from developed economies, e.g. on Germany’s model of a social market economy or its energy policy reform (“Energiewende”), certainly also add value to mutual learning processes.

Sharing ideas, exchanging knowledge, learning from one another and working together on a level playing field are all central to this novel form of international cooperation. Meanwhile, actors are no longer just limited to governments or governmental bodies, but include civil society, NGOs, think tanks, the private sector etc. The nature of any such cooperation is one of mutual interest. At the core of the value system underlying these novel approaches to international cooperation stands the global public good of sustainable development – i.e., promoting socially inclusive growth that is environmentally sound.

On the implementation side, GIZ has long started to respond to this transformation in the international cooperation sphere, offering a wide range of innovative approaches, including inter alia on global networks, global knowledge sharing, global fund management, triangular cooperation and south-south cooperation in general.

To illustrate, let me provide two examples from the work of GIZ: the Alliance for Financial Inclusion (AFI) and the Economic Policy Forum (EPF). The goal of AFI is to improve access to and usage of financial services for the poor through the implementation of effective policies and regulations. The alliance brings together decision-makers and practitioners from central banks, ministries of finance and other financial regulators from altogether 89 countries. AFI’s members share their knowledge on policy reforms that have been developed and successfully implemented in their respective countries. In doing so, AFI contributes to lifting around 50m people out of poverty. GIZ facilitates the network on behalf of its members and, in this regard, organizes the annual meetings of AFI as well as regional and global conferences, manages an online platform, facilitates knowledge exchange visits and the implementation of policy changes through a grant programme, and cross-connects with external partners and stakeholders. AFI is funded by the Bill & Melinda Gates Foundation. In addition, selected AFI activities have been supported by the Australian Agency for International Development (AusAID). Since the end of 2012 BMZ has been funding the SME finance work stream and the policy grant programme.

EPF is an alliance of think tanks from emerging and from selected developed economies. EPF’s goal is to provide a platform for knowledge sharing and collaborative, policy-oriented research on key economic policy challenges of emerging economies, focusing on global economic stability and the quality of growth. Working as a flexible network facilitated by GIZ, think tanks jointly develop policy proposals with relevance to their respective countries and national and international reform agendas. In a recent survey, 100% of all participating think tanks indicated that they gained helpful insights through EPF for the policy recommendation processes they are involved in. EPF is funded by the German Federal Ministry for Economic Cooperation and Development (BMZ), with participating think tanks bringing in their own resources. Additional funders for EPF are currently being actively sought.

To ensure knowledge sharing creates impact, linking specific in-country initiatives with the global sharing networks is highly valuable. For example, in the case of EPF, while knowledge is shared with other emerging economies on inter alia resource policy, GIZ also supports India on various related national reform initiatives. In this way, global lessons can feed directly into national reform efforts, while national reform initiatives bring in reform implementation experiences into the global sharing network.

In conclusion, what middle income countries need to tackle their most pressing economic, social and environmental challenges is global top-notch know-how that is adequate to their respective circumstances and reform needs. That know-how needs to be tapped globally through global networks and knowledge sharing platforms which promote mutual learning and feed their findings into domestic reform processes. Linking these global mechanisms with national reform initiatives is a crucial success factor to ensure relevance and impact for the “new bottom billion”.

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