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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?.

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The Puzzles and Contradictions of Development Policy and Finance…. …and what it means for international ‘donorship’ and governanceKanni WignarajaUN RC/UNDP REP, ZAMBIASeptember, 2013,

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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?
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Expansion of the Middle Class – Myth or Reality?

Growing Inequality

  • Over a billion people still live in extreme poverty (< $1.25)
  • Zambia - a very small middle class (with Gini at an alarming 0.65)

Growing Middle Class

  • By 2030, the South will account for 80% of the global middle class with two thirds in Asia-Pacific region
  • By 2030, the South will account for 70% of the global total consumption expenditure
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Contrasting and Confusing Development: with Africa as Illustration

Economic Growth Story

  • Robust and resilient economic growth rates (overall annual growth rates averaging 5.2 %)
  • Second fastest growing region, globally
  • Economic growth accompanied by falling inflation rates, from average inflation rates of 22% in the 1990s to around 8% in 2010
  • Rising annual labour productivity rates of around 2.7%
  • Trade between Africa and the rest of the world increased 200 % between 2000 and 2010
  • Reduced external debt and budget deficits – sound macro economic management

Human Development Story

  • 75% of SSA countries are in the low human development group
  • Very high inequality accounting for an average loss of human development of 35%
  • Over 25% or close to 218 million people in Africa are undernourished
  • 150,000 women in Africa continue to die at childbirth each year
  • 12 out of 100 children in Africa die before their fifth birthday
  • A third of children in Africa between the ages of 5 and 14 are child labourers
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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?

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Making Big HD Strides

Afghanistan, Timor-Leste, Burma, Angola, Ethiopia, Mauritius, Rwanda, Uganda, Sierra Leone, DRC, Liberia, Rwanda, Mali, Tanzania, Burundi, Mozambique, Niger

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

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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 add-on, 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.
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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

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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

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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
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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

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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……

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