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This first report from the Future of Development Cooperation Coalition makes the case that any discussion of development cooperation must have the ambitions, capacities, and needs of low- and middle-Income countries front and center, recognizing that countries at all income levels are the agents of their own sustainable development.
With low- and middle-income countries firmly as the starting point, the report takes a stylized “balance sheet” approach to examine both the financial and non-financial assets and liabilities of countries as they seek to advance their development goals and navigate the risks and opportunities against a tumultuous geopolitical and economic backdrop. The paper takes a deliberately broad view of assets and liabilities — not to be exhaustive, but to convey the breadth and complexity of the circumstances in which low- and middle-income countries are operating.
To understand countries’ development goals, the paper presents the findings of a review of a roughly representative sample of the development strategies of 30 countries of diverse sizes and income levels. This survey reveals both important commonalities and distinctions.
There are also important regional differences across the strategies reviewed, with different weights placed on industrialization, innovation, technology competition, and addressing inequality. Inequality appeared in every Latin American strategy reviewed, industrialization was cited as a high priority in Africa, and technology more highly emphasized in Asia.
The paper then turns to how low- and middle-income countries can best achieve their goals by leveraging their assets and managing their liabilities. It strongly posits that long-term development, while influenced by external regional and global currents and shocks, is first and foremost the result of domestic policy choices, productive investment, trade integration, innovation, institutional strength, and political economy. The balance sheet approach presented in the paper is not only a lens for understanding individual country trajectories. It also shapes, and is shaped by, countries’ capacity to cooperate internally and internationally in pursuit of development goals.
Key assets examined by the report include:
Liabilities considered include:
The balance sheet of most low- and middle-income countries reveals a complex and nuanced picture, unique to each individual country, but one that ultimately has significant assets and is full of potential. For example, Ethiopia, while being roughly 100 million people smaller than Nigeria, receives more than three times the scale of foreign direct investment. Nigeria receives more than 7.5 times in remittances than it does in official development assistance. Nigeria’s pension fund holdings are considerable; Ethiopia’s relatively modest. Nigeria has impressive levels of tax revenues, but also a high debt servicing burden; Ethiopia struggles with a narrow tax base, but suffers less in the way of illicit financial flows, and although its debt servicing burden is lower, it is in debt distress. In short, the detailed specifics for each country matter tremendously and shape the critical decisions and trade-offs which they face.
Countries must decide how to prioritize which assets and liabilities they manage most actively; it is nearly impossible to address every element with equal intensity. Choices matter. And in the past, arguably too much energy has been directed toward one asset in particular: development assistance. This is not to suggest that development assistance no longer matters. Rather, that aid has always been only one part of a much broader development landscape that includes domestic resources, institutions, trade, investment, innovation, and political leadership.
A number of these assets and liabilities are also effectively opposite sides of the same coin. For example, borrowing can help unlock transformational growth and investment, but unsustainable debt payments can cripple a country’s potential. And, obviously, effective cooperation can accelerate progress on key development goals, while ineffective cooperation can produce fragmentation, misalignment, and lost opportunities.
What are the central lessons of such a country-focused approach?
The report concludes that recognizing countries as the stewards of their own development trajectories has the potential to significantly improve effective development cooperation by establishing relationships and partnerships based on mutual benefit, respect, and clearly articulated and transparent objectives.