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International development cooperation
The interest rate hikes by the US Federal Reserve (Fed) and the European Central Bank (ECB) are not only having an impact on the respective currency areas, they are also impacting global markets. Developing countries and emerging economies in particular often find themselves in financial difficulties through no fault of their own.
The current edition of “Development in Brief” shows the effects of recent financial decisions on the situation of developing countries and emerging economies, and how these should be addressed.
The international climate conference COP27 has closed with a breakthrough in providing “loss and damage” funding for vulnerable countries hit hard by climate disasters. The heavy floods in Pakistan and the dire droughts in Eastern Africa in 2022 have shown us before our eyes, urgent and concerted action is needed to create protection against increasing levels of climate disasters.
Against this background, Germany, under its G7 presidency last year, has teamed up with the group of the most vulnerable countries, the V20 (“the Vulnerable Twenty”), and created the Global Shield against Climate Risks initiative. The current issue of “Development in Brief” explains the initiative's approach and how it differs from the previous response to climate disasters.
The climate crisis is now – Call for protection against climate risks(PDF, 50 KB, accessible)
Great expectations are attached to the humanitarian-development-peace (HDP) nexus. Initiated by the then UN Secretary-General Ban Ki-Moon at the 2016 World Humanitarian Summit, the HDP nexus was not only intended to meet humanitarian needs more efficiently and effectively. Above all, it should "strengthen the capacity of the international system to prevent crises from occurring and to develop early solutions to reduce humanitarian needs and preserve development progress". However, the implementation of the nexus by humanitarian, development and peace actors still poses a multitude of challenges.
The current issue of "Development in Brief" explains these challenges in implementation and outlines possible solutions.
It is not a particularly new or original idea that the future is uncertain and can sometimes bring surprises. However, the degree of uncertainty and unpredictability has steadily increased in recent decades. Especially in fragile contexts, it has long been the case that “development” is more a succession of crises, structural disruptions and temporary surges than a continuous process that could even remotely be reliably depicted with traditional point forecasts.
The current issue of “Development in Brief” features “strategic foresight”, an alternative way of dealing with a high degree of uncertainty about future developments, which makes it possible to respond flexibly and remain capable of taking action even in widely varying circumstances.
The current Covid-19 crisis has a firm grip on all of us. In response to the economic consequences, states are mobilising financial resources on an unprecedented scale. But to what extent are economic support programmes compatible with our climate goals? Is climate protection now losing momentum in the wake of short-term support? One thing is certain: current investments play a decisive role as to the development of our emissions in the coming years.
The current edition of "Development in Brief" explains how, against this background, the "Green Recovery" approach can be seen as both a historical opportunity and an imperative.
Green recovery –a historic opportunity and a necessary methodology(PDF, 139 KB, non-accessible)
The ambitious global sustainability goals (SDGs) explicitly call for a commitment by the private sector, in cooperation with the established state institutions, since the SDGs cannot be achieved without additional private capital. With this in mind, the OECD is currently developing guidelines for the OECD DAC Blended Finance Principles adopted in 2017, which are intended to pool existing knowledge on the topic and at the same time focus on practical design and implementation. As one aspect of blended finance, the keyword "additionality" is used to discuss how additional private capital can be mobilized and additional effects achieved through state intervention, if possible without distorting the market.
In this edition, "Development in Brief " takes a closer look at additionality in private capital mobilization and draws attention to the challenges and its growing importance in mobilizing or crowding in additional private capital.
Additionality of mobilized private capital: Crowding-in or crowding-out?(PDF, 40 KB, non-accessible)
The concept of resilience is currently very popular in development cooperation and is used as a buzzword in the most diverse contexts – be it climate resilience, crisis resilience or poverty resilience, etc.
The current issue of Development in Brief discusses what exactly lies behind this concept and what concrete measures can be derived from it for development cooperation.
Resilience in development cooperation – what exactly does that mean?
Private direct investment (FDI) is decreasing in developing countries and emerging economies, while ODA and tax revenue are stagnating. Calls for additional private funds in development financing have therefore become louder and louder since the 3rd International Conference on Financing for Development in Addis Ababa, and an ever-increasing number of organisations other than the traditional donors are now responding to this demand.
The latest edition of Development in Brief will look at Blending 2.0. This instrument continues to grow in importance in light of the significant financing needed to achieve the global sustainability goals. It describes the strategic use of government development financing to mobilise additional private funds in developing countries and emerging economies.
Blending 2.0: Could mobilising private capital work in poorer countries, too?
By the time the UN Conference on Financing for Development had been held in Addis Ababa in July 2015, the term "blending" was already a widely discussed topic. The conference made it clear that neither developing countries alone, nor official development assistance will be in any position to close the enormous funding gap of around USD 2.5 trillion per year that is needed to achieve the Sustainable Development Goals. This is why an agreement was reached in Addis to increasingly use development assistance funds to mobilise private funds for development finance in future - and blending is a central instrument for achieving this.
The current issue of Development in Brief explains how blending works and what the advantages and limits of the instrument are.
Blending: a useful extension of the scope of development finance instruments
The low-interest phase in the advanced economies is slowly coming to an end. The first steps have been made by the US Federal Reserve. Interest rate increases in advanced economies are raising concern that capital flows into emerging economies (DE/EE) will decrease. This concern is not entirely unjustified. We do not expect a sudden reversal of capital flows because the growth prospects of DE/EE are still too positive for the next one to two years. But the climate for capital flows into the DE/EE will presumably become rougher in the coming years nonetheless.
Interest rate reversal – a threat to capital flows to developing and emerging economies?
Many public discussions on development cooperation sooner or later indicate that corruption is a central obstacle to development and aid effectiveness. However, clear scientific evidence for this opinion hardly exists. Instead, it must be noted that some of the countries which have made the greatest progress in recent years are also considered to be particularly vulnerable to corruption.
In the current issue of Development in Brief, we summarize the current research findings on the relationship between corruption and development on the one hand, and between corruption and development assistance on the other.
What do we know about the link between corruption and development or development assistance?
There is now some movement in the debate about development economics thanks to the new book, "Beating the Odds", by the previous Chief Economist of the World Bank, Justin Lin, and his counterpart, Célestin Monga, who is still in office at the African Development Bank. After the professional discourse was very strongly shaped by microeconomic analyses of "poor economics" (randomised controlled trials) in the last several years, the authors are now presenting a draft for a new development strategy for the first time in a long time. They call it "New Structural Economics".
The current issue of Development in Brief explains the main features of New Structural Economics and summarises their added value and key criticisms.
New Structural Economics (NSE): A groundbreaking new development strategy?
Certainly since the UN conference in Addis Ababa (2015) on financing the Sustainable Development Goals (SDG), if not before, the international community has recognised that low-interest (soft) loans are an important instrument in development finance: their terms can be adapted very flexibly to the performance capacity of countries and the economic efficiency of projects, thus bridging the large gap between pure grants (for the poorest countries) and pure market funds (for very advanced countries). The reform to the OECD's Official Development Assistance (ODA) statistics, which will come into force in 2018, takes into account the increasing importance of development assistance loans.
The latest edition of Development in Brief explains what exactly will change in terms of the ODA recognition of development assistance loans from 2018.
How will development assistance loans be recognized in the OECD's ODA statistics in future?
The human rights' agenda and the global 2030 Agenda for Sustainable Development result from different political discourses but both are actually concerned with developing a dignified quality of life for individuals. When a superficial comparison is made of both agendas, large overlaps in content can be seen, which begs the questions as to how they relate to each other and what the advantage of the one or the other agenda is.
The current edition of Development in Brief analyses differences and similarities between human rights and Sustainable Development Goals (SDG) and explains to what degree the two dimensions complement each other.
China's economy plays an important role not only for many industrialised countries, but increasingly also for the development of poorer countries: China's high imports from these countries and the rise in Chinese foreign investments spur their economic development. On the other hand, emerging economies face increasing competitive pressure from Chinese exports and fluctuations in commodity prices as a result of the Chinese demand.
This issue of ”Focus on Economy“ analyses in detail the positive and the negative economic impacts of China’s economic and trade policies on the development of poorer countries.
China’s rapid rise affects other developing and emerging countries at various levels
The megatrend digitalisation has also captured most developing countries by now. Experts agree that the megatrend will be a pivotal "game-changer" for these countries. However, the direction these changes will take is extremely controversial: some see digitalisation as an opportunity to more quickly overcome major barriers to development, others primarily see the risk that poverty and inequality in these countries could be intensified instead of reduced due to national and international structural transformation.
The current issue of Development in Brief explains the main arguments of both perspectives.
Megatrend digitalisation: a pivotal "game-changer" for developing countries
At the end of the 20th century, the indebtedness of many developing countries was a key challenge for international development cooperation. The critical situation could ultimately be handled within the framework of the HIPC (heavily indebted poor countries) through consolidation policies of partners and partial debt relief. Today, however, the foreign debt of many low-income countries in sub-Saharan Africa is growing again significantly.
The current edition of Economics in Brief further discusses the causes of this trend, as well as the risks involved and refers to the needs for a sound debt management to prevent a new debt crisis.
The external debt levels of the poorest Sub-Saharan countries must be monitored closely
Globalisation is one of the dominant megatrends of our age. A revival of national internal interests has currently been observable in some significant industrial countries and this may briefly weaken this trend, but it will not be able to bring the necessity of stronger international cooperation into question in the long term.
The current edition of Development in Brief is focusing on the stable, relatively long-term dimensions of the globalisation trend. We analyse the role that developing countries have played so far in the economic, political, cultural and ecological globalisation process and which part they will presumably play in this trend in future.
Megatrend globalisation: what is the role of developing countries?
Today, China is one of the most important global players, both economically and politically. For a long time, foreign financial resources flew into China to a considerable extent, mainly in the form of direct investment. However, that trend stopped in the middle of 2014. Since then, the capital flows to and from China have reversed: China is now affected by significant capital outflows, which has led to a certain concern about the capital markets.
The current issue of the "Economics in Brief" analyzes the changes in the capital flows in detail, explains what is behind this development and answers the question as to whether this development should be worrying.
For a long time, emerging economies such as Brazil, Russia and South Africa have been admired for their impressive rise to middle income countries. However, their growth path has changed and many of them face a period of declining growth. One explanation for their current situation is linked to the so-called middle income trap thesis. In a nutshell, it states that after the successful climb to the emerging market it is difficult for a country to reach the next higher status of an industrial state.
Today’s edition of Economics in Brief explains this thesis and shows that a further economic growth of emerging economies is possible if the internal economic environment is improved accordingly.
The current weakness of many emerging markets evokes the concept of the middle income trap
