Our guest blogger today is Jens Sedemund, Executive Adviser to the Development Assistance Committee Chair at The Organisation for Economic Co-operation and Development (OECD).
We are living through the period of most rapid change in human history. By and large this change is for good. For the first time ever, the prospect of ending absolute poverty is a real one. Indeed, making this a reality is set to become a central goal for the targets that replace the Millennium Development Goals in 2015.
One reflection of this success is graduation. When countries cross the High Income Country (HIC) threshold according to World Bank terminology, and stay above that for three years, they graduate from the OECD, Development Assistance Committee (DAC) list of Official Development Assistance (ODA) recipients which currently has 148 members.
That is consistent with the idea that development assistance can be deemed a success when it is not needed anymore. Another measure of success is that overseas aid is increasingly being crowded out by other sources of finance across the developing world, particularly as countries move up the income scale.
Just 20 years ago, many countries that are now well-established donors were on the aid recipient list or making the transition to leaving it. These include current DAC members the Czech Republic, Poland and South Korea; as well as major non-DAC donors such as the United Arab Emirates. This graduation success story is sure to continue, and very likely in a much more striking way than so far.
Forecasting is often a risky business, but it is pretty clear major shifts in the developing world will continue over the next 15 years. Taking current World Bank and International Monetary Fund growth projections for the years ahead, and extrapolating them up to 2030, show that 28 countries on the current list are set to become HICs by that year.
Collectively home to around two billion people today, many from this next wave of graduates, including China, Brazil, Mexico and Turkey, will be no surprise. Indeed, these countries, and others like them, have become major providers of overseas aid, or “South-South Cooperation” as many of them prefer to call it, – in their own right.
The picture among countries further down the income range is also likely to change dramatically. The World Bank’s International Development Association (IDA) provides assistance to the poorest, least developed, often conflict affected states. Currently there are 62 IDA countries.
Under current policy settings, all but 14 could pass the upper income threshold for IDA funding by 2030. Of these 14, Afghanistan is the only country outside of sub-Saharan Africa.
Despite rising per-capita incomes, many development challenges remain. New global development goals arriving in 2015 are expected to be both universal and to fully integrate sustainability, adding a new dimension to the need for continued global cooperation.
Against this backdrop, much thought is being given to the targeting of aid to those in greatest need. This raises the question of the graduation process from the DAC list and whether it should be accelerated.
There are many differing views here, but accelerated graduation implies a very crude, in or out, choice. More relevant is the role that aid and other development resources can play in different contexts, and how a mix of such resources can best be applied. Therefore, it seems the issue is more one of targeting rather than qualification. What’s not in doubt, is that even under the current rules for the DAC list, the graduation process is set to continue.
You can also use the data visualisation tool below to see country by country growth forecasts relative to the ODA and IDA thresholds.
The ideas expressed in this paper are those of the author and do not necessarily represent views of the OECD, the OECD’s Development Assistance Committee (DAC), or their member countries, or the endorsement of any approach described therein.