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Owen Barder is a Vice President at the Center for Global Development, Director for Europe and a senior fellow. He is also a Visiting Professor in Practice at the London School of Economics and a Specialist Adviser to the UK House of Commons International Development Committee. Barder was a British civil servant from 1988 to 2010, during which time he worked in No.10 Downing Street, as Private Secretary (Economic Affairs) to the Prime Minister; in the UK Treasury, including as Private Secretary to the Chancellor of the Exchequer; and in the Department for International Development, where he was variously Director of International Finance and Global Development Effectiveness, Director of Communications and Information, and head of Africa Policy & Economics Department. As a young Treasury economist, Barder set up the first UK government website, to put details of the 1994 budget online.
Approximately 15 million people are displaced outside of their home countries. Most refugees are not able to return home for many years, often more than a decade. But just 8% of these refugees are resettled safely to third countries. So without focused actions, today’s internationally displaced people are likely to be part of the growing “refugee caseload” for many years, neither able to return home nor able to settle permanently elsewhere. That not only deprives refugees of the ability to live full, productive lives, but is also overwhelming the world’s humanitarian aid budgets. Although the real value of global aid has grown 9% in the last five years, all of that increase (and then some) has been eaten up by the rising costs of humanitarian aid and refugees.
Instead of condemning more and more people to a long-term future as aid-dependent refugees, what if we turned the support they would receive from donors over many years into an endowment that would enable them to start a new life in a new country? By capitalising future humanitarian aid spending and borrowing on capital markets, we could invest in these people. This could simultaneously make it more politically palatable for countries to take in people fleeing violence, radically improve those refugees’ lives, and reduce long-run humanitarian costs for donors. That’s the basic thinking behind the Humanitarian Investment Fund, an idea that could perhaps help Kenya, for example, which this week threatened to close the Dadaab refugee camp, to see the 300,000 Somalis living there as an opportunity rather than a threat.
In the long run, refugees can make significant economic and social contributions to countries that choose to resettle them. But in the short run, facilitating their arrival and integration involves a cost to the government – resources like housing and language classes come with a price tag. Although costs decline as refugees integrate into labour markets, the issue remains one of the most politically challenging today. Newspaper coverage focuses on the (usually exaggerated) short-term fiscal effects and while ignoring the longer-term benefits that young, entrepreneurial workers can bring to aging workforces. This mismatch between short-run costs and long-term benefits creates an opportunity for financial innovation that can leave everyone better off.
Consider a Syrian living in Jordan. Like many professionals forced to flee their homes, she is probably relatively well-educated, but struggles to find formal employment. She can't go back: the risks are too great, and there may be precious little of her old life left to return to. The humanitarian response plan to accommodate Syrians in Jordan indicates that donors pay an average of $1,210 a year to support her. Instead of paying her that money year after year to maintain a (bad) status quo, we could invest in her up front by allowing her to resettle in a safe third country. This might result in a short-run cost for that country – but it would also generate long-term benefits.
Imagine a framework under which she is endowed with a sum of money to offset the (temporary) costs she and her future host government incur for her resettlement. Potential host countries anywhere in the world – perhaps those with labor market or demographic needs – can offer to accept her and receive the associated endowment.
This scheme might be particularly attractive to developing countries, which could especially benefit from both the voucher payment and the skills that refugees could contribute to their labor markets. For every refugee currently living overseas and supported by humanitarian aid, a fund could pay this one-off "voucher" to any country able and willing to accept them. By accepting the payment, the receiving country would be obliged to grant the refugee the same status it accords other migrants for whom it doesn't receive any payment. At a minimum, this would mean granting the right to work and access to public services (not currently guaranteed in all potential host countries). So returning to the example of the Kenyan government, which cites security concerns as its reason to close the Dadaab refugee camp, viewing the 300,000 Somali refugees as representing a potential investment in Kenya might change the political and fiscal algebra, or at least have better options for relocation.
We call this framework the "Humanitarian Investment Fund." What might it cost? We can get an idea by comparing the amount countries pay to support refugees overseas and the costs they report incurring when they resettle them. Looking at those differences in today’s money (net present value terms) and considering a scheme that would work for 100,000 refugees gives us a rough idea of the range of capitalisations we’re discussing. (We do this for OECD countries that report the first year costs for refugee resettlement, and leave out countries that don’t report this figure, like Australia, or reported an implausibly low figure).
For the median case, we estimate that 100,000 refugees could be resettled for about $4 billion dollars, or $40,000 per refugee. That’s squarely in the ballpark of problems that the global public sector can get its arms around. For example, if we were able to capitalise a $4 billion fund with a bond paying 2.5% a year, the nominal interest cost of permanently moving people off the global refugee caseload would be just $1,000 per person per year. And borrowing $4 billion dollars is not a high hurdle: in 2014, global aid commitments were just over $135 billion; the UN High Commissioner for Refugees’ 2014 budget was $3.6 billion (and that was only half funded).
More generally, these are conservative estimates for three reasons:
Quantity: Assuming 100,000 potential beneficiaries is an overstatement, at least to start. In reality, less than a tenth of refugees are designated eligible for resettlement. In 2014 in Jordan, only eight-tenths of one percent of the total Syrian refugee population was resettled overseas (6,084 of 623,112).
Price: Our calculations assume gently declining costs each year for a decade, tied to OECD countries’ first-year refugee costs. In fact, most refugees receive this level of benefits for only in their first year in most of Europe, between six months and five years in the US (it varies across an alphabet soup of programmes), and six months to three years in Canada. So we are being conservative in attributing this scale of cost to refugees for a decade, and only slightly optimistic in assuming that they decrease slowly over time, pricing in payoffs as refugees integrate into local labour markets (which could be much greater in practice).
Time: These figures assume that in the absence of this scheme, a person would spend 10 years on the international refugee caseload. In reality, we have a shaky idea of how long the average refugee spends in and out of camps overseas. The oft-quoted figure of 17 years, for example, turns out to be a zombie fact that has gained currency by virtue of repetition. The assumption of ten years is reasonable but ultimately just that – an assumption.
These numbers seem especially reasonable in light of the European Commission’s proposed scheme to fine countries as much as €250,000 for every asylum-seeker that they should admit, but refuse to. That scheme is intended to be a stick, punishing countries which fail to meet their commitments to share in the “burden” of hosting a small number of refugees. Our proposed system would instead operate as a carrot, creating healthy and fair incentives for countries to go above and beyond this minimum hurdle to the mutual benefit of all involved.
The program could be expanded to many more potential refugees – without reducing commitments to those already on the caseload – by pooling these costs and borrowing from capital markets, backed by donors’ promises to repay. This method of using private capital, repaid from future government budgets, builds on other successful financial innovations. For example, IFFIm is an international fund which borrows from capital markets to pay for vaccination programs, with donors repaying the costs of borrowing over time. IFFIm’s "vaccine bonds" borrow cheaply because donors are largely wealthy OECD countries with strong credit ratings.
The proposed system creates a "triple-win." Potential host countries would have more control over who they admit, and be able to alleviate up-front short term costs. Refugees would be able to escape the long-term destitution and disempowerment of refugee camps and dependence on humanitarian aid; with a job in a safe third country, they would be able to apply their skills and create positive spillover effects for their families and home communities. Donors would assume no additional expenses, transferring the long-run costs of a substantial and growing caseload of humanitarian aid into upfront resettlement investments.
A scheme like this would likely need to have at least three core features in order to be politically viable, and attractive for the refugees themselves. It would need to be
Voluntary: Both refugees and host countries must agree to participate. Under a matching system, refugees would make a list of places they would like to live, while host countries would be asked to identify who they would most like to admit, likely based on labor market needs and integration capacity. The fiscal voucher each refugee brings with them lowers the "relative cost" to potential host countries. (Countries could use the endowment to provide for local services where the refugees are resettled, perhaps reducing possible sources of friction with local communities.) This system would enroll refugees from their current country of residence (Syrians in Jordan), rather than individuals who have arrived in the EU seeking asylum, as proposed by Will Jones and Alex Teytelboym of the University of Oxford.
Additional: People eligible for this scheme would still have to qualify for refugee status in prospective host countries, even though they would be enrolled overseas. Refugee status granted to individuals overseas by UNHCR does not necessarily align with the criteria in place in host countries. To be eligible for this scheme, refugees would have to qualify under both UNHCR and host country rules.
Valuable: In order to earn the lump-sum payment, receiving countries would have to confer real benefits to their new arrivals. In particular, the receiving country would have to grant refugees the right to work and access to public services.
Refugees are a net financial win for receiving countries, paying more into public treasuries than they cost in services. The economic arguments in favour of accepting refugees from Syria – a middle income country before this crisis unfolded, with high levels of education and healthy civic social capital – is not complicated. As our colleague Lant Pritchett explains, Europe’s aging populations are living longer than ever, creating larger cohorts of pensioners and thereby placing increasing tax burdens on dwindling numbers of younger, productive workers.
But as our colleagues Michael Clemens and Justin Sandefur have discussed, “countries struggle to absorb refugee flows when those flows are sudden and concentrated in a limited area.” In other words, the greatest tension comes up front, when host countries scramble to find the time, money, and compassion to facilitate arrival and integration. Those difficulties are compounded by the fact that resettlement schemes are usually centrally-run while pressure on local services is local. This proposed framework slackens the immediate financial constraint, empowering governments and communities to determine where these funds are best spent – a fiscal release valve for some of these pressures.
There are a number of reasons that some countries are unwilling to accept refugees. Some of these may reflect simple-minded xenophobia. But a dab of financial chemistry could at least tackle the fiscal case against doing so, putting a thumb on the political scale in favour of compassion, and helping many people secure better, safer, and more productive lives.
Britain will become the first G-20 country to publish the identities of the owners of companies registered here. Australia has announced that it will do the same.
We can argue about whether British ministers should force the Crown Dependencies and Overseas Territories to follow suit. The British government does have feudal royal powers which means they could do this, but that isn’t the same as saying they should override local democracies in these countries. (I personally think the UK should use its influence over these countries to make them open up.)
Either way, Britain can’t make the State of Delaware (state motto: Liberty and Independence) publish the names of the owners of companies registered there.
Companies that own property in the UK are going to have to publish the names of their owners, in a publicly-accessible registry. And they will also have to list their owners if they want to get a contract from the UK government.
That will apply to companies equally, whether they are registered in London, Moscow or Delaware.
This is a clever way to project the requirement of openness onto jurisdictions that the UK doesn’t control.
People want to own property in London because it is a safe, free, fair country. But if you want to benefit from the prosperity that comes from living in a free and open society, you have to play by the rules.
I would like to see the UK government extend this principle still further.
Half the cases before UK commercial courts involve companies which are not registered in the UK. The rest of the world depends on our reputation for a fair, transparent legal system.
The benefits of Britain’s open and fair legal system should only be available to companies that publish the names of their owners in the new public registry.
Some companies will want to continue to hide the names of their owners. But then they’ll have to rely on other people’s institutions to enforce their contracts.
If you want to benefit from an open society, you have to be part of it.
“For too long there has been a taboo about tackling [corruption] head on. The summit will change that.” That, at least, is the optimistic pronouncement from the leader of Her Majesty’s Government ahead of the UK anti-corruption summit in London this week. Led from the front by Prime Minister David Cameron, the event aims to "[step] up global action to expose, punish and drive out corruption in all walks of life."
With the leaders of, among others, Afghanistan, Colombia, Nigeria and Norway in attendance, along with the heads of the World Bank and IMF and representatives from the business, legal and NGO sectors, the summit will aim to agree on a package of practical steps to expose and drive out corruption. It will be preceded by a day-long conference, Tackling Corruption Together, which features panels that will consider, among other topics, how the international community can work together to lift the lid on practices that allow the corrupt to act with impunity, and to ensure justice for those affected.
Summit attendees will be invited to sign up to the first-ever global declaration against corruption. But beyond the signatures, deliberations, and rhetoric, what concrete actions could come out of the summit that would help reduce corruption and the global poverty that it helps to perpetuate? We’ll hear from Owen Barder first, and then Charles Kenny.
CGD vice president, senior fellow, and director of CGD Europe Owen Barder writes from London:
There has been an important shift in the discussion about corruption. For much of the post-colonial period, Europe and America have talked about corruption as a problem that affects other countries – a sort of neglected tropical disease that western medicine can help to eliminate.
There is growing recognition that we in the west have been part of the problem (though by no means all). In 2012 David Cameron called for the developed world to “get our own house in order” and he used the UK’s presidency of the G-8 the following year to put a number of issues on the table that would help to do just that. Here’s what I’d like to see come out of the summit:
More countries joining the UK and Australia in establishing and publishing the true owners of each company they register (so-called “public registries of beneficial ownership”).
Companies being required to report publicly how much profit they earn, and how much tax they pay, in each country where they work (so-called “country by country reporting”).
The spread of these norms by denying access to our economies for anonymous shell companies – no anonymous company should be able to buy property in the UK, get a government contract, or use the British courts to uphold a contract.
CGD senior fellow Charles Kenny adds to Owen’s three wishes:
I’d echo Owen’s welcome of the changed discussion around corruption, recognizing it is a global issue, not just a problem of poor countries. It would be good to see a further shift towards recognizing that for all of the challenges of corruption, many developing countries are seeing progress in wealth, health, and broader wellbeing that is historically unprecedented. The anti-corruption discussion should be about speeding that process, not reinforcing a toxic and inaccurate worldview that sees developing countries as suffering an incurable cancer, or as rat holes where taxes, investment and aid are simply wasted. But, beyond tone, here are three things I’d like to see in the summit communique:
More governments joining the lead taken by the UK, Slovakia, Georgia, and Colombia (amongst others) in routinely publishing the full text of government contracts with private firms. The key principle that countries should sign up to: open by default. And they should commit to make it easy to link those contracts with budget details and outcome details – using the Open Contracting Data Standard, for example. Finally on contracts, participants should commit to ensure that commercial secrecy isn’t used illegitimately to block information release (discussed in this report). Open contracting for power provision is a lot less valuable if we can’t figure out the price paid per kilowatt hour, for example. Similarly, open contracting in health should involve publishing the prices paid for drugs.
Results measurement highlighted as a key anti-corruption tool. My draft book (comments still very welcome!) discusses what happens if governments (and aid agencies) focus on tracking payments for goods and services to the exclusion of a proper emphasis on getting what they paid for in terms of outcomes. Tracking receipts over results can simply move corruption from inflated pricing or financial theft to skimping on delivery – which can be considerably more harmful in terms of development outcomes. We need accountants as part of an anti-corruption strategy, but we need engineers and survey specialists, too.
An explicit recognition that anti-corruption responses can have unintended consequences, and solutions to limit that problem. Know your customer (KYC) regulations might limit the flow of corrupt financing, but can also make it more difficult to send remittances to some of the world’s poorest people. Tax treaties might increase revenues in signatory countries, but could exclude less-developed countries that need the revenues most. Delivering aid through consulting firms based in donor countries might help reduce leakage (maybe), but also leads to less effective assistance overall. Corruption slows development. Anti-corruption tools shouldn’t slow development even more.
If you have read a newspaper in the last two weeks, you’ll know that transparency can lead to changes in policy, behaviour and even changes of Prime Minister.
Transparency of foreign assistance can increase efficiency, improve coordination, reduce waste, limit opportunities for corruption, spread knowledge, and increase accountability of governments and public services. Aid transparency respects the right of citizens in developing countries to know what is being given to their governments and spent in their country, and the rights of taxpayers in donor countries to know what has happened to their money and what it has achieved. Aid transparency simultaneously increases trust in the aid system and makes aid more effective.
Five years ago, I wrote two blogposts, setting out the lessons from my involvement in the then nascent campaign for aid transparency, and identifying ten steps needed to make aid transparency meaningful.
The good news is that the aid transparency movement has achieved unparalleled success in a relatively short space of time. Ten donors, accounting for about 25% of global aid, are now in the “very good” category and are meeting the commitments to aid transparency they made in Busan in 2011. There are now about 400 organisations publishing information about aid in the International Aid Transparency Initiative (IATI) standard. What began as annual reporting, and then moved to quarterly or monthly publication, is now moving to real time data-sharing.
Nine of the ten steps that I recommended five years ago have been implemented in full or in part, and so far, all have been successful. (As far as I know, despite the great work of Feedback Labs, we have not yet made progress on getting beneficiary feedback systematically included in the aid data system. As I predicted five years ago, we are now reaching a tipping point of usability, as the data becomes more comprehensive and timely. Not only is the data being used by aid agencies themselves, and by analysts and researchers, it is also increasingly being used by developing country governments and NGOs. Bangladesh and Myanmar are able to get data into their aid management system directly from IATI, without having to enter it manually. This provides them with more complete and up-to-date information, with less bureaucracy both for them and for donors. The software to connect the aid management system to IATI is open source, and there are similar projects for automatic information sharing at various degrees of progress in Burkina Faso, Chad, Cote d’Ivoire, Kosovo, Madagascar, Mali, Nepal and Senegal. The infrastructure for sharing real time information about aid has been built - on time and on cost - and it has been proven to work.
But more than thirty donors have not met, or have only partially met, their transparency commitments, and these include large donors such as USAID and JICA. And while some aid ministries have made progress, in many countries their finance and defence ministry colleagues seem to have missed the memo. During the Ebola outbreak in West Africa, it became obvious that there is still far too little shared information, creating scandalous inefficiencies and waste that cost lives and money.
With more than half of all official development finance now visible in IATI, there is no longer any doubt that real-time transparency of aid information is both technically feasible and cost-effective. Five years ago this was contested. One large donor agency opposed aid transparency claiming that it would cost them about $800m to implement (a figure that their staff had simply made up, as we discovered when we asked them for the details of the calculation). Today that agency is in the “good” category of the Aid Transparency Index. Donors, NGOs and private contractors who do not publish comprehensive, real time aid data are fast running out of excuses.
What is the agenda for the coming years?
First, the donors that have not done so must live up to the commitments they made to aid transparency five years ago. The technical and cost effectiveness challenges have all been solved: all that is needed now is political will.
Second, the system makes it possible for each dollar of aid to be traced from taxpayer to the communities it is intended to serve, through the long chains of intermediaries of international organisations, private contractors and NGOs. The traceability system works: donors should now require that it is used whenever public money is spent.
Third, standardised real-time information exchange creates the opportunity to cut down the reporting burden on implementing organisations and intermediaries, and the bureaucracy in donor organisations: again, it is time to start to use this instead of, and not as well as, all the manual reporting and checking that drains the development system.
Fourth, faster progress should be made towards common measures of outcomes and impact as part of the transparency standard, including measuring success through feedback from the communities that aid is intended to help.
And fifth, the system should be extended to create transparency in other forms of development finance.
The Aid Transparency Index creates healthy competition among donors; it recognises the huge advances that have been made, and it keeps up the pressure on laggards. With half of official development finance now visible in IATI, and a growing number of aid recipients and organisations able to use that information automatically, the huge potential of aid transparency is now within reach.
* Owen Barder is a Trustee of Publish What You Fund, the UK-based charity which is responsible for compiling and publishing the Aid Transparency Index
The roundtable event, to be held in Brussels, Belgium, and organised by ECDPM with the Center for Global Development in Europe, will bring together analysts, development finance practitioners, stakeholders from a spectrum of development finance institutions, and policymakers with a durable public and private finance experience for a series of brief, focused presentations and a constructive, curated discussion.
The headlinesfocused on the $10 billion of aid that has been pledged. This money is desperately needed to tackle the humanitarian crisis that is unfolding in the region. Of course, this is only the beginning. Past pledges haven’t been delivered, and even if donors meet their promises, they also have to spend it wisely and effectively. (Much greater transparency and accountability of humanitarian aid is needed).
But donors would be deluded if they thought that this additional aid, even it arrives and is properly used, would be enough to stop large numbers of refugees from trying to migrate. Extra food rations wouldn’t be enough to stop me from trying to take my family somewhere where I could get a job, and build a better life for me and my children.
That’s one reason why the new deal for Jordan to create economic development and opportunities in Jordan, both for Jordanians and for Syrian refugees, is so important.
Under the deal, Jordan will allow Syrian refugees to apply for work permits. In return, the EU will review its market access rules. Specifically, the EU’s restrictive “rules of origin” make it difficult for Jordanian exporters to take advantage of what is supposed to be duty-free, quota-free access to EU markets. The US scheme, which is much less restrictive, has already provided Jordan with a transformative export boost. This is one of a number of initiatives to boost growth - another is nudging European firms to invest - which are expected to create over a million jobs in the region for the local population and Syrian refugees.
This is a terrific example of what is known (in ghastly jargon) as “policy coherence for development.” The EU will flex its trade rules to boost Jordanian exports and incomes, and so create opportunities for people living in Jordan. This is exactly the kind of idea that we at CGD promote. (Sadly we can’t take the credit for this one. I gather it came from Oxford professors Sir Paul Collier and Stefan Dercon.)
This announcement is of course hugely welcome. Less so is the footnote that it may take half a year for the change in European trade rules to be agreed by European member states.
There is also a deal to promote jobs in Lebanon, involving investment as in Jordan, and also a new subsidised temporary employment programme which, if it succeeds, could be a model for other countries.
In addition to opening European markets to exports from Jordan, and the measures to promote investment and employment in both Jordan and Lebanon, there is more we can and should do to create more opportunities for people in the region. One thing that would help would be to provide most of our humanitarian aid in the form of cash transfers, rather than in kind, so that it helps generate local jobs and growth, as well as giving more choice and dignity to the refugees (CGD and ODI recommended scaling up humanitarian cash transfers in this joint report last September). Another would be to accept a larger number of migrants to our own countries, instead of expecting Jordan, Turkey and Lebanon to accommodate them.
And of course it should force us to ask some deeper questions:
why don’t we make the same offer to Lebanon? Which other countries are hampered by unnecessarily restrictive trade rules that prevent them from selling their goods in Europe? (Turkey is part of the customs union, so it doesn’t face the same challenges for selling goods in the EU - but it could benefit from market access for agriculture and services.)
why hadn’t we changed the rules of origin long ago?
why does it take a European policy crisis to persuade governments to look seriously at “policy coherence” reforms which are in everyone’s interests?
The media tends to reduce every development policy to billions of dollars of aid. But there are many things we can do which are mutually beneficial - making us better off as well as accelerating economic development. It is good to see donor countries exploring, at last, what else they can do.
Millions of people face hazards like cyclones and drought every day. International aid to deal with disasters after they strike is generous, but it is unpredictable and fragmented, and it often fails to arrive when it would do the most good. We must stop treating disasters like surprises. Matching finance to planning today will save lives, money, and time tomorrow.
At the heart of our work on Development Impact Bonds is the idea that to solve complex social problems it is necessary to test interventions, measure the effects, and then learn and adapt.
This is why, unlike Duncan Green, I think that the growing recognition that we are dealing with complex adaptive systems means that we need to collect more data, not less. The mantra for dealing with complexity is probe – sense – respond. Effective use of data – learning by measuring - is at the heart of how we should manage complexity.
But what does “learning by measuring” mean in practice?
My interest in how data can improve complex service delivery did not originate in some conceptual, think-tanky discussion or academic paper. I learned this from the real world experience of the organisations who are working together on the Social Impact Bond to reduce re-offending by former inmates of Peterborough Prison.
We had a bit of a finger-in-the-air approach to understanding how clients engaged with us after our initial intensive work with them on release. A lot were drifting off but we didn't understand why. Through the Peterborough bond, we've been able to see really clear trends for the first time. We can see which areas of crime young people are returning to, why people stop engaging with us, how we can stay in contact in a way that's right for them, and be there for them to turn to if they are heading towards re-offending, as well what work and training are having the most positive effect. We've been getting results with some of the most prolific locals who are known for repeat offences.
Development Impact Bonds are not primarily a financing model: they are a business model. They enable a group of organisations to come together around a well-defined social problem, and work together to find solutions through a process of testing interventions, measuring the effects, adapting and learning. This is possible in the case of a SIB or a DIB, but not in a conventionally structured project, because private investors provide flexible funding for the interventions and public sector agencies only have to pay if they work. These investors have the incentives to put in place high-quality data management systems (in the case of the Peterborough Prison SIB, managed by Social Finance) to ensure that interventions are adapting to information about what is working as it is gathered. Evan Jones adds:
Normally, by the time we've realised what is working or isn't working on a contract, the funding has run out. This time we have space to say, 'Let's do more of this and less of this.’
We think that NGOs and other service delivery organisations working in development face these challenges in much the same way as their counterparts working in domestic service delivery. By design, DIBs put the rigorous collection and use of data at the heart of the partnership, informing and improving decision-making in real time. A striking lesson from the Social Impact Bonds in that using this data in this way is hugely powerful for improving performance, and that the service delivery organisations – contrary to feeling “over-managed” - find it empowering and valuable.
The Good Country Index (GCI), aiming “to measure what each country on earth contributes to the common good of humanity,” has just been launched by Simon Anholt at TEDsalon in Berlin. Congratulations, Simon! We are happy to see more and more people thinking about how the decisions of one country can have great effects on another.
We also know how difficult it is to put together a composite index like this, as we’ve been publishing the Commitment to Development Index (CDI) since 2003. The architects are always constrained by data availability, the credibility of sources, and even the underlying theory. With 125 countries under its purview (compared to the CDI’s 27), many of the GCI’s indicators are not available for every country. That’s understandable, but even recognizing the data constraints, we are not completely convinced by the choice of indicators of how much a country contributes to the common good.
Coincidentally, the Good Country Index and the Commitment to Development Index both rank countries in seven dimensions. But as you will see from the table below, the dimensions are very different.
CDI and CGI components (in alphabetical order)
Commitment to Development Index
Good Country Index
health and wellbeing
international peace and security
planet and climate
prosperity and equality
science and technology
The Good Country Index does not publish detailed scores (only final rankings) or the underlying data, so it is not possible for the ordinary reader to know what exactly happens behind the scenes. [Update 6 Aug: Simon Anholt has got in touch to say that a spreadsheet with the sub-scores is available on request (and apparently has been sent to anyone who asked) by e-mailing firstname.lastname@example.org. The GCI website provides information on original sources, and describes the indicators, but there is no way to download the underlying data and code from the GCI site.] We cannot therefore make a full assessment, but below are some of our thoughts on the GCI components and methods, presented in the spirit of constructive dialog.
The culture subcomponent of the GCI is based on the premise that a country contributes to the common good by exporting its culture. This judgment is likely to be contentious to some, but it is not a surprising starting point for Anholt, whose work has mainly been in helping nations and cities project their brands. The component rewards countries that export creative goods and services and also countries whose citizens can enter other countries without a visa. It isn’t obvious what the underlying theory is here: it appears mainly to reward the geopolitical power of the European Union, United States, and other developed countries. If we wanted to measure what good the country does for others we should rather be concerned with the number of migrants that it allows to enter its borders without restrictions, not where its citizens are allowed to travel. Our recent study authored by Gonzalo Fanjul shows that migration policies of OECD countries have not become more open to non-OECD citizens over the past decade.
Science and Technology
Investments in science and technology contribute to important advancements for humanity, and so it is proper that they are reflected in the GCI. However, the GCI rewards countries which apply for a patent, presumably as a proxy for the amount of knowledge the country creates. Intellectual property regimes, however, aren’t always a force for good. In 1955, the American journalist Edward R. Murrow asked Jonas Salk, the inventor of the first successful inactivated polio vaccine, “Who owns the patent on this vaccine?” Salk replied, “Well, the people, I would say. There is no patent. Could you patent the sun?” Because it was not patented, the Salk vaccine was distributed widely and saved the lives of millions of people. Effective intellectual property regimes can stimulate research (which is good), but they can also restrict access to the fruits of that research (which is bad). That’s why the CDI penalizes countries for unnecessarily restrictive intellectual property rights (see our previous blog post). Taking out a lot of patents is not necessarily evidence of a country’s contribution to the common good.
The world order component of the GCI is perhaps the most contentious. It penalizes countries for generating refugees, which seems harsh on those countries which have suffered natural disasters or conflicts beyond their control. The GCI penalizes Vietnam because it has many ‘refugees’ living abroad, but not Norway or Ireland whose wealth today is partly the result of previous waves of economic migration. It might be helpful to measure the flow of new refugees, rather than the stock of refugees living abroad, so countries are not penalized today for events which happened decades ago. This component also rewards countries for UN security treaties signed (we think ratification would be better). But most bizarrely, the GCI penalizes countries with high rates of population growth, presumably out of an abundance of neo-Malthusian zeal.
Prosperity and Equality
The prosperity and equality component assesses, amongst other things, open trading based on the World Bank’s Doing Business database, but it does not penalize countries for imposing tariffs and quotas on imports from elsewhere. As Kim Elliottpreviously pointed out, some OECD countries impose tariffs that increase the price of imported rice seven-fold. We’d have liked to see these trade barriers recognised in the Good Country Index as harmful to the common good.
Weighting and Other Quibbles
The Good Country Index scales its indicators “so that smaller and poorer countries aren’t unduly penalized in the ranking for their limited ability to ‘make a difference’ in the world.” But it appears that the indicators are mainly weighted by GDP, which may not be the best denominator in all cases. Some countries face limitations other than size and income on what they can contribute: for example, landlocked countries are less likely to seize illicit drugs at their border. It is an interesting design question whether an index should penalize a country for underperforming if a lower contribution to that particular field is a more or less inevitable consequence of their geography or history. (The GCI penalizes countries which seize relatively few illicit drugs, and the CDI penalizes Switzerland for not having a navy to police the sea lanes).
We have other quibbles. The planet and climate component, for example, could do more to measure the impact of countries on the biodiversity and biocapacity of the rest of the world (such as reducing fish stocks in other countries’ waters), and we’re not convinced that the export of periodicals and journals greatly contributes to science and technology.
Looking Ahead to More
It’s easy to focus on what you don’t agree with. Again: we offer our observations to be constructive. We welcome the Good Country Index and wish it well because it, like the Commitment to Development Index, highlights the important effects a country’s policy choices and behavior have on others. We are sure the GCI will benefit from suggestions and debate, just as the CDI has benefitted over the years from new analysis and data and from the feedback and ideas of people who use it.
Thanks to Matt Collin for valuable comments and suggestions on this blog post.
 CBS Television interview, on See It Now (12 April 1955); quoted in Shots in the Dark : The Wayward Search for an AIDS Vaccine (2001) by Jon Cohen
How can we make humanitarian aid better? Give refugees cash. That’s the main recommendation of a high level panel convened by the UK’s Department for International Development (DFID), and chaired by CGD’s Owen Barder. You can read his blog on the Panel’s report here.
The report is very timely, as tragic images from Europe remind us of the scale and urgency of the global humanitarian crisis. But while European governments agonize over how to deal with the thousands of mainly Syrian refugees seeking safe haven and a better life, we must remember that many more refugees are not on the move – but stuck in refugee camps or informal settlements around the world.
The Panel says we can help them better by giving them cash. How would that work? What have trials taught us? And what are the problems?
I’m joined by two members of the Panel: Degan Ali, Executive Director of African NGO Adeso, and CGD’s Owen Barder.
A draft (PDF) of the report of the DIB Working Group sets out proposals for Development Impact Bonds, and the Working Group’s emerging conclusions on how this approach could improve the quality and efficiency of public services in developing countries.
The consultation period of the DIB Working Group draft report came to a close on July 17, 2013. The final report will be published this fall. We always welcome feedback on this new idea for financing development, by email to email@example.com, or post your comments here.
A summary with recommendations is available here.
A two-page briefing note (PDF) is available here.
Many of us working in development policy have attended dozens of meetings and conferences where participants applaud (even if some privately bemoan) the changing landscape of development finance. Traditional aid flows are now dwarfed by developing government revenues, private investment, remittances, and money from private foundations and new official donors. This is, of course, very good news, and these conferences invariably conclude with a call for “innovative” ways for these many diverse interests to work together. But as a senior donor agency official admitted to me the other day, “When we get back to the office we don’t know what to do.”
Development Impact Bonds are exciting because they help to answer that question. Done right, they are a platform for that collaboration, combining the distinct contributions of each stakeholder to improve the coverage and effectiveness of public services in developing countries and improving the efficiency with which precious aid resources are used.
In a Development Impact Bond, investors provide finance for social interventions in developing countries. The money is channelled to local public and private service providers. Once independently verified evidence shows that results have been achieved, the government and donors repay the investors their principal plus a financial return linked to performance.
Development Impact Bonds are an adaptation of Social Impact Bonds, a way of financing public services with promising experiments underway in America, Australia, Britain, Canada and Ireland. (CGD’s partner Social Finance, a non-profit company in London, pioneered the first Social Impact Bond in the UK, at Peterborough prison.)
The distinctive characteristic of Development Impact Bonds, relative to the Social Impact Bonds already underway, is that in countries whose governments cannot yet afford the full cost of additional public services, donors provide some or all of the repayment to investors when the results are proven.
The Working Group concludes that Development Impact Bonds are a potentially powerful instrument for development cooperation for a variety of reasons, set out in the report. These include:
They are a mechanism to engage a coalition of investors, governments, NGOs and service delivery specialists in a way which plays to the strengths of each partner;
They focus attention on the results achieved by public and private contributions, rather than inputs, activities and processes;
The challenge is often to “deliver science” to people (vaccines, bednets, fertilizers) but there is no “science of delivery”. Every situation is complex and requires local knowledge, experimentation and adaptation, and often the integration of services from many different specialists. That flexibility is often impossible in aid programmes financed by government donors who are inevitably risk-averse;
Governments and donors often find it hard to invest in interventions which cost money today, but bring about significant benefits (and perhaps savings) in the future;
The private sector could make a bigger contribution to meeting social priorities in the developing world, but it is hard to engage business in a way which does not limit access for the very poorest people who have little capacity to pay;
Some investors would like a “double bottom line” of a return on their investment and social impact; but there have been few investment opportunities of this kind in international development.
The Working Group’s report is now online for public consultation for the next six weeks. It sets out the circumstances in which Development Impact Bonds might work, including detailed case studies and a lot of practical advice about what is needed to get them off the ground.
Specific Development Impact Bond proposals which are in different stages of development and negotiation include reducing sleeping sickness in Uganda (Social Finance), providing education in Pakistan (Lion’s Head Global Partners), avoiding teen pregnancy in Colombia (Instiglio), investment in clean energy (the US Overseas Private Investment Corporation or OPIC), and fighting malaria in Mozambique (Dalberg). The consultation draft includes detailed recommendations for governments, foundations, investors, donors, service delivery organisations and ‘integrators’ who pull deals together, including a recommendation for a donor “outcomes fund” for the best Development Impact Bond proposals.
I and many other members of the Working Group are sceptical by instinct, preferring to see ideas tested and evidence gathered before reaching conclusions. None of us believe in magic bullets which will solve all development problems. We are a tough crowd to please. But the more the Working Group considered the opportunities offered by Development Impact Bonds and the pilots being developed, the more enthusiastic we became about the possibilities that they offer.
We know that it will not be straightforward to get the first deals done, and it is important that they are done well. The approach is already demonstrating its worth in developed countries; we believe that if and when this approach becomes a normal part of the development toolkit, it will also unlock huge benefits for services for people in the developing world.
Intrigued by this idea? Hate it? Either way, the Working Group wants your views and will take them into consideration for its final report. We are especially interested in answers to these questions:
Which part of this idea seems weakest and most prone to failure?
What parts of the report are vague and confusing, or otherwise leave you scratching your head?
Are there potential applications of this idea that we failed to mention?
Please share your ideas in the comments field below or by email to firstname.lastname@example.org.
The Financing for Development Conference, which drew to a close yesterday in Addis Ababa, was never going to solve all the world’s development problems.
What it could do was establish a shared policy framework within which decisions for the rest of 2015 can be taken. The outcome document, known as the Addis Ababa Action Agenda, actually does that pretty well.
As I said in my blog post from Addis, development finance is no longer about how a group of rich countries can provide aid to enable a group of very poor countries to deliver basic services. The AAAA is a new agenda: how can countries across a spectrum of high, middle and low incomes generate the investment and growth that is needed to provide shared, sustainable prosperity. Developing countries would rather have jobs than aid, and the AAAA reflects this.
There is a lot to like about the ideas agreed in the AAAA, including the new social compact tackling the unfinished business of the MDGs; openness as a thread that runs throughout the document (including transparency of budgets, aid, tax, extractives, data); a compact on tax revenues; an emphasis on women and girls; a commitment to focus aid on those with the greatest need, and praise for countries that allocate more aid to least developed countries; and commitments to generate more and better private investment and support from private investors and from development banks.
After Addis, the real test is still to come: what will countries commit to which will make these ideas real? Tweet this
But you can’t eat ideas. The real test is still to come: what specifically will countries commit to which will make these ideas real? They have plenty of opportunities over the second half of this year. In order of likely significance these are:
I agree with Alex Evans’s brilliant summary in The Guardian. I’m not terribly disappointed by the lack of concrete policy actions in the Addis outcome document; but I will be if we don’t get some during the rest of the year. It is a good first step, but would be a terrible last word, for the rest of the year.
The British government yesterday announced a huge capital increase for CDC, the British development finance institution which helped create 1.3 million jobs last year. This is the first such increase for 20 years. If the AAAA is translated into enough specific commitments of this kind during the rest of the year, it will have been a great success.
I’m both optimistic and pessimistic about the prospects for the rest of the year. On the optimistic side, I think we will continue to see progress on issues which are within the control of individual governments, companies and organisations, and that we will accelerate the unprecedentedly rapid reduction in poverty and improvements in access to basic services that we have seen in the last fifteen years. But on the pessimistic side, I think the prospects are receding for making progress on issues that require global agreement and cooperation. These include putting a price on carbon to tackle climate change, building an open and fair trading system, allowing people to move freely, cooperating to collect taxes, reforming our international organisations, and ensuring provision of key global public goods (such as R&D, peacekeeping, rule of law, and tropical forests).
There has been a lot of talk (much of it insincere) about how the SDGs are a “universal agenda.” Addis brought home to me how much this is true, in at least the following sense. With no growth of incomes in decades for working class people (or “middle class”, as Americans call them) in developed countries, it is not surprising that this has created a sense of economic insecurity and stagnation. This in turn leads to pressure for protectionism that limits trade and migration, and fosters economic nationalism that undermines prospects for global agreements on climate, trade and intellectual property. Only if developed countries do more at home to tackle inequality and increase economic security will they have the political space to reach international agreements that we desperately need if we are to meet the SDGs, and to sustain the pace of global integration that has helped lift so many people out of poverty in recent decades.
The High Level Panel on Humanitarian Cash Transfers
The Report of the High Level Panel on Humanitarian Cash Transfers shows why giving aid directly in the form of cash is often a highly effective way to reduce suffering and to make limited humanitarian aid budgets go further. We urge the humanitarian community to give more aid as cash, and to make cash central to future emergency response planning.