In 2021, the ongoing grip of COVID-19 served as a stark reminder of the fragility of our progress in fighting poverty and COP26 highlighted the need for richer countries to provide substantial funding to meet global challenges. As the twin crises of a global pandemic and climate change threaten to leave developing countries far behind, and squeezed aid budgets in many donor countries create their own challenges, development agencies are facing intense pressure.
Last month we had an opportunity to discuss these issues at the Development Leaders Conference (DLC) co-hosted by the Center for Global Development (CGD) and the Swedish International Development Cooperation Agency (Sida). This annual gathering, now in its fourth year, brings together heads of bilateral development agencies and senior management from selected multilateral institutions for a frank peer-to-peer exchange and mutual learning.
While the event is held under Chatham House rules, this blog summarizes some of the key discussion points and illustrates why there was so much agreement on the need for a paradigm shift in development cooperation.
Can we tackle global challenges while also advance in-country development?
The current environment leaves development agencies facing hard choices: How can they most efficiently meet needs at country level while stepping up to respond to global challenges? Does the focus on Global Public Goods (GPGs) erode the country based model they have traditionally used or are there synergies between GPGs and global development?
In addressing these questions, most development leaders highlighted how global challenges are increasingly shaping their strategies. Rather than seeing the two as opposing goals, there was broad consensus on the need to integrate GPGs into country-level programming and developing a more comprehensive approach to development cooperation. These views were backed by a survey conducted by CGD colleagues over the summer: when asking development agency staff on the role and purpose of aid, the findings confirmed that for many respondents tackling global challenges like climate change and pandemics have become increasingly important purposes of ODA – more important than poverty reduction. Also, according to the majority of respondents, ODA spending focuses more on catalyzing other sources of finance. These findings correspond to commitments made by policymakers at COP26: GPG spending is to be significantly strengthened, as richer countries recognized the substantial financial needs of poorer countries to adapt to climate change.
Enriching the DLC peer-to-peer discussion with an outside perspective, Inge Kaul called for a new model for international cooperation which strengthens synergies between GPGs and global development. Participants agreed on the need to find synergies and that the shift in aid spending on meeting global challenges and away from more traditional uses of aid should be seen as an opportunity. In addressing global challenges, development agencies have a comparative advantage and valuable experiences to build on with regards to cost effectiveness and evidence-based interventions. Mark Lowcock provided useful guidance on GPG spending by highlighting some do’s and don’t for agencies. He warned of increased fragmentation of both development agencies’ individual funding strategies and the climate finance architecture more broadly. Many colleagues agreed that further fragmentation of the international system needs to be avoided and more long-term country-level strategies are needed. A more coordinated approach is needed to tackle both poverty and global challenges in-country, as opposed to tasking separate institutions to address the different needs. A commitment to supporting ‘country platforms’ is essential in this regard. The “Team Europe” approach was mentioned as one example of a means to reduce fragmentation. Several colleagues called for better accountability mechanisms: a particular challenge given the uncertain character of GPG investments.
Another passionate call for change came from Ngozi Okonjo-Iweala, who reminded us of the short-falls in the provision of GPGs and the corresponding financial and socioeconomical costs, with bills for global disasters reaching billions and trillions. As COVID-19 has demonstrated, the absence of preparedness financing mechanisms diminishes the value of every dollar spent on global development cooperation once disaster strikes. Hence, we must do much more to set in place proper governance and financing mechanisms. Most among us shared the view that we must move from a reactive to a proactive approach and that the unequal global risks are leading to a worrying erosion of trust among many developing countries. There was also wide agreement of the need to reposition the multilateral architecture to meet these challenges, so as not to further undermine all the progress in poverty reduction which has happened over the last few decades. Development agencies will have to play their part to address these needs. To do so, colleagues highlighted how we need to overhaul our current business models and forge new partnerships to meet the unprecedented challenges of our time.
The importance of leveraging the private sector: What can we do for aspirations to become reality?
Leveraging the private sector with aid money is often seen as key for the success of the SDGs, and a crucial tool in addressing global challenges. However, even pre-COVID-19, the amount of private financing that was leveraged through official financing remained far below the promised “billions to trillions”. Most development agencies are stepping up their ambition and funding to leverage private flows but, as shown by a survey conducted by CGD colleagues to evaluate the use of blended finance by bilateral aid agencies, this effort is still work in progress (findings will be published early next year). Colleagues identified two big obstacles limiting the use of blended finance: the shortage of commercially viable projects and the lack of in-house expertise in bilateral agencies. Linking back to the previous discussion on GPGs, some raised concerns about greenwashing, while others pointed to the need for more rigorous impact systems and transparency. Many colleagues agreed that so far, blended finance has under-delivered. Development leaders expressed a lot of interest in partnering with development finance institutions (DFIs) and other stakeholders and the need for building up in-house expertise in blended finance. It was also agreed that a forum for bilateral agencies to exchange experiences and lessons learned with blending is much needed. Our discussions were an important first step for more transparency on blended finance, but further conversations will be required for concrete steps to be taken. Together with our partners, CGD will take this forward and work with others to enable these much-needed discussions. At next year’s DLC, fostering deeper partnerships between DFIs and bilateral agencies will be at the center of the discussions.
Outlook: a key moment to act as a community
The Development Leaders Conference 2021 enabled a much-needed discussion on our priorities in unprecedented times, while the scale of global challenges reminded us of the need to act as a community.
Participants agreed on the need for a paradigm shift of development cooperation and the urgency of repositioning of our business model. Global development is more uncertain and complex than ever before, and there is an urgent need to think outside the box and build bridges with both domestic and international audience on why this agenda matters.
It’s been energizing to see the willingness of participants to rethink their approach and to witness the spirit of global collaboration in this moment of crisis. We’re excited to contribute to the next stage of these discussions until we meet again – hopefully back to an in-person format – for the next iteration of the DLC, which will be co-hosted by the AFD (Agence Française de Développement).
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.