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Jonathan GlennieSenior research fellow
Seoul, 13-15 May 2013
MICs and the future of development cooperation
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1. The MIC category in a changing international context
2. Implications for international development cooperation: 2 scenarios
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)
1. The MIC category in a changing international
context
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Human development and income/capita (Hans Rosling)
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Arbitrary (and stingy) cut-off points
Middle income countries
Low income (LIC)
Lower middle income (LMIC)
Upper middle income (UMIC)
High income (HIC)
$1000 or less
$1000 -
$4000
$4000 -
$12500
$12500 or
more
“Is it not time for these arcane
income thresholds for ‘graduating’
from ‘low-income’ status to be laid
to rest?”
Martin Ravallion, Director, Development
Research Group, The World Bank
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Countries graduating to MIC status since 2000
(There are now only about 30 LICs left)
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Historically, progression has not been linear
1978 1990 2003 2012LIC 27 48 61 36LMIC 54 50 56 54UMIC 40 35 37 54HIC 30 44 54 70LDC 30 43 50 48World 151 177 208 213
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Annual world GDP (PPP) growth rate (3-year moving average)
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The end of poverty?
(Source: World Bank)
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Where do poor people live?(Sumner A, “Another bottom billion”,
2010)
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Poverty is persistent in fragile states
(Kharas and Rogerson, “Horizon 2025”, 2012)
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Aid from MICs is about $15bn and rising (plus much non-monetised)
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SSC and private funds are complementing traditional “aid”
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Post 2015 = Sustainable development
(Green D. From Poverty to Power, Oxfam, 2012)
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An expanding set of objectives
Already agreed goals
Possible future goals
MDGs Climate
finance
SDGs Broader
Poverty eradication
Adaptation and mitigation
Equitable use of natural resources and ecosystem management e.g. forests, oceans
E.g. technological connectivity, security
“Development only really begins
when extreme poverty is
eradicated.”
Adolf Kloke-Lesch, former managing director
at GIZ, Germany
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2. Implications for development cooperation
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Development cooperationFinancial and non-financial
Development cooperation (broadly defined)
Financial development cooperation
Innovative
MultilateralBilateral
Private
Non-financial development cooperation
(Glennie J, “From Poverty Eradication to Sustainable Development”, 2012)
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Recap
1. New context (power and poverty)
2. New actors/flows (public and private)
3. New challenges (planetary limits)
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Scenario 1: Traditional viewAid declines in the medium term
• Half of remaining LICs likely to “graduate” in next ten years, leaving only fragile states (and making MIC category even less useful)
• MICs will graduate from grants towards loans and blended finance, private flows
• Normal trading relations emerge between countries
• Aid becomes history
“There is basically no role for
international development
cooperation in middle income
countries.”
Paul Collier, author of “The Bottom Billion”
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Scenario 2: Challenging orthodoxyA transformation in international public
finance
• Orthodox definitions of poverty are narrow, the MIC category is arbitrary; global inequalities are still vast; most poor people today live in middle income countries
• International presence (incl. civil society) can prove crucial for incentivising the kind of progress necessary in MICs
• Sustainable Development and Global Public Goods emerge as the major framing theories of the 21st century – MICs need to develop more sustainably = more expensive
• “Non-traditional” sources of development finance continue to proliferate including: South-South Cooperation; Innovative sources (taxes); Private funds
“the evaluation [of aid to Colombia] found that in certain
fields – such as the environment, institutional
strengthening, and productive system support, as well
as problems related to the struggle against inequality,
internal displacement and human rights violations –
the selective use of aid financing, expertise and
shared experience was ‘a determining factor in
achieving better development results’”
(Wood et al, 2011)
“What is relevant is not so much the direct effect
of the amount of resources channelled by aid,
but the role that international cooperation may
play in modifying the framework of incentives
in which agents operate.”
Jose Antonio Alonso, Complutense
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The vast majority of poor people continue to live in Low Aid Countries
(Glennie J, What if ¾ of the world’s poor live (and have always lived) in Low Aid Countries”, 2012)
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10 most poor-populous countries
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Aid to MICs is likely to be increasingly effective (VFM)
LIC
UMIC
Need
LMIC
Effectiveness
(Glennie J, “The role of aid to MICs, 2011)
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A global public sector: mutual benefit, mutual cost
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Thanks for listening.