International Cooperation and Development - Elcano Royal Institute empty_context Copyright (c), 2002-2018 Fundación Real Instituto Elcano Lotus Web Content Management <![CDATA[ Global norms, gender equality and development cooperation: the need to build on strong local support to change gender relations ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari58-2019-engbergpedersen-global-norms-gender-equality-development-cooperation-need-build-strong-local-support-change-gender-relations 2019-05-22T12:47:03Z

Do global norms on gender equality diffuse to all corners of the world? Based on a study of major organisations in international development cooperation this seems questionable.

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Theme1

Do global norms on gender equality diffuse to all corners of the world? Based on a study of major organisations in international development cooperation this seems questionable.

Summary

Much work is undertaken to establish global norms, not least in development cooperation. The 2030 Agenda and its 17 Sustainable Development Goals constitute a recent example, but to what extent do they influence development activities in individual societies? A study of how development organisations engage with global gender equality norms demonstrates that these organisations cannot avoid addressing the norms, but they do so in substantially different ways. Thus, global norms seem to diffuse only symbolically, whereas their specific contents are twisted and changed according to circumstances. Policy makers and stakeholders should acknowledge this and find local support to promote global norms on gender equality.

Analysis

International development cooperation is a field of norm production and engagement. International meetings, negotiations and declarations provide an important framework for concrete development cooperation. For many years, actors have come together to discuss both the objectives and the instruments of development cooperation which could, accordingly, be seen as a field of excellence when it comes to norm diffusion. Some have argued that development organisations are ‘carriers’ of global norms seeking to use them and support them in projects and programmes and thereby bring them to most parts of the world2.

International discussions of gender equality go a long way back and from the mid-1970s to the mid-1990s many substantial declarations were adopted to specify a whole variety of principles, objectives and issues under the heading of gender equality. These agreements have provided frameworks stimulating the consideration of gender equality in development initiatives across the globe. However, gender equality has been described as an ‘empty signifier that takes as many meanings as the variety of visions and debates on the issue allow it to take’3. Accordingly, the term allows for interpretation, ‘translation’ and very diverse activities supposed to strengthen gender equality.

This is amplified by the fact that gender equality is a deeply political issue. While much can be done by changing traditional practices and ideas marginalising women but being of little benefit to men, there are also substantial issues of distribution of resources and opportunities from which men gain at the expense of women. Thus, global norms on gender equality are not harmless, but may challenge the existing distribution of advantages and disadvantages.

This analysis summarises some findings from a research programme studying specific development organisations and how they engage with global norms on gender equality. The cases have been selected to cover some of the diversity in contemporary development cooperation and include AMEXCID (Mexico), Danida (Denmark), Islamic Relief, Oxfam GB, South Africa’s Development Cooperation, the Bill and Melinda Gates Foundation, and the World Bank. This selection of development organisations comprises both newer and older organisations; governmental, non-governmental and multilateral institutions; and agencies from the global South and North. As such, the organisations cover a wide range of large aid agencies taking a comprehensive view on development.

The analysis begins with some points about the nature of global norms on gender equality. Subsequently, it turns to major observations from the study of development organisations and, finally, it discusses the future of the struggle for gender equality. This struggle is and should be local and contextualised, but development organisations may provide a helping hand.

The global normative regime on gender equality

Apart from rather few, very specific issues (eg, women’s suffrage), global gender equality norms consist of relatively diffuse, changing, sometimes contradictory, and often contested ideas about gender equality. The norms are diffuse in the sense that they can be interpreted in different ways. For instance, the question of whether women’s equal access to the labour market should imply parental leave for men may be interpreted very differently in distinct societies. Moreover, the very fundamental notion of gender equality may be differently understood as equal rights and opportunities, as making room for different gender identities or as deconstructing gender stereotypes.

Furthermore, gender equality norms are changing4. Also in the field of labour markets, norms have moved from emphasising the protection of women to viewing such practices as further marginalising women5. Likewise, norms regarding women’s political participation have changed from a focus on suffrage and access to political office to an equal number of political positions for women and men6.

An example of the contradictions between different aspects of these norms is the relationship between gender-balanced decision-making and gender mainstreaming, particularly as a consequence of their respective development since the Beijing conference in 1995. Whereas gender mainstreaming was then seen as a broad encompassing framework for many elements in gender equality, it has become a more technical term in development cooperation associated with the implementation of projects and programmes. It draws attention away from political processes and suggests that gender equality can be achieved with technical means in depoliticised development activities. Gender-balanced decision-making, on the contrary, is a clear political objective implying that more women and fewer men will have a seat at the table.

The issue of sexual and reproductive health and rights (SRHR) is especially contested7. In international negotiations the issue continues to provoke resistance from a so-called unholy alliance composed of the Vatican, certain Islamic states, sometimes the US and recently Russia, whereas other countries (eg, Denmark) regard it as a primary concern to promote. The fact that one of the targets of SDG 5 refers specifically to SRHR is counted as a major achievement by some, given that the annual sessions of the Commission on the Status of Women repeatedly constitute a battleground, with SRHR among the most fiercely debated issues.

All in all, it is not possible to fix a particular meaning of global gender equality norms8. They do not constitute a coherent, unambiguous body of ideas about gender relations. Even so, this is not to say that ‘anything goes’. Certain practices and institutions are at odds with most (though not necessarily all) interpretations of gender equality norms. One may describe global gender equality norms as an ambiguous normative regime, open to interpretation, seeking to address gender-based discrimination; but despite the formal international agreements that it builds upon, the regime covers a wide range of interpretations, some of which clearly disagree over what can be described as acceptable or unacceptable gender-related practices. This obviously weakens the regime.

The origin, culture and structures of organisations

Turning to the question of how development organisations engage with these global norms, a first observation is that the history and the purpose with which these organisations were first established clearly influence how they take up questions of gender equality. When actors engage with norms in particular organisational contexts, this is done amid layers of practices, rules and ideas embedded in the institutional history. Having an historically religious, entrepreneurial, banking, anti-apartheid, ministerial or voluntary origin greatly shapes how gender equality will be conceptualised within an organisation. The framing of gender equality is highly dependent on how the organisational culture legitimises different arguments, ideas and concerns9.

Within the World Bank, the (re)turn to ‘gender equality as smart economics’ gained legitimacy and credibility by being framed in a way that was particularly appealing to the dominant logic of economists. Around 2000 a number of micro-economic studies emphasised gender in relation to the allocation of resources within households, making gender a legitimate research subject amongst micro-economists. Later, over the next decade, economists at the World Bank began to focus on different evaluation techniques, including randomised control trials, and micro-economic concerns increasingly dominated the Bank’s knowledge production. When economists were brought into the gender group in order to produce the Gender Action Plan in 2006, not only had an overall positive relationship between women’s activities and development outcomes already been established, but gender had become an important and acknowledged issue in the analysis of micro-economic processes. However, the way that gender-related issues were framed at the Bank clearly sought to fit its original purpose and organisation. Gender was interesting not in itself, except insofar as it helped to explain resource allocation and development outcomes.

Similarly, gender equality norms have had to assimilate to the dominant organisational culture characterised by ‘quantitative impact measurement’ and ‘technology-as-progress’ mantras at the Bill and Melinda Gates Foundation. With the help of strong norm entrepreneurs and support from top management, gender was taken up and turned into a Gender Impact Strategy in 2008. However, gender equality proponents were careful to frame their concerns in line with the foundation’s origin and basic orientation ‘as something “right and smart” to do, not in a moral sense, but rather through the aim of increasing impact and results. Institutionalising gender equality notions should thus not be perceived by the programme officers as a new requirement being imposed, but rather as a logical extension of the foundation’s mission and nature’.

Its origins have also marked the ways in which Islamic Relief Worldwide has approached gender equality. Despite the fact that this NGO –one of the largest Muslim NGOs in the world today– has changed fundamentally, both quantitatively and qualitatively, since its creation by two medical students in 1984, its original purpose of channelling religious alms and donations to needy Muslim communities (as basic relief and support for the celebration of religious holidays) has framed how norm entrepreneurial staff members have sought to promote gender within the organisation. Three simultaneous processes characterise how global gender equality norms are addressed in the organisation: bridging, thinning and parallel co-existence. Norm entrepreneurs have done much to bridge global ideas about gender equality with their conservative Muslim counterparts, both by downplaying potentially provocative elements and by challenging religious authorities to rethink common Muslim ideas and interpretations of the Qu’ran. However, and particularly during the move from headquarters to country programmes, gender equality norms have been weakened to the extent that anything even slightly related to women has come to be described as gender-related activities. Moreover, clearly distinct normative ideas about women, gender and family co-exist within the organisation, due in part to organisational structures and insufficient communication across departments.

Contingent factors: organisational pressures and priorities

When norms are addressed within organisations, they are strongly influenced by the organisational pressures and priorities prevailing at the given time and place. Such pressures and priorities include management concerns and organisational threats or opportunities that staff may see as overriding the more immediate daily purposes of their work. Particularly in relation to new projects and policy-making, organisational pressures and priorities tend to set a determining framework for organisational processes. Organisational leaders may assess sudden significant windows of opportunity as being central to their organisation, but threats to organisational survival and organisational change are typically at the top of leaders’ and managers’ agendas. Thus, staff perceptions of both formal and informal priorities can influence whether and how gender equality norms acquire strong focus within concrete development programmes. When Warren Buffett granted US$30 billion to the Melinda and Bill Gates Foundation in 2006, that action sharply reframed the organisational context into which gender equality norms were being introduced at the time. In some organisations, disbursement pressure is significant, while gender equality is rarely a concern that can move a lot of money quickly. Conversely, thanks to continuous administrative cuts at the Danish Ministry of Foreign Affairs, one significant organisational priority shaping the context of a new gender equality policy was that it require as little administrative capacity as possible.

Organisational culture and history do not change rapidly over the course of years or even decades. The organisational history of the Bill and Melinda Gates Foundation, for example, reveals it to be deeply embedded in private sector practice and thought, with a strong belief in technology and measurability as cures for the world’s illnesses1011. Such cultures are not easily challenged or transformed. On the other hand, organisational pressures and priorities can experience rapid change as a consequence of change in leadership, or through the influence of stakeholders, or shifts in the normative environment. This is frequently the case with public aid agencies, where elections are a regular source of disruption in political priorities and a source of organisational pressures. At Oxfam GB, recent discussions of gender equality and its conceptualisation have been heavily influenced by both organisational restructuring and funding pressures. The Oxfam family is changing its organisational set-up in a strategic process lasting into 2020, and this is seen by staff as the paramount concern of top managers. At the same time, Oxfam’s fundraising has been challenged both politically and through increased competition. All this has led to the conceptualisation of a gender-related programme that has been likened to a tumbleweed –blown in all directions and never settling down12.

Normative environments

Normative environments refer to actors sharing organisational or social spheres with the organisation in question. These environments are characterised by specific values that influence the organisation, even though actors in normative environments may have no relation of formal authority with the organisation13. Actors may be part of a similar institutional or organisational field, or else be perceived as legitimate stakeholders, such as those representing civil society, the media or academic environments. Normative environments encourage particular forms of actions, logics and goals, and they may accordingly favour particular kinds of norm engagement, exerting indirect power through knowledge, legitimacy or prestige.

Responses to such forms of pressure from the normative environment may take many forms. ‘Decoupling’ is a central idea14, according to which organisations disconnect foreground (symbolic) changes from more structural or procedural changes in the organisation’s machinery. Pressure from (perhaps several different) normative environments creates multiple, often conflicting demands to which the organisation is expected to respond in timely fashion, which is not always possible. Moreover, public aid agencies are expected to respond simultaneously to the national political environment and the normative framework espoused by the international community of aid agency peers.

Several of the case studies emphasise how different normative environments entail the bridging of very distinct, sometimes contradictory sets of norms in order to appeal to different audiences. In building its identity as a regional development partner, South Africa is navigating between the normative environments of liberal internationalists (who believe that the country’s regional leadership would be best pursued through the promotion of human rights and democracy) and constituents (primarily concerned with non-interference and anti-imperialist discourses). Moreover, historical contestations in South Africa between feminists and nationalists over the meaning and interpretations associated with gender issues continue to shape gender discussions among actors inside and outside the administration (Cold-Ravnkilde, forthcoming).

In the case of Mexico’s Agency for International Development Cooperation, or AMEXCID, debates around gender equality and women’s rights are introduced and framed to simultaneously resonate with and address a national crisis of feminicide15. By emphasising its own national historical experiences with (unsuccessfully) addressing violence against women, gender policy-making has come to form an important part AMEXCID’s identity as a development partner in the region. Mexico’s gender-related South-South cooperation seeks to appeal to domestic constituencies, the international donor communities and targeted partner countries in the region. The bridging of these normative environments is far from unambiguous, nor is it moving in a definite direction. Support as well as opposition may arise in unforeseen ways and influence the ongoing framing of gender equality.

Conclusions

What does all this mean for the struggle to create a more gender-equal world? First, as international development cooperation is a field of norm production, policy makers and development organisations should be aware of the importance of international meetings, negotiations and declarations framing development discussions and policies. The current international normative struggles concerning the issue of sexual and reproductive health and rights clearly weaken the scope for promoting this significant aspect of gender equality. Thus, policy makers should invest efforts in global norm production.

Secondly, global norms on gender equality allows, however, different interpretations, implying that reticent governments and societal actors can legitimately interpret the norms in ways not producing the changes that, eg, women’s organisations sought when they fought for the adoption of the norms. Thus, women’s organisations and local organisations advocating gender equality are needed to put pressure on governments in order to ensure an interpretation of global norms that will correspond to their needs and concerns. Global norms do not diffuse automatically and political change does not come about easily. It requires work and political struggle.

Thirdly, even so-called ‘norm carriers’ like development organisations engage with global norms in very different ways shaped by their history, their normative environments and contingent factors. This has several implications. It is futile to expect, for instance, a bank concerned with growth and production to be a leader in political change enabling gender equality. Rather one should expect it to twist the issue to something manageable and understandable for itself, exactly like the World Bank has done when turning gender equality into a matter of ‘smart economics’. Moreover, as normative environments may influence organisations there are sometimes opportunities for organisations advocating gender equality to put pressure on public and private institutions to take global norms seriously. However, institutions may pay lip service to the norms and decouple their concrete activities from their official policies. Thus, getting the right policies in place is rarely enough. It is also necessary to check how they are implemented. Finally, contingent factors may overrule most other concerns. In cases of political, organisational or economic crises, actors may be significantly circumscribed from or, sometimes, induced to take action. This may create windows of opportunity or seriously close them, and advocates of gender equality need to be aware of such contingent factors which may change rapidly again.

The future of gender equality is basically determined by the amount of strength and support that advocates of gender equality can mobilise. Global norms do not by themselves create a more gender-equal world, but they do constitute reference points which can be used in local struggles everywhere to create more equal and fair relations between women and men. If development organisations take gender inequalities seriously, identify locally embedded actors and provide flexible, pragmatic support, they may significantly facilitate these struggles. As gender inequalities are lived and experienced in everyday life, it is also in those specific situations that they should be changed. This requires strong and sustained actions by women’s organisations and everybody else, including policy makers and development practitioners, who want to change one of the biggest and most tenacious injustices in the world.

Lars Engberg-Pedersen
Senior Researcher and Research Coordinator, Danish Institute for International Studies | @l_engberg


1 This analysis and the related debates organised by the Elcano Royal Institute in Madrid are part of a series of “sustainable development dialogues” which are funded by the Spanish Ministry of Foreign Affairs, European Union and Cooperation.

2 Swiss, L. (2018) The Globalization of Foreign Aid: Developing Consensus, Routledge, London.

3 Verloo, M., & E. Lombardo (2007), 'Contested gender equality and policy variety in Europe: introducing a critical frame analysis approach', in M. Verloo (Ed.), Multiple Meanings of Gender Equality: A Critical Frame Analysis of Gender Policies in Europe, Central European University Press, Budapest, p. 21-49.

4 Van Eerdewijk, A., and C. Roggeband (2014), 'Gender equality norm diffusion and actor constellations: a first exploration', in A. Van der Vleuten, A. Van Eerdewijk & C. Roggeband (Eds.), Gender Equality Norms in Regional Governance: Transnational Dynamics in Europe, South America and Southern Africa, Houndmills: , Palgrave Macmillan, Houndmills, p. 42-64.

5 Zwingel, S. (2016), Translating international women's rights: the CEDAW Convention in context, Palgrave Macmillan, London.

6 Krook, M.L., & J. True (2012), 'Rethinking the life cycles of international norms: the United Nations and the global promotion of gender equality', European Journal of International Relations, vol. 18, nr 1, p. 103-127.

7 Kabeer, N. (2015), 'Tracking the gender politics of the Millennium Development Goals: struggles for interpretive power in the international development agenda', Third World Quarterly, vol. 36, nr 2, p. 377-395.

8 Zwingel, S. (2019), Gender equality norms in international governance – actors, contexts, meanings', in L. Engberg-Pedersen, A.M. Fejerskov & S. M. Cold-Ravnkilde (Eds.), Rethinking Gender Equality in Global Governance: the Delusion of Norm Diffusion, Palgrave Macmillan, Basingstoke

9 Mosse, D. (2004), 'Is good policy unimplementable? Reflections on the ethnography of aid policy and practice', Development and Change , vol. 35, nr 4, p. 639-671.

10 Fejerskov, A.M. (2017), 'The influence of established ideas in emerging development organisations: gender equality and the Bill and Melinda Gates Foundation', Journal of Development Studies, vol. 53, nr 4, p. 584-599.

11 Fejerskov, A.M. (2018), 'Development as resistance and translation: remaking norms and ideas of the Gates Foundation', Progress in Development Studies, vol. 18, nr 2, p. 1-18.

12 Crewe, E. (2018), 'Flagships and tumbleweed: a history of the politics of gender justice work in Oxfam GB 1986-2015', Progress in Development Studies, vol. 18, nr 2, p. 110-125.

13 Meyer, J.W., & R. W. Scott (1983), Organizational Environments: Ritual and Rationality, Sage, Beverly Hills, CA.

14 Meyer, J.W., & B. Rowan (1977), 'Institutionalized organizations: formal structure as myth and ceremony', American Journal of Sociology, vol. 83, nr 2, p. 340-363.

15 Sørensen, N.N. (2018), 'Diffusing gender equality norms in the midst of a feminicide pandemic: the case of AMEXCID and decentralized Mexican South-South cooperation', Progress in Development Studies, vol. 18, nr 2, 95-109.

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<![CDATA[ Aid Power and Politics - How do international-relations theories explain aid policies? ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/video-aid-power-politics-how-do-international-relations-theories-explain-aid-policies 2019-05-21T05:29:50Z

The ‘Aid narratives project’ explores diverse political arguments behind development cooperation. This analysis is framed in an international context where the basic grounds of this public policy are under debate, or even contested.

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El proyecto sobre “Narrativas de la ayuda” explora distintos argumentarios políticos tras la cooperación al desarrollo, en un contexto internacional en el que las bases mismas de esta política pública están a debate, o incluso en entredicho. En este argumentario se encuentra el potencial de la ayuda para el ejercicio del poder o la influencia internacional.

Esta idea acerca del poder de la ayuda ha sido debatida en el seminario internacional Aid power and politics, que reunió a académicos y expertos en el Real Instituto Elcano en octubre de 2018. Los contenidos de este seminario se recogerán en un libro de próxima publicación, y se resumen en esta lista de vídeos (los otros dos estarán próximamente disponibles), así como en otras publicaciones del Real Instituto Elcano.

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The ‘Aid narratives project’ explores diverse political arguments behind development cooperation. This analysis is framed in an international context where the basic grounds of this public policy are under debate, or even contested. Among the arguments in the case for aid, we can find the potential of aid for the exertion of international influence or power.

This idea on aid power was discussed in the international seminar ‘Aid power and politics’ that gathered academics and experts at the Elcano Royal Institute. The contents of this seminar, held in October 2018, will be gathered in collective book to be published in August this year. These contents are also summarised in this video list (two additional ones will follow shortly) as well as in several publications by the Elcano Royal Institute.

YouTube. Real Instituto Elcano / Elcano Royal Institute Play list: Aid Power and Politics

Ver también / See also:

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<![CDATA[ Target 2030: illicit financial flows ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari81-2018-cobham-target-2030-illicit-financial-flows 2018-06-26T06:23:03Z

Target 16.4 in the UN Sustainable Development Goals is a global commitment to reduce the level of illicit financial flows. The target stands as a great achievement by civil society organisations, but there remain critical challenges, both technical and political, if progress is to be realised.

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Also available the Spanish version: Objetivo 2030: los flujos financieros ilícitos

Theme

Target 16.4 in the UN Sustainable Development Goals (Agenda 2030) is a global commitment to reduce the level of illicit financial flows and the damage they do. The target stands as a great achievement by civil society organisations, bringing a complex set of issues from the wilderness to the international agenda. But there remain critical challenges, both technical and political, if progress is to be realised.

Summary

‘Illicit financial flows’ is an umbrella term which covers cross-border movements related to tax avoidance, tax evasion, regulatory abuses, bribery and the theft of state assets, the laundering of the proceeds of crime and the financing of terrorism. While international organisations had been somewhat active in relation to grand corruption and money laundering, it was only with the growing drive of civil society organisations from the early 2000s that the focus shifted to reflect the importance of tax-motivated flows.

Because the necessary expertise was also concentrated there, civil society can claim an unusually large degree of credit for two key differences between the Sustainable Development Goals framework and their predecessor the Millennium Development Goals, which ran from 2000 to 2015. While the latter completely overlooked any role for taxation in development, the new Agenda 2030 not only includes a target devoted to reducing illicit financial flows but also establishes the importance of tax as the primary target in goal 17, related to the overall implementation.

Target 16.4 is not the end of the story, however. Perhaps because of a lack of deep expertise among policymakers and international organisations, both the target and the outline indicator on illicit financial flows suffer from poor drafting. The indicator is likely to be among the last to be confirmed in the entire framework and substantial technical challenges remain. But there are now concrete proposals on the table and an active process underway to test and confirm their potential.

Analysis1

This brief paper aims to provide a background to the Sustainable Development Goals target 16.4. To that end, it contains three main sections. The first explains the rise of the tax justice movement and of the related umbrella term ‘illicit financial flows’ as a case study in both civil society influence and Southern leadership in international policymaking. Evidence on the scale and impact of illicit flows is also briefly surveyed here.

One of a number of key successes has been the achievement of target 16.4 itself; but this has also brought to the surface a series of technical and political challenges that are yet to be fully resolved. The second section addresses these challenges.

Finally, the third section presents the proposed indicators for target 16.4 which are currently under discussion in the UN process. Despite the inevitable difficulties of providing summary indicators for such complex phenomena, and of doing so in such a way that policy progress can be meaningfully assessed and policymakers held accountable, there are reasons to be broadly optimistic. The success of the tax justice movement over the past 15 years has laid the grounds for the necessary transparency.

(1) The rise of tax justice and IFF: a brief history

(1.1) The roots of tax justice

When the Millennium Development Goals (MDGs) were under discussion in the late 1990s, tax was a sorely neglected issue in international development research and policy analysis. On top of that, there is some truth in the caricature of the MDGs as entirely donor-led, so the complete absence of tax from the framework eventually adopted was neither altogether surprising nor seriously contested. But the MDGs did, however, contribute to a powerful dynamic that the next time –if there was to be one– there would have to be genuine ownership among countries at per capita income levels.

By the time of the MDGs’ launch in 2000, however, a progressive agenda around tax had begun to emerge. This was most obvious in the UK, where Oxfam published the first paper on the threat posed to development by ‘tax havens’, estimating a revenue loss of US$50 billion a year, and the still-new government of Tony Blair released a white paper on globalisation which highlighted variously the importance of taxing multinationals, ‘an important mechanism for sharing the gains from globalisation between rich and poor countries, and for reducing poverty’ (p.57), that offshore financial centres ‘can offer cover for tax evasion, capital flight and the laundering of illegally acquired funds that can be particularly harmful to developing countries’ (p.58), and identifying transparency as an important part of the solution.2

Over the next few years, discussions grew in intensity internationally, not least via the European Social Forum. As a direct result, in 2003, the Tax Justice Network (TJN) was formally established as a network of experts and activists in all walks of tax and policy life: economists, lawyers, accountants, political scientists and more, many of whom had professional experience in public policy, academic research and campaign activism. The set of related concerns is a wide one, but at its core are three overlapping issues: (1) the scale of tax evasion and tax avoidance; (2) the pivotal role of tax havens; and (3) the resulting damage to human rights and human development, globally.3

By 2005,4 TJN had laid out the core policy platform that would, 10 years later, become the entire basis for the global policy agenda –that was initially written off as utopian and unrealistic–. This platform is the ABC of tax transparency:

  1. Automatic, multilateral exchange of tax information.
  2. Beneficial ownership (public registers for companies, trusts and foundations).
  3. Country-by-country reporting by multinational companies (public).

At the same time, the ‘4Rs of tax’ had begun to be established as a framing of the positive benefits that effective and just tax systems can provide:5

  1. Revenue: the central importance of tax in ensuring that governments can provide administrative functions and core public services.
  2. Redistribution: tax, along with the direct and indirect transfers that tax revenues provide for, is the key mechanism by which societies can limit gross inequalities in income, wealth and opportunity facing individuals and also groups (including by gender, ethnolinguistic group and disability).
  3. Re-pricing: the potential of effective tax systems to ensure that market prices fully reflect social costs and benefits (eg, of tobacco consumption or carbon emissions).
  4. Representation: perhaps least appreciated but most important is the role of tax in building the social contract between citizens and with the state. The share of tax revenues (and direct taxes most of all) in government expenditure is one of the few indicators consistently associated with improvements in governance. When states increase their reliance on taxing citizens, the prospects are not only of more revenue but –crucially– that the revenues will be better spent, reflecting social preferences through enhanced political representation.

(1.2) A new umbrella term: illicit financial flows

In 2005 the US businessman Raymond Baker published a book about his experience of blatant tax abuses by multinational companies during his many years working in Nigeria and elsewhere in sub-Saharan Africa.6 The NGO he established, Global Financial Integrity (GFI), went on to popularise the term ‘illicit financial flows’ to refer to the wider range of phenomenon that the UK white paper had bracketed together: tax abuses, corruption and the laundering of the proceeds of crime. Crucially, Baker argued that the ‘old’ agenda of corruption as a problem of lower-income countries was responsible for just a limited percentage of the overall total –while tax-related behaviour, including trade price manipulations by multinational companies, was the greatest part–. In this way, and through GFI’s subsequent estimates of around US$1 trillion a year of illicit financial outflows from lower-income countries, the umbrella term IFF came to popular usage.

Inevitably, such estimates are associated with a high degree of uncertainty: (1) because they attempt to quantify phenomena which are by their very nature deliberately hidden; (2) because they seek to estimate a wide range of phenomena with a single methodology; and (3) because they rely on publicly available information which is unfortunately limited.7 But they have clearly contributed to keep illicit flows in the spotlight.

Alternative approaches have tended to focus on individual IFF types. Estimates of undeclared offshore assets have ranged from around US$8 trillion to as much as US$32 trillion, with associated revenue losses conservatively estimated to approach US$200 billion annually. The greatest research focus has been on the tax avoidance of multinational companies, with estimates by IMF and Tax Justice Network researchers of around US$500 billion to US$600 billion annually, of which around US$200 billion is suffered by lower-income countries –representing a disproportionately large share of their actual tax revenues–.8

Figure 1. The impacts of illegal financial flows

The impacts of illicit financial flows are many and varied, but the common element is that IFF are corrosive to the state’s legitimacy and capacity to act, which in turn undermines the achievement of human rights and development. Figure 1 above highlights just some of these effects, and two key categories can be identified.

Most simply, IFFs weaken state revenues. Global estimates of the losses to multinational tax avoidance and individual tax evasion through undeclared offshore assets run into the hundreds of billions of US dollars each year. While the losses are likely greatest in absolute terms in the richest economies, the losses are most intensely felt in lower-income countries. To be specific, the losses are estimated to account for a systematically higher proportion of current tax revenues in lower-income countries.9 Since these are also the countries with lower per capita spending on crucial public services such as health and education, it is likely that in addition the losses translate most directly into forgone human development progress. Non-tax IFF will also aggravate the impacts, through the diversion of economic activity into illegal markets when they generate hidden profits and through the diversion of public assets for private gain. More broadly, markets will work less well, rent-seeking activities will proliferate at the expense of productive activities and so economic growth is also likely to be inhibited.

The second category of IFF impact is on governance –and therefore on the likelihood of any given revenues being well spent–. The damage here occurs in multiple ways. Illegal market IFFs such as those related to drug trafficking are also associated with a loss of state control and even legitimacy, as criminal actors become more powerful. Grand corruption moves a state along the spectrum from a broad-based provision of public benefits to private capture. Tax-related IFFs compound the issue. IFFs militate against effective taxation and against direct taxation in particular –thus undermining the most important of the four Rs of tax, a representative state. The evidence shows, for example, that governments more reliant on tax revenue are not only likely to spend more out of each dollar of revenue on public health, but that independently of the financing level public health systems are also likely to achieve greater coverage.10

And so, countries facing higher IFF are likely to exhibit higher inequalities, weaker public services, poorer governance, lower growth and –above all– markedly worse prospects for the progressive realisation of human rights.

(1.3) Southern leadership and a new consensus

In this context, it was perhaps surprising that the post-2015 framework has come to differ so sharply from the MDGs. There are at least three major differences between the MDGs and the Sustainable Development Goals (SDGs). These can be summarised as ownership, implementation and inequality.

In terms of ownership, the MDGs were caricatured as a creature of the donors, a plan to spend aid for the achievement of limited improvements in some basic human outcomes. While not entirely unfair, such a characterisation does not do justice to the substantial progress that was achieved over the period on extreme poverty measures –nor to the growing ownership among lower-income country policymakers over the period–. Nevertheless, the frustration of many was clear, and it was evident before the post-2015 discussions began in earnest that no repeat would be permitted. The SDGs would reflect much more than a limited donor agenda of meeting basic needs.

This shift is reflected clearly in implementation. Where the MDGs contained no verifiable targets for higher-income countries, neither in terms of their own human development progress nor in terms of their contribution to others, the SDGs are universal in coverage and include clear measures reflecting both national and international implementation responsibilities. And where tax was not even mentioned in the MDGs, it provides the very first target in implementation goal 17.1. This also reflects the logic of aid-recipient-countries’ determination to exert greater ownership.

Finally, the topic of inequality was almost entirely absent from the MDGs. Arising at a moment when the progressive challenge to the World Bank’s extreme-poverty focus was the UNDP’s Human Development Index (fighting to ensure extreme lack of income was at least joined by consideration of extreme lack of health and education), the MDGs inadvertently incentivised an approach that targeted the easiest first. The greatest progress could be made by shifting the members of a population nearest the poverty line in question, above it –while those furthest away could be left for some later time–.

The SDGs, in contrast, speak of inequalities in every breath. The mantra of ‘leave no one behind’ is resoundingly backed by a framework that, for many goals, rewards no progress that is not fully shared by the most marginalised groups. While proposed targets on individual inequality were heavily diluted or excised, the issue remains central: and with it, a hugely important and as yet unmet commitment to ensure the data are available to hold policymakers accountable.11

Within this set of shifts, Southern leadership was perhaps most powerfully demonstrated in the issue of IFFs. In the early MDG period at least, ‘corruption’ featured as a reason why aid was not more effective. The Corruption Perceptions Index came to great prominence despite its reliance on the perceptions of a small, international elite and its high correlation with per capita incomes –to say nothing of giving top marks to the likes of Switzerland and Singapore, now rightly seen as providing financial secrecy that drives corruption elsewhere–.12

The crucial moment in establishing IFFs on the international development agenda came with the formation of a high-level panel under the auspices of the UN Economic Commission for Africa and of the Africa Union, and chaired by former South African President Thabo Mbeki.13 The report of the High Level Panel on Illicit Financial Flows out of Africa, delivered after three years of evidence gathering and political engagement, does not shirk from identifying national and regional responsibilities but is also explicit about the critical roles played by financial secrecy jurisdictions such as Switzerland and by multinational companies, and hence about the international responsibilities of each.

With wider G77 and civil society support, the report created an irresistible basis for the inclusion of IFF in the post-2015 framework. The UN Secretary General’s own High Level Panel, co-chaired by the heads of state of Indonesia, Liberia and the UK, discussed illicit flows including multinational tax avoidance at length, and recommended an explicit, if vague target:

‘Reduce illicit flows and tax evasion and increase stolen-asset recovery by $x’.14

In the absence of any noticeable dissent, and with the energetic support of G77 members and many civil society organisations, the proposal was carried unopposed into the final SDG framework.

(2) Technical and political challenges: defining IFF

Regrettably, perhaps, the broad support for the thematic focus on illicit flows led to a failure to challenge the specific framing of the proposed target. The final target agreed globally, SDG 16.4, combined references to other illicit activity but kept the key features –namely, the emphasis on reducing the dollar scale of IFFs and the failure to disaggregate the umbrella term into its component parts–:15

16.4. By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime.

16.4.1. Total value of inward and outward illicit financial flows (in current United States dollars).

The direct result of this is that there are now significant technical challenges to establishing an agreed methodology for the single IFF indicator, 16.4.1 (or indeed to create space for additional indicators). To construct a single dollar-value indicator for all IFFs raises three problems.

First, such an approach requires consensus on a single methodological approach (and data sources) for a group of quite distinct phenomena that are unified only by the fact that they are deliberately hidden by using a range of financially opaque channels. All estimates are inevitably subject to some uncertainty and so reaching a consensus is inevitably fraught with difficulty.

Secondly, addressing the target and indicator to the umbrella term hampers the possibility of using more robust approaches to the estimates of some of the underlying components –potentially adding to the difficulty of reaching consensus on an estimation approach–.

Third, and perhaps most importantly for the prospect for progress, targeting the level of IFFs at a global level only risks having no meaningful accountability. Which policymakers, after all, can be held responsible for the global IFF trend? If outflow estimates can be disaggregated to the national level, there may be more meaningful accountability for the countries that suffer IFF –rather than those that are ultimately responsible for the financial secrecy and the multinational companies that drive IFF–. The following section lays out proposals currently under consideration in the UN process, which seek to address the technical challenges.

An important political challenge also exists. The indirect result of failing to disaggregate the umbrella term is that lobbyists have identified the potential to subvert the target, specifically by seeking retrospectively to remove the multinational avoidance element. This lobbying has been visible in the positioning of various OECD and EU countries in related UN processes, prompting conflict with G77 members and others.16 In the technical discussions of the SDG 16.4 indicators held in Vienna in December 2017, for example, the representative from a lobby group for multinationals, the International Tax and Investment Center, called repeatedly for the exclusion of avoidance.17

Some supporting voices have challenged the inclusion of avoidance on the grounds that the definitions used are sometimes unclear or contradictory,18 but that is to ignore the history of the term’s emergence and the pre-eminence given to avoidance in both the high level panels’ reports that underpinned the SDG agreement and the underpinning development of tax-justice issues.19 A contemporaneous independent expert analysis by the U4 Anti-Corruption Centre confirms the central role of counter-avoidance measures in the illicit flows discourse at the point the SDG target was agreed.20

We might try to construct an alternative view, in which the repeated emphasis on combating avoidance in the context of the post-2015 framework was somehow not intended to lead to the inclusion of avoidance in the IFF target. If we rule out the possibility that the high-level panels and many others were highlighting avoidance in order for it not to be included anywhere, then the remaining possibility would be that it was intended for avoidance to be addressed elsewhere in the framework. The only logical alternative to 16.4 would seem to be target 17.1, which addresses the level of tax in general:

17.1. Strengthen domestic resource mobilisation, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection.

17.1.1. Total government revenue as a proportion of GDP, by source.

17.1.2. Proportion of domestic budget funded by domestic taxes.

To the best of my knowledge, however, there was never a serious proposal by member states or a UN body, even for the level of disaggregation necessary to treat corporate tax here21 –to say nothing of revenue losses to multinational avoidance–. It is impossible, therefore, to conclude that the intention of the high-level panels and the subsequent member-state agreement was anything other than for multinational tax avoidance to be included under SDG 16.4.

(3) Concrete proposals for concrete progress

As things stand, the indicator/s for 16.4 will be among the last to be set. While lobbying pressure to exclude avoidance may not gain further traction, the technical challenges posed by the loosely drawn target remain substantial. A range of alternatives are discussed in our paper prepared for UNCTAD (with Petr Janský).22 Within the constraints of the current design we propose two indicators that reflect the breadth of tax-related IFFs and also include one major outcome of illegal market IFFs also (undeclared offshore wealth).

It is interesting to note that both indicators depend on data only now becoming available, following the work of civil society to promote the policy platform established in the early 2000s. Specifically, the two indicators rely on data generated by the ‘A’ and ‘C’ of the Tax Justice Network’s ABC of tax transparency.

(3.1) Profit shifting: SDG 16.4.1a

For IFFs related to multinationals’ avoidance of corporate income tax we propose an indicator of misaligned profits based on OECD country-by-country reporting data. A clear advantage of this approach is that the data should provide a precise measure for all multinationals above the OECD reporting threshold of the misalignment of profit away from the locations of real economic activity. Issues of estimation can therefore be set aside completely. Since profit shifting is made up of lawful and unlawful avoidance, along with criminal evasion, this will inevitably contain a degree of lawfully achieved profit misalignment. Since the agreed aim of the OECD Base Erosion and Profit Shifting process (BEPS) was to curtail the degree of misalignment, however, it is uncontroversial to embed this direction of travel in the SDGs (while reflecting that the value of the indicator consistent with IFF elimination need not be absolute zero).

The misaligned profit indicator is defined as the value of profits reported by multinationals in countries for which there is no proportionate economic activity of MNEs. It is defined for each jurisdiction and it can be summed across some or all countries, allowing both the global number required by the SDG indicator and also the disaggregation that will support accountability for individual governments –whether they obtain profit shifting or suffer it–.

(3.2) Undeclared offshore assets: SDG 16.4.1b

This policy measure is intended above all to address offshore tax evasion by individuals. The category of undeclared assets, however, –and hence the proposed indicator– should include the results of the great majority of illicit flows except those related to avoidance. With only certain exceptions, maintaining the success of the illicit flow will require continuing not to declare ownership of the results of offshore assets to the home authorities.

The proposal is to use aggregate data gathered under the OECD Common Reporting Standard (CRS), which requires financial institutions to confirm the citizenship of accountholders in order to exchange individual data with the home-country authorities. The undeclared offshore assets indicator is defined as the excess of the value of citizens’ assets declared by participating jurisdictions under the CRS, over the value declared by citizens themselves for tax purposes –in other words, the total offshore assets undeclared–.

Assuming participation by countries to report aggregate data, the indicator would also allow both a global total for SDDG reporting, and a country-level and bilateral breakdown to support accountability of policymakers, both in countries suffering tax evasion and in jurisdictions holding the underlying assets. In this paper we explore the potential of the two indicators if the UN framework requires a single indicator only –although separation is clearly desirable if allowed–.

Conclusions

The last two decades have seen the emergence of a powerful tax justice movement globally, led by civil society expertise and increasingly by policymakers of the global South. One significant marker of progress has been the establishment of a target to address illicit financial flows, including offshore tax evasion and the tax avoidance of multinational companies, as part of the Sustainable Development Goals. While technical and political challenges remain, progress on civil society’s policy platform for tax transparency means that the data is available to construct robust indicators with the potential to drive change by ensuring accountability at the national level –including the many jurisdictions that benefit from facilitating tax abuses and corruption elsewhere–.

Alex Cobham
Chief Executive, Tax Justice Network and Visiting Fellow, King’s College, London
 | @alexcobham


1 The contents of this paper were discussed at an Elcano Royal Institute seminar in April 2018, sponsored by the Spanish Ministry of Foreign Affairs and Cooperation. The author would like to express his gratitude to the seminar participants for their comments, particularly Iliana Olivié and Aitor Pérez, and to the discussants Raquel Cabeza and Antonio del Campo.

2 Oxfam (2000), ‘Tax havens: releasing the hidden billions for poverty eradication’Oxfam GB Policy Paper; and HMG (2000), ‘Eliminating world poverty: making globalisation work for the poor’White Paper on International Development, HM Government, London.

4 TJN (2005), Tax Us If You Can, Tax Justice Network, London.

5 A. Cobham (2005), ‘Taxation policy and development’Oxford Council on Good Governance: Economy Analysis 2.

6 R. Baker (2005), Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market System, John Wiley, London. See also http://www.gfintegrity.org/about/.

7 A current TJN project is the open writing of a book devoted to providing a comprehensive critique of the methodologies and data of the leading estimates of illicit financial flows.

8 See TJN (2017), ‘Tax avoidance and evasion: the scale of the problem’Tax Justice Network Briefing.

9 A. Cobham & L. Gibson (2016), ‘Ending the era of tax havens: why the UK government must lead the way’Oxfam Briefing Paper.

10 P. Carter & A. Cobham (2016), ‘Are taxes good for your health?’UNU-WIDER Working Paper, nr 171.

11 A. Cobham (2014), ‘Uncounted: power, inequalities and the post-2015 data revolution’Development, vol. 57, nr 3-4, p. 320-337.

12 A. Cobham (2013), ‘Corrupting perceptions’Foreign Policy.

13 United Nations Economic Commission for Africa, & African Union (2015), Report of the High Level Panel on Illicit Financial Flows from Africa.

14 United Nations (2013), ‘A new global partnership: eradicate poverty and transform economies through sustainable development’Report of the High Level Panel of Eminent Persons on the Post-2015 Development Agenda. Note that while publication of this report preceded that of the UNECA/AU panel report, the early discussions and public documents of the former had already set the tone.

16 For example, the UNCTAD Intergovernmental Group of Experts on Financing for Development (November 2017) saw a prolonged debate among member states before finally agreeing policy recommendations that include avoidance as part of IFF: ‘[The Group] Stresses the need for redoubling of efforts to substantially reduce illicit financial flows by 2030, eliminating them, including by combating tax evasion and corruption through strengthened national regulation and increased international cooperation, to reduce opportunities for tax avoidance and considering inserting anti-abuse clauses in all tax treaties, to enhance disclosure practices and transparency in both source and destination countries, including by seeking to ensure transparency in all financial transactions between Governments and companies, with respect to relevant tax authorities, and to make sure that all companies, including multinationals, pay taxes to the Governments of the countries where economic activity occurs and value is created, in accordance with national and international laws and policies’.

17 The organisation (ITIC) has published plans, co-authored by the representative in question, to promote a tax agenda for lower-income country policymakers that focuses attention away from multinationals. The report was recently taken down from their website but can be found at Archive.org. ITIC is, however, perhaps best known for its years of tax lobbying on behalf of tobacco companies.

19 See, eg, A. Cobham (2017), ‘The significance and subversion of SDG 16.4: multinational tax avoidance as IFF’, remarks delivered at ECOSOC Forum on Financing for Development follow-up.

21 Related suggestions were made by civil society, including in the global thematic consultations, but to no avail. On 17.1 and the separation from the IFF target, see also this discussion from the time.

22 A. Cobham & P. Janský (2017), ‘Measurement of illicit financial flows’UNCTAD Background paper for UNODC-UNCTAD Expert consultation on the SDG Indicator on Illicit financial flows, nr 12-14, December.

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<![CDATA[ What is behind the African miracle? Implications for European cooperation ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari65-2018-lippolis-what-behind-african-miracle-implications-european-cooperation 2018-05-07T06:58:39Z

The evolution of African economies since the end of the raw-materials boom has been marked by a growing heterogeneity. The EU’s development cooperation should adapt to the new realities unfolding on the continent.

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Original version in Spanish: ¿Qué hay detrás del milagro africano?: implicaciones para la cooperación europea

Theme

The evolution of African economies since the end of the raw-materials boom has been marked by a growing heterogeneity. The EU’s development cooperation should adapt to the new realities unfolding on the continent. Above all, the EU should recognise the specificity of political conditions in each country and act accordingly.

Summary

During the decade of the 2000s, most African economies were able to recover from the deep crisis of the 1980s and 1990s, supported as they were by improvements in domestic policies and more favourable global economic conditions. Despite the gradual movement towards more democratic political environments, improvements in the quality of institutions have not accompanied economic growth; indeed, in some countries dependent on natural resources there has even been a deterioration. After the moderating of primary product prices in 2013, economic trajectories have become differentiated in Africa. While most oil exporters have now entered a crisis, and other countries dependent on natural resources have shown different evolutions, a third group continues to grow at high rates. Nevertheless, with the exception of a small number of ‘developmentalist States’, political conditions on the continent still do not favour growth based on productivity gains.

Europe has traditionally been the external actor with the most significant presence in Africa. As such, Europe has the capacity to help with the continent’s economic transformation. Still, both the importance and the effectiveness of this relationship have eroded with the passing of recent years. Today, European policy towards Africa continues to follow antiquated models and to prioritise European needs over the aspirations of African leaders. Furthermore, European development cooperation continues to be based on the principle that recipient country elites have a sincere interest in development, ignoring the real political incentives actually affecting them. But if it wants to have a positive impact in Africa, the EU should begin to incorporate such variables into their calculus for action. To this end, the EU will need to overcome the incoherence created by the variety of conflicting incentives at the heart of European institutions.

Analysis

The ‘African miracle’: Afro-optimists and Afro-pessimists

The positive change in the trajectory of African economies that occurred during the decade of the 2000s –following on the debacle of the 1980s and 1990s– revived the optimism of the international community with respect to Africa. The stark contrast in the two covers of the Economist –at the beginning and end of the decade– are by now well-known: one from 2000 characterised Africa as ‘The hopeless continent’, but another, from 2011, carried the title, ‘Africa rising’ (a headline which Time Magazine also used again in 2012).

Figure 1. Africa: poverty, relative and absolute

Behind this rising enthusiasm for the region’s potential has been, in fact, an improvement in the principal economic indicators, accompanied by rapid urbanisation and a strong expansion of the internal market. These changes have led to a marked decline in poverty in relative (if not in absolute) terms, due to rapid population growth (Figure 1). In addition, during this period many African governments issued Eurobonds for the first time. These bonds were in high demand, especially amongst European and North American investors.1 Nevertheless, many have continued to argue that Africa’s economic growth was exclusively dependent on the rise of primary product prices generated by the breakneck speed of Chinese growth. In fact, after the collapse of global primary product prices in 2015 and the resulting deterioration in the terms of trade for Africa countries, one can observe a clear deceleration in African growth rates (Figure 2).

Figure 2. Covariation of GDP, current account and terms of trade in Sub-Saharan Africa

If the contribution of primary product demand to the improvement in the economic performance of the Africa continent is undeniable, to attribute growth to this factor alone would simply not be appropriate. African countries benefitted during the 2000s from a series of policies introduced during the two preceding decades in response to the deep economic crisis of the 1980s and 1990s. These policies, largely imposed by the World Bank and the IMF through structural adjustment programmes, focused on correcting economic distortions that supposedly placed a brake on African development. Among these, macroeconomic stability policies stand out, including the ending of the financing of government spending by central banks, important fiscal adjustments and marked improvement in the business environment. These changes coincided with heightened political stability and a reduced number of armed conflicts on the continent. Finally, one should underline the importance of programmes like the Heavily Indebted Poor Countries Initiative (HIPC) and the Multilateral Debt Relief Initiative (MDRI) which, by forgiving the external debt of many African countries, allowed budgets to be freed up for public investment and social spending.

Figure 3. Per capita GDP in developing regions of the world, 1980-2016 (2011 USD, PPP 1980=100)

Most of these changes have been maintained up to the present day, protecting against an even more significant deceleration as a consequence of the deteriorating terms of trade. Nevertheless, it is important not to exaggerate the extent of the economic acceleration of the last 15 years. Although it is true that the period from the turn of the millennium has been marked by faster economic growth, in the early years of this period economic growth was barely sufficient to recover the lost ground of the previous two decades. Figure 3 shows how Africa did not regain its 1980 level of real per capita income until 2005. Furthermore, it is important to highlight the doubtful reliability of African macroeconomic data, given the lack of funds dedicated to statistics offices and due to the difficulties inherent in collecting economic data in predominantly informal agricultural economies.2

Institutional framework

Given the notable economic growth in Africa during the raw materials boom, and the decade of reform and democratisation that preceded it, it would be natural to expect an improvement in Africa’s institutional development indicators. Nevertheless, this is not the picture revealed in Figure 4, from which it becomes clear that most governance indicators have remained stable –or have even deteriorated– over the last 20 years. The only exception has been in the category of voice and accountability, which could be interpreted as an indicator of the extent to which the government responds to the demands of the population. It is interesting to note that, for all the indicators, the 2006 values are higher than for those in 2016, possibly suggesting that institutional quality has also moved in parallel with the fluctuations of primary product prices. Considering that the database is made up of 214 countries, of which 48 are in Sub-Saharan Africa, the position of the region’s average ranking is the 22nd percentile. Figure 4 shows that for the majority of indicators Sub-Saharan Africa is close to the 30th percentile, and at the 26th percentile in terms of governmental efficacy. This implies that the countries of the continent are increasingly bunched at the lower reaches of the ranking.

Figure 4. Average position of Sub-Saharan Africa in governance indicators

One should analyse this type of indicator with a certain scepticism, given the difficulties in measuring political variables with numerical indicators, their inherent subjectivity and the fact the global indicators on governance measure the relative position of African countries (possibly reflecting simply that some countries have improved less than others). Depending on the indicator, and the institutional variable of interest, we can observe different trajectories. For example, the ‘Polity’ indicator (Figure 5) shows a gradual improvement in the average quality of democracy on the African continent, while according to the CPIA Index of the World Bank, the quality of the public administration and related institutions deteriorated between 2005 and 2016. Therefore, even taking into account the imperfections of numerical indicators for institutional development, the evidence does not allow us to speak of economic growth stimulated by the strengthening of institutions, but rather of growth which has occurred in spite of the persistence of rather weak institutional frameworks.

Figure 5. Average score for Sub-Saharan Africa on the polity indicator for quality of democracy

Differentiating African economies

Beginning in 2013, with the moderation of primary product prices, and specifically since the collapse of the oil price in 2015, the solidity of the ‘African miracle’ has made itself discernible with increasing clarity. The growth of the continental economy fell from 5.1% in 2014 to 3.4% in 2015 and to 1.4% in 2016. The IMF estimates that this year growth will reach 2.6% but, even then, Africa will remain below the global average of 3.6%, as well as below the 4.6% expected in emerging markets and developing countries. The World Bank and the African Development Bank have similar projections. Assuming 2.7% population growth, as foreseen by the UN for 2017, this level of growth would imply stagnation for per capita income. Other economic indicators have followed the same tendency: the current account has deteriorated, currencies have been devalued, risk spreads have increased and the fiscal deficit has grown. Although such negative movements were more accentuated in 2015, with something of a recovery registered in 2016 and 2017, we are still far from the experience of the primary product boom.

Despite the ease with which the African economic miracle appears to have come to an end, the aggregate numbers hide a growing diversity of economic experience across the continent which has been driven primarily by the three most important economies: South Africa, Nigeria and Angola. These economies are by no means representative of the continent taken as a whole: for example, South Africa is the largest African economy, one of the few to have risen to an intermediate income level, and it boasts the continent’s most diversified industrial structure. In recent years, South Africa has been marked by a growth slowdown, high unemployment rates, de-industrialisation, inflationary pressures and eroding balance of payments, along with a persistent legacy of significant inequality left behind by apartheid.

The situation is very different in the other two large African economies. Nigeria and Angola are the major African producers of oil, the product which accounts for nearly all their exports. As a result, they have naturally been negatively affected by the abrupt drop in the price of oil. In both countries, the macroeconomic deterioration has been worse than the African average, particularly with respect to growth (the two economies contracted in 2016), the change in the current account (which until 2013 registered a significant surplus), exchange rate pressures and inflation. In an effort to defend the value of their currencies, these governments imposed controls on foreign exchange markets, which in turn has increased the spread on the black market. Such interventions have been strongly criticised by the international community as negative for local economic activity. Nevertheless, both economies are projected to grow this year, although at lower rates than those observed during the primary products boom.3 The situation is similar among the other African exporters of oil (Figure 6).

Figure 6. Growth comparison, during and after the primary products boom

The distinction made here between oil exporting countries and the rest of the African economies illustrates the importance of analytically differentiating these economies based on the kind of insertion into the international economy that characterises them. Analyses of the African continent’s economic panorama typically differentiate between oil exporters, other countries dependent on natural resources, and others that are not. Figure 6 presents a comparison of the average growth rates during and after the boom in primary products. The majority of African countries are found bunched together in the centre of the graph, but the oil exporters dominate the lower right quadrant as a result of the sharp fall in their growth rates after the end of the raw materials boom. In the bottom left corner of the graph, one finds the Central African Republic, Zimbabwe and Sierra Leone, all countries which have recently suffered intense internal convulsions. Finally, in the upper righthand section are found those countries which have maintained high economic growth, including Ethiopia, Rwanda and Tanzania, as well as the Ivory Coast, whose growth appears to have accelerated in the wake of the end of its internal conflict. Mozambique also stands out, although its success in the coming years has been put into doubt by the serious scandal generated by the hiding of government debt and by the return of armed conflict.4

Growth models

To better grasp the drivers of recent African growth, to see the region’s medium- and long-term potential, and to discern a possible role for ODA (official development assistance), it is necessary to understand the different ‘growth models’ that exist today in Africa. By ‘model’ we mean a unified vision of economic processes that generate growth in a country. At the same time, an evaluation of the region’s potentials also requires an understanding of the relationship between the economy and the political world. Therefore, we include some political characteristics in our brief panoramic review of the African economic scenario. By abstracting certain characteristics of each country to separate them into groups, we risk ignoring important specificities; nevertheless, in this way it is possible to navigate through a very diversified and varied terrain which is little known in Spain.

The first identifiable development model is that of Nigeria, Angola and the countries of the CEMAC (Central African Economic and Monetary Community), like Gabon, Congo-Brazzaville and Equatorial Guinea: the petroleum exporters. Despite the differences between them, they all have a political economy based on the distribution of petroleum rents. As a result, they are characterised by high levels of corruption, even by African standards, and their governments lack incentives for the diversification of the economy and the provision of public goods.5 In Figure 7 we can see that, in terms of public management and institutional quality, these countries are far from being the worst in Africa, although Gabon and Equatorial Guinea are among the countries with the highest per capita incomes on the continent.

Figure 7. CPIA Index of Institutional Quality and Political Management

South Africa is an outlier with respect to these development models. At the root of its mediocre economic performance in recent years are structural factors like an education deficit, logistical and infrastructure problems, poor management of public enterprises and large salary increases out of proportion with low productivity. This economic inertia is due in large part to a political equilibrium, or informal pact, in which the corporate leaders of the mining sector, trade union leaders and parts of the government coalition perpetuate a capital-intensive economic model which privileges a minority, without generating much needed employment.6 Indeed, a notable institutional deterioration has been observed recently, with recurring corruption scandals affecting Jacob Zuma’s government and accusations that the State has been ‘captured’ by private interests. Such worrying developments led the credit rating agencies, Fitch and Standard and Poor’s, to downgrade South African sovereign debt in April 2017 to ‘junk’ status.

Beyond the three principal economies and the oil exporters, there are a series of smaller countries together with those with adverse and challenging geographies; there is also another group of larger countries that, despite their potential, suffer from serious problems of political instability. This group is made up either of ‘predator States’ –in which leaders are only concerned with extracting resources from the population for their personal benefit– or of ‘failed States’ –in which there no longer remain any State authority over the national territory–. In such countries, international aid can have very little impact on economic development, and the fundamental challenge is the reestablishment of peace and State authority.7

The most promising economic trajectories in Africa today are found among a group of East and West Africa countries, including Ethiopia, Rwanda, Tanzania, Ivory Coast, Senegal, Kenya and Mali. The growth of these countries is due to a combination of public investment, external transfers and productivity gains in the agricultural sector; these factors in turn have fostered the growth of the urban services sectors.8 Despite frequent references to the ‘African lions’, this growth model is very different from the Asian model based on the exportation of manufactured goods. This group of rapidly growing countries is projected to continue on this high growth trajectory for a number of years, although there are some doubts as to its sustainability, given that this model is characterised by decreasing returns. At a certain point, the productivity gains stemming from structural change will begin to exhaust themselves, while the productivity of urban sectors will have to grow.

There are some doubts that the politics and institutions of these countries will allow more ambitious economic interventions by their governments. In these (as in most) Africa countries, the fragmentation of political power, the weakness of government structures and the limited productive capacities of companies combine to produce a politics of clientelism, not very propitious for the designing of long-term strategies.9 In addition, in democracies like Ghana and Kenya, the reality of political competition leads to risks of fiscal irresponsibility (especially in Ghana which is subject to an IMF programme). In the other countries of this group there remains a series of political risks, although this is somewhat natural given their low level of development. One recent example has been the controversies over the presidential elections in Kenya.

Among those countries with high rates of growth, Ethiopia and Rwanda are the only exceptions to the general rule with respect to political settlements. Both countries are governed by authoritarian regimes that attempt to rise above internal ethnic divisions and to win legitimacy through economic growth. Their State apparatuses are relatively effective and respond to the developmentalist priorities of their governments, among which an important one worth mentioning is the ambition to strengthen this very State apparatus.10 In addition, their geostrategic importance, their military efficacy and the international perception that Ethiopia and Rwanda are serious about development has given them abundant resources from foreign assistance, which is now equal to 80% of the governmental budget of Rwanda. Nevertheless, despite their success in channelling resources towards improvements in agricultural productivity and extending services to the population, the industrialisation of both countries has been limited to date, and risks stemming from ethnic tensions persist.

This brief analysis of African economic perspectives shows us that, since the end of the primary products boom, the region has been increasingly characterised by its heterogeneity, not only in the economic realm but also in the political sphere, with the co-existence of various forms of government, including more or less consolidated democracies, personalist dictatorships, developmentalist authoritarian governments and failed States. This underlines the need to understand each specific national context and to overcome the tendency to generalise across a continent so vast and so little known in the West. In any case, it is impossible to forget the challenges shared by most African countries, like the need to expand and improve their educational systems and infrastructures, to strengthen the private sector, expand their tax collecting capabilities and to reduce their vulnerability to shocks stemming from climate change in predominantly agricultural economies.

Implications for external action: the role of political economy analysis in ODA

As mentioned, the impact of ODA depends on its interactions within the political context of the recipient country. Frequently, this context is not favourable for investment in projects which stimulate economic growth or provide benefits to the general population. An external intervention, even if well-intentioned, will not be successful if it runs counter to the incentives inherent to the local political circumstances themselves. In these cases, it is possible that aid resources will be used for political ends and will end up benefiting the elites with little interest in economic development. Furthermore, dependence on external resources can aggravate the weakness of African States, given that they reduce the imperative to strengthen State structures to increase their tax collection capacity.11

In recent years, following the example of the British DFID (Department for International Development), the World Bank and some other development aid agencies from northern Europe have begun to integrate political economy analysis into their operations.12 This type of analysis can be used for many purposes, including the formulation of strategic visions and the identification of obstacles to project implementation. Political economy analysis can also serve as a starting point for a more dynamic vision which proposes long-term political, economic and social change. Given the interdependence between politics and economics, such a vision should be based on a recognition that each country will follow a unique, distinct development path, even if it attempts to identify common patterns between the trajectories of different countries.13

Despite the potential for political economy analysis to promote a more effective development agenda, it has been difficult to institutionalise, due to current bureaucratic incentives in development aid agencies. In addition, it is natural that the Heads of State of recipient countries do not like the idea of external actors interfering with local political balances and settlements. Neither does this type of interference help foreign countries seeking to expand their political, diplomatic and economic presence on the African continent. Therefore, in the next section we analyse in more detail the challenges facing the implementation of a more effective development aid framework within European institutions.

The EU-Africa relationship

As a consequence of former colonial ties, Europe has a strong presence in Africa. For the EU (and its predecessors), the central component of relations with Africa since 1975 have been the institutions of the ACP (Africa, Caribbean and Pacific) States, which group together African countries with small developing island States. Originally, the complex of institutions which brought the ACP together with the EU had important functions in trade, development aid and political cooperation. Nevertheless, the importance and effectiveness of this relationship have suffered over the course of the years due to changes in global geopolitics, the growing regionalisation of international relations, excessive heterogeneity among the countries of the ACP and EU expansion.14 The Cotonou Agreement of 2000 was supposed to correct for some of these problems and adapt the relationship to the 21st century, but it has not been that successful, particularly with respect to the polemic surrounding the ratification of the EPA (Economic Partnership Agreements). Therefore, the debate has begun over whether, at the conclusion of the Cotonou Agreement in 2020, it will even be possible to maintain the current form of ACP-EU cooperation.

At the same time, the direct relationship between the EU and the African Union (AU) has gained in prominence since the release of the Joint Africa-EU Strategy (JAES) in 2007. The EU has also pushed other initiatives, like the Emergency Trust Fund, the Africa Investment Facility, the Foreign Investment Plan, and a series of sub-regional accords. The multiplicity of modalities in EU-Africa relations produces a complex and at times incoherent architecture, where elements of realpolitik mix with development aid. Such incoherence stems from the variation in institutional incentives faced by the different internal organs of the EU.15 To this confusion are added the divergent interests of the Member States, especially between the ex-colonial powers and the rest of the European countries.

Problems in the framework of EU-Africa relations create important obstacles for the promotion and institutionalisation of a more pragmatic development cooperation policy which is conscious of the real challenges in the recipient countries. In spite of the evidence that the current form of development cooperation has produced few concrete results, European leaders continue to give priority to formal summits where declarations of good intentions abound to the detriment of more concrete actions to create favourable political conditions for development.16 One recent example has been the German idea to create a ‘Marshall Plan for Africa’,17 ignoring the evidence which suggests that it is unlikely that a simple injection of money will be capable of catalysing development on the continent (on the contrary, it would only accentuate the dependence of African elites on external resources and reduce further their incentives to transform the economy). Such initiatives respond to the imperatives of the media and of power; they are not evidence of any serious attempt to understand the challenges of development. Often such projects only express the preoccupations of European countries with the issues of democracy and human rights, and, contrary to the intentions expressed at the various summits, they do not consider the primarily economic concerns of the African countries. As a result, a lack of confidence exists between the two sides, the lines of dialogue have withered, and space has opened up for actors in the Global South like China (which gives a more central role to self-determination in its Africa policy).

Conclusions

To increase the effectiveness of its development cooperation with Africa, it is essential that the EU recognise the growing heterogeneity of the continent and adapt its policies to the newly emerging realities. These policies should be more realistic and recognize the interests at stake. It is especially important to abandon an agenda which imposes European normative ideals in contexts where the informal institutions do not support them, and to think of long-term strategies for achieving these ideals. The EU has a fundamental role to play. Nevertheless, the importance and effectiveness of Europe’s relationship with Africa has eroded over the years, even if it remains the external actor with the largest presence on the continent and its principal donor of international development cooperation assistance.

The African continent faces many challenges, but from the perspective of economic growth, the priorities vary, depending on the growth model and the political regime. For example, in oil exporting countries, the principal challenges are good management of petroleum income and the diversification of the economy. In fragile States (or those in conflict) the key objective is the reestablishment of viable States. In the States with clientelist politics –the modal case in Sub-Saharan Africa– it could be that the most promising interventions are those which establish ‘islands of excellence’ whether in terms of specific industries or more efficacious bureaucratic entities. Finally, the traditional frameworks of cooperation would be more successful in the so-called ‘developmentalist States’. In these States there is a real interest on the part of governments to expand the supply of public services, and it is likely that efforts to improve economic competitiveness will be received well by such governments, as long as they do no reduce their control on power. These are examples of the types of considerations that development cooperation policy should make, but it is clear that political economy analysis of cooperation should be based on a more complex theoretical framing.18

To improve the quality of European cooperation it will be necessary to overcome the collective action problems inherent in a complex and fragmented institution like the EU and to create an institutional architecture that allows a more realistic analysis of development. Currently, the political and institutional incentives are not propitious for such innovations, and it seems unlikely that this situation will radically change in the short to middle term.19 Nevertheless, the absence of incentives does not imply the impossibility of change; in such cases, it is necessary for ‘political entrepreneurs’20 to take the initiative to reform institutions. In Europe, the UK, the Netherlands and the Nordic countries have already reformed their development cooperation policies to be more consistent with the complexities of the development process. If Spain wishes to truly become a policy ‘maker’ –rather than continue to be a mere policy ‘taker’– this would be an agenda to which it could commit, in coalition with other reformist actors.

Nicolás Lippolis
Researcher, Centre for the Study of African Economies, Blavatnik School of Government, Oxford University
 | @nicolaslippolis


1 John Mbu (2016), ‘Why Eurobonds are an important source of finance for Africa’World Economic Forum, 12/II/2016.

2 Morten Jerven (2013), Poor Numbers, Cornell University Press, Ithaca.

3 The IMF projects that in 2017 Nigeria will grow 0.8% and Angola 1.5%. At the same time the World Bank projects that both economies will grow by 1.2%.

4 Joseph Cotterill (2017), “State loans at heart of Mozambique debt scandal”Financial Times, 25/VI/2017.

5 For a classic analysis of the political effects of petroleum, see Terry Lynn Karl (1997), The Paradox of Plenty: Oil Booms and Petro-States, University of California Press, Berkeley. The African case is also well-illustrated by Ricardo Soares de Oliveira (2007), Oil and Politics in the Gulf of Guinea, Hurst, London.

6 See the analysis of Haroon Bhorat, Aalia Cassim & Alan Hirsch (2014), ‘Policy co-ordination and growth traps in a middle-income country setting: the case of South Africa’, UNU-Wider Working Paper, nr 2014/155.

7 The reconstruction of States after conflicts is another fertile field within the debate on international cooperation, but here we are more interested in cooperation aid in the economic field.

8 Xenshin Diao, Margaret McMillan & Dani Rodrik (2017), ‘The recent growth boom in developing countries: a structural change perspective’, NBER Working Paper, nr 23132.

9 For an analysis of the role of ‘political equilibria’ (political settlements) in African industrial politics, see Lindsay Whitfield, Ole Therkildsen, Lars Buur & Anne Mette Kjaer (2015), The Politics of African Industrial Policy, Cambridge University Press, Cambridge.

10 Will Jones, Ricardo Soares de Oliveira & Harry Verhoeven (2013), ‘Africa’s Illiberal State-builders’, Oxford Refugee Studies Centre Working Paper Series, nr 89.

11 See Todd Moss, Gunilla Pettersson Gilander & Nicolas Van de Walle (2006), ‘An aid-institutions paradox? A review essay on aid dependency and State building in Sub-Saharan Africa’, Center for Global Development Working Paper, nr 74.

12 For the story of World Bank experience in the application of political analysis to aid programmes, see Verena Fritz, Brian Levy & Rachel Ort (Eds.) (2014), Problem-Driven Political Economy Analysis: The World Bank’s Experience, World Bank, Washington DC.

13 For an example of this type of study, see Brian Levy (2014), Working with the Grain: Integrating Governance and Growth in Development Strategies, Oxford University Press, Oxford.

14 See the analysis of the European Centre for Development Policy Management (ECPDM) ‘ACP-EU relations beyond 2020: engaging the future or perpetuating the past?’ and ‘The future of ACP-EU relations: a political economy analysis’.

15 See, for example, Maurizio Carbone (2011), ‘The European Union and China’s rise in Africa: competing visions, external coherence and trilateral cooperation’, Journal of Contemporary African Studies, vol. 29, nr 2.

16 For a more profound analysis of this issue, see Jean Bossuyt (2017), ‘Can EU-Africa relations be deepened? A perspective on power relations, interests and incentives’, ECDPM Briefing Note, nr 97.

17 For more details, see Germany's 'Marshall Plan with Africa', Devex, and the cooperation agreement between the G20 and Africa presented at the last G20 Summit.

18 For studies on external cooperation with coverage of political interests, see Pablo Yanguas (2014), ‘Leader, protester, enabler, spoiler: aid strategies and donor politics in institutional assistance’, Development Policy Review, vol. 32, nr 3, p. 299-312; and Pablo Yanguas (2016), ‘The role and responsibility of foreign aid in recipient political settlements’, ESID Working Paper, nr 56.

19 For a fuller analysis of EU-African relations see Maurizio Carbone (Ed.) (2013), The European Union in Africa: Incoherent policies, asymmetric partnership, declining relevance?, Manchester University Press, Manchester.

20 Dani Rodrik (2013), ‘The Tyranny of Political Economy’Project Syndicate.

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<![CDATA[ The international aid of subnational governments: the case of Spain ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/wp10-2018-perez-international-aid-subnational-governments-case-spain 2018-04-25T05:13:29Z

Spanish Autonomous Communities (regions) and municipalities gave some US$220 million in development assistance in 2015. This accounts for a third of total Spanish bilateral ODA, making Spain the world’s most decentralised donor.

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Original version in Spanish: La ayuda internacional de gobiernos subnacionales y el caso particular de España

Index

Summary – 4
(1) Introduction – 5
(2) Analysis of decentralised aid – 8
(3) Decentralised aid around the world – 12
(4) Spanish uniqueness – 21
(5) Conclusions – 32
Annex I: sources and treatment of data – 37
Annex II. Spanish Bilateral Aid, 2015 – 48
Annex III. Ranking of Spanish Decentralised Donors, 2014 – 54

Summary

The official development aid (ODA) of subnational governments around the world totalled nearly US$2 billion in 2015, according to the Development Assistance Committee (DAC). In the last five years, this kind of aid has experienced a slight upward trend, both in absolute and relative terms. However, analysing the current figures in the light of studies undertaken 10 years ago, it appears that the phenomenon has doubled in magnitude in terms of both the volume of finance and the number of countries involved.

Spanish Autonomous Communities (regions) and municipalities gave some US$220 million in development assistance in 2015. This accounts for a third of total Spanish bilateral ODA, making Spain the world’s most decentralised donor.

In absolute terms there are other national donors with higher amounts of decentralised aid. Germany, for example, gives nearly US$1 billion a year this way –more than all Spanish bilateral ODA–. Almost all of it is directed at financing (nearly completely) the costs of foreign students in Germany itself. Canada (the second most decentralised donor) and Austria (the fourth) also have significant decentralised ODA spending realised in their own territories, including refugee assistance.

In contrast, in Spain (as in Switzerland) the regions and localities channel nearly all their aid through NGOs. This also occurs in the UK and Japan, although in Japan there is practically no decentralised aid.

There exists a third type of decentralised donor –represented by France and, to a lesser extent, Belgium– that targets its aid to finance its own technical cooperation with counterpart entities in developing countries. According to international and European doctrine, under this modality of development cooperation, the regions and cities can make a large contribution to development through the exchange of experience, knowledge and innovation. This notion has been reinforced within the context of Agenda 2030. Decentralised cooperation is also gaining attention within the EU, the OECD and the UN.

Aitor Pérez
Senior Research Fellow, Elcano Royal Institute
| @aitor_ecoper

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<![CDATA[ ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/possible+impacts+of+brexit+on+eu+development+and+humanitarian+policies 2017-04-17T11:29:03Z ]]> <![CDATA[ Fourteen dilemmas for Spanish development aid in the new incoming parliament ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari46-2016-olivie-perez-14-dilemmas-for-spanish-development-aid-new-incoming-parliament 2016-06-08T05:47:42Z

The future of Spanish policy on international development cooperation requires a series of dilemmas to be politically addressed; these concern, for example, the geographical distribution of aid, the connection between development policy and other strands of foreign policy and the appropriate combination of instruments and actors.

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Original version in Spanish: Catorce dilemas de la cooperación española en la nueva legislatura

Theme

The future of Spanish policy on international development cooperation requires a series of dilemmas to be politically addressed; these concern, for example, the geographical distribution of aid, the connection between development policy and other strands of foreign policy and the appropriate combination of instruments (bilateral, multilateral) and stakeholders (public administrations, NGOs, companies…).

Summary

A significant number of analyses and assessments of Spanish foreign aid policy generally point to similar strengths and weaknesses. Prominent among the latter are the fragmentation of aid, the lack of capabilities and resources for managing a development policy that is rich in knowledge and in a changing environment, the lack of a strategic vision and the delays in obtaining coherence in development policies.

Such a convergence in the diagnosis is all the more surprising given that people have been identifying similar weaknesses for years. This paper is based on the premise that tackling these structural shortcomings in Spanish aid first requires an in-depth debate to be held on the policy dilemmas surrounding development aid insofar as they concern (1) the scope and role of the aid policy itself (the strategic goals of aid, the internal dimension of sustainable development agenda, Spain’s profile as a global player, the connection between Spanish development aid and other policies, such as security, and other political goals, such as democracy); (2) its geographical and sectoral concentration (more or less concentrated, with a presence in Latin America and the Caribbean, North Africa and the Middle East, and West Africa); and (3) the means of implementation, including the possible combinations of instruments (multilateral, bilateral, reimbursable or otherwise), actors (public or private, including development NGOs and companies) and the institutional architecture.

Analysis

This text falls within the framework of a joint debate carried out by a working group (made up of representatives of political parties, including members of parliament, as well as other experts in the field of development) regarding the launch of the Sustainable Development Agenda for the period 2016-30.1 The purpose of this discussion is to address the main challenges and dilemmas that Spanish development aid will need to face in the near future.2

The first section of the text gives a broad survey of the question and identifies the main points of the domestic debate on international aid development policy. In this regard the authors believe that there is significant convergence in the diagnosis of the state of Spanish aid and even the route map towards a solution. This applies, however, to the purely technical level where the policy debate about the more strategic aspects of development and aid does not enter. Thus in the second section, on the basis of the debates that have been held within the framework of this initiative, the authors provide a tentative list of policy debates that will have to be addressed in the next parliament and, in any event, in the wake of the Sustainable Development Goals (SDG) agenda being approved,3 by the Spanish cooperation programme.

Technical consensus without political debate

Many analyses have already addressed the strengths and weaknesses of public policy on international development cooperation. In a recent self-assessment of Spanish aid,4 the Secretary-General for International Development Cooperation (SGCID) identifies such weaknesses as the volatility of the cooperation budget, the persistent fragmentation of aid, the difficulty of adopting a more knowledge-based management approach, the restrictions of the current institutional design of the aid system (which hinders coordination between agents, the adoption of a common strategic vision and, in consequence, the coherence of development policies) and the lack of a sense of ownership of this policy on the part of the public at large.

These challenges are to a large extent also emphasised in the latest peer review issued by the OECD’s Development Assistance Committee (DAC),5 as well as being identified in various studies of Spanish aid drawn up by development NGOs, think-tanks and other experts on the domestic stage,6 some of which are not exactly recent. Indeed certain weaknesses –such as the problem of the institutional architecture and the shortage of knowledge-based management (mentioned by the assessments)– had already been identified in the International Cooperation for Development Act, passed almost 20 years ago.7

In addition to these more qualitative studies, there have also been various attempts to quantify the quality the development aid that is donated, which in broad terms reveal similar results. The latest edition of the QuODA index8 ranks Spain between 17th and 21st (of 22 bilateral donors and nine multilateral organisations) in aspects such as efforts to maximise the efficiency of aid (21st place), fostering local institutions and reducing the administrative and bureaucratic burden of aid for partner countries (18th place in both cases), and transparency and scope for learning (17th place). Falling outside the strict confines of the cooperation field, the Commitment to Development Index (CDI),9 an integrated assessment of the development focus in policies of aid, finance, technology, the environment, trade, security and migration, places Spain in 13th position in a ranking of 27 donors (with poorer performance in aid and security policies). Spain also occupies 13th place in the Policy Coherence for Development Index (PCDI).10

If there is general agreement on the nature of the challenges, there is also to a large extent consensus on the proposed solutions (taking a more strategic view, reforming the system institutionally, stabilising the flows of aid and improving the potential for the proper management of this policy), which, in this case too, are repeated in more or less recent analyses.

This situation is now joined by the adoption of the SDG agenda, as it will require greater efforts precisely in areas such as policy coherence and knowledge-intense cooperation, which stand out as weaknesses in Spanish development aid (budgetary stability and commitment, a strategic and cross-cutting vision of development, knowledge-rich cooperation…). In more everyday terms, the SDGs have effectively ‘upped the ante’ for cooperation in the framework of the foreign policy of the States that participate in the international community.

It would seem that this ease in reaching a consensus on the shortcomings of Spanish cooperation also applies traditionally to the Cooperation Commission of the Congress of Deputies,11 where the divisions between the policy proposals of this Commission and other parliamentary commissions are greater than between the political parties represented on the Commission. As two participants in this working group on the 2030 Agenda have said (both representatives of political parties), this ready consensus may be explained by both the superficiality and the vagueness of the proposals that have been agreed.

As far as the former is concerned, most of the proposals debated (and accordingly the proposals agreed) come within the framework of what one member of parliament described as ‘non-debate’; in other words, those political areas where disagreement is practically impossible, such as the need to devise a solid development policy or to increase, as far as fiscal constraints allow, the development aid budget.

So, the consensus is facilitated by the vagueness of the language, which helps the Commission reach agreements on texts approved by all the political groups where the text is amenable to multiple political interpretations. Thus, for example, all the political groups can agree on improving the efficiency and quality of Spanish aid, particularly if there is no in-depth debate about what is understood by the efficiency and quality of this public policy.

Perhaps it is this ‘superficial and vague consensus’ that, at least in part, accounts for the fact that although there is a widely-agreed diagnosis and proposed treatment for solving the ills of Spanish cooperation, the necessary measures have not yet been applied.

Towards a policy debate on Spanish cooperation

It is therefore worth crossing these two barriers of superficiality and vagueness in distinct directions. One of these would involve pinning down the debate on Spanish cooperation in its role in the ensemble of the State’s initiatives and Spain’s definition as a global actor.

This exercise sets out to focus on three aspects. First, this process of debate and reflection seeks to avoid the clearly technical emphasis that usually predominates in debates on development aid (such as the extent to which cooperation measures up to the yardstick of aid efficiency). Such technical aspects have had the virtue of nurturing consensus among various actors and political forces and of improving Spanish cooperation in areas like its transparency.12 Focusing the debate on technical aspects, however, would create another reason, in addition to the ones outlined above, for steering the debate away from more political and strategic questions where there is less scope for automatic consensus. This reflection thus takes a political approach, meaning that it identifies areas where political leaders will need to make decisions to shape the future of Spanish development policy.

Secondly, and related to the above, the aim is to locate the debate on Spanish cooperation within the framework of Spain’s foreign policy and the country’s role in the international community.

Thirdly, this is the reason for the present text being unable to offer a list of recommendations for the improvement of aid policy. The authors set out from the premise that, from a policy perspective, the direction taken by Spanish cooperation in this new political cycle will be the outcome of a range of decisions taken in response to a series of dilemmas where it is by no means easy to identify a ‘first-best’ solution. The decisions that are taken will necessarily stem from the political view (or the assembly of views) of the institutions and people with responsibilities in this field.

It is, however, the aim of this document to present some of the dilemmas, which do not in any event exhaust the list of hard choices and decisions that will have to be addressed by policy-makers in this new political phase. This map of dilemmas is the outcome of the proposals and debates held within the series of four sessions of the aforementioned working group, which covered the general proposals of the 2030 Agenda, its implications in Latin America and the Mediterranean and the means of implementation (see Figure 1).13

Figure 1. The 14 dilemmas of Spanish cooperation

1st dilemma: which world? what development?

As pointed out above, within the framework of this working group’s meetings a representative of a political party raised the possibility that the ease with which consensus is reached by various political groups in the field of cooperation may be due in part to the vagueness of the language (eg, private sector involvement in development), enabling different (and sometimes opposing) world views to be entertained using identical labels.

In this respect, an in-depth debate regarding international development cooperation first requires a debate of similar depth regarding world views, global challenges and possibilities (what are the problems facing the global community?, what world do we want to build?), as well as regarding the various implications for Spain of the distinct views.

It hardly needs saying that this rather fundamental question goes well beyond the strict limits of aid policy and gets tangled up with Spain’s role in the world and even the debate on identity.

2nd dilemma: concentrating on domestic problems or going beyond?

The first aspect of this dilemma, which also determines the relevance of all the other dilemmas set out below, has to do with Spain’s contribution to international development in its current political and economic context. Should Spain continue focusing on its internal problems or, on the contrary, should it start to pay more attention to neighbouring countries’ problems and those that it shares with the international community?14

It is worth pointing out that more than four decades of economic, political, social and institutional globalisation have steadily blurred, for all the countries affected by the globalisation process, the dividing line between internal and external. This global trend tends to force, to a certain extent, a move towards a more integrated approach to managing political, social and economic challenges (something that is also reflected in the spirit of the SDGs). To date, however, equally significant has been the conceptual and administrative division between internal and foreign policies and the concentration of political efforts on the domestic sphere.

3rd dilemma: policy taker or policy maker?

As far as the management of the international dimension is concerned, it is worth debating the question of what profile is being sought, as a member of the international community, in the search of solutions to global problems and also within the specific field of international development aid.

Spanish cooperation has atypical features such as its geographical distribution, which also determines its sectorial distribution, the nature of its instruments and the size of its projects (see also dilemmas 6-9). These characteristics have traditionally earned Spain the reputation of an anomalous donor in the international community, an unorthodox country in the context of the doctrine stemming from the Millennium Development Goals (MDGs),15 which stress the need to focus aid on low-income countries and high levels of poverty (least developed countries or LDCs,16 located mainly in sub-Saharan Africa). Such aid would be channelled through the wholesale transfer of resources in large-scale social infrastructure projects (such as transport, health and education infrastructure).

To some extent, however, the advent of the SDGs destabilises this orthodoxy of development. The SDGs take into account the emergence of the global South, the blurring of the North-South divide, the aspects of aid that are not strictly social (such as environmental, technological, institutional and economic aspects) and the new challenges of development (such as internal inequalities, for instance). In this new scenario, the characteristics of an aid policy such as Spain’s have the potential to turn into strengths for a global aid programme that will moreover unfold in the context of greater GDP per capita (in middle-income countries in Latin America, Africa and Asia), needing interventions that are highly knowledge-intensive and possibly, depending on the context, less intensive in financial resources (through aid that is fragmented into more sectors, with highly diverse instruments employed in small projects).

If Spain decides to raise its profile as a donor in the international community, and aspires to shape the agenda, its contribution could consist, for example, in capitalising upon its experience in supplying international aid to middle-income countries as an input for the attainment of the SDGs and the necessary adaptation of aid in these contexts.

4th dilemma: integrate or separate security and development?

The multifaceted nature of development is better reflected by the SDG agenda than by the MDG agenda. Development thus entails the reduction of poverty and hunger, the improvement of educational and sanitary conditions, the reduction of income and gender inequalities, access to justice and participation in institutions and the ability to live in a secure environment. This multi-dimensional nature has tended to be managed in a fragmented manner from the international relations perspective. Thus, for example, international aid policy has unfolded in a box that is hermetically sealed from that of security, whether in its military aspects or insofar as it relates to, for example, asylum, refugee or migration policies (in the same way that occurs with other aspects of foreign policy, such as trade and investment).

The importance of security to development, and vice versa, is clear in one of the regions on Spain’s doorstep, the Mediterranean. The close link between both goals has prompted some donors to suggest a close link too between the interventions of their aid agencies and their militaries, provoking criticism on the part of traditional aid actors about the militarisation of aid. This is deemed to have been a growing trend since 200117 and is likely to remain so as long as international terrorism continues to spread. Meanwhile the current refugee crisis is also revealing the close ties between security and development.

Resolving the debate between the departmentalisation or integration of security and development policies is thus essential in order to plan cooperation with certain regions such as North Africa, the Middle East and West Africa18.

5th dilemma: integrate or separate the promotion of democracy and human rights and development?

Just as it is worth raising the dilemma of the coexistence of international aid policy with other strands of foreign policy (security, defence, the fight against terrorism, trade and investment promotion, etc.) and domestic policy (gender equality and inequality), there is also a parallel debate about the coexistence of distinct goals of the policy (development, promotion of democracy and human rights, and economic growth).

Although the 2030 Agenda does not clearly address the issue of democracy as a goal, European countries are unable to avoid this dilemma when designing their cooperation programmes with a large number of their partner nations, such as the Mediterranean countries, most of which have gone through social upheavals demanding greater democratic participation and social justice; although the number of cases in which they have really transitioned towards democracy is limited (in fact only one).

The transition towards or deepening of democracy may be seen as a legitimate goal of international cooperation and also as a means of effectively achieving other goals such as equality and security.

It might also be argued, however, that the democratic pathway cannot be imposed on a country from the outside and that therefore its being linked to international aid will prove ineffective and even seen as meddling in the domestic affairs of a partner country.

6th dilemma: Spanish aid in Latin American, yes or no?

Spanish political leaders need to determine where the geographical focus of cooperation investments should be and how cooperation with Latin America should be prioritised. There are various arguments for withdrawing aid from Latin America, a region made up almost exclusively of middle-income countries (MICs) with the single exception of Haiti. These reasons, put forward by donors that have been withdrawing their development aid from the region, include the fact that poverty levels account for notably lower percentages of the population than those recorded in the least developed countries (LDCs), while involving economies with a significantly higher per capita income, something that gives the local administrations considerable room for manoeuvre to fight against such poverty, without needing recourse to international aid.

So the arguments for maintaining Latin America as the main recipient of aid do not include those of extreme poverty, or not exclusively. In addition to the significant level of poverty there are profound inequalities (an issue that has at last made an appearance in the SDG agenda), the risk of falling into the ‘middle-income trap’ without the necessary external support, and the fact that the region holds the key to the environmental challenges that are being posed globally (not only in the SDG agenda, but also in the climate-change agenda).19

Seen from the foreign policy perspective, Spain has accumulated an institutional presence in which aid policy coexists (and even intermingles) with other policies such as investments, trade, scientific and academic and cultural policy. Thus to the arguments about the enduring challenges of development in the region it is necessary to add those concerning the definition of Spain’s role as a global player (see dilemmas 2 and 3), which includes the regions and countries with which it has relations but also the terms of these relations, which will determine the place that development and cooperation occupy.

In short, Spanish aid can either remain in Latin America or be withdrawn. Both decisions would be founded on a series of rational criteria. If the decision is taken to maintain aid, however, in order to comply with the SDG agenda, this would require the devising of a strategy that would go beyond aid policy and would suitably express the SDGs in terms of the various objectives of foreign policy via each of its various policy instruments.

7th dilemma: North Africa and the Middle East, yes or no?

The situation regarding development aid for North Africa and the Middle East is similar to that of Spanish cooperation in Latin America. Here too most recipients are middle-income countries and the development challenges are akin to those existing in places not facing extreme poverty (inequality, unemployment, the challenges of climate change and security).

These complex development challenges link, in this case as in the former, to foreign policy strands other than cooperation (such as migration, asylum and security, including the fight against terrorism), using an integrated approach, requiring even more delicate handling than in the case of Latin America.20 Moreover, it so happens that North Africa and the Middle East form a geographically neighbouring region for Spain and the EU as a whole, something that to a large extent would facilitate European cooperation in relations with the region.

8th dilemma: West Africa, yes or no?

In a sense, West Africa is the region in which Spanish aid activities can be carried out in the most ‘orthodox’ and traditional ways. Among the countries that make up the region there are various LDCs with problems of extreme poverty and clear and widespread shortages in the health and education areas. The arguments in favour of giving aid to the region therefore seem obvious in terms of development. From the perspective of specifically Spanish development aid it is also necessary to bear in mind that this is a sort of ‘second southern border’.

Spain has not accumulated the institutional presence, experience and track record as a donor in West Africa that it boasts in various Latin American countries and certain countries in North Africa (such as Morocco). There is already a large group of existing donors operating in this region, in which the main challenge in order to comply with the SDGs consists of identifying the specific added value of Spanish aid in the context and also of taking advantage of the region as a place for exchanging knowledge and experiences with an ample donor community.

The questions of geographical allocation are ultimately related to the selection of overall priorities (priorities should shape where funds are invested) and the appropriate ways of delivering aid can vary from country to country, according to the contexts. This would be a way of emphasising the interrelated character of the broad political choices that you outline in this paper.

9th dilemma: concentration or fragmentation?

The concentration of aid has become one of the mantras of the agenda on aid effectiveness. The so-called Paris Principles (later underpinned in Accra)21 stress the need for aid donors to concentrate their efforts on a limited number of countries, sectors, instruments and projects with a view to improving aid effectiveness and impact, on the basis that disperse and fragmented aid leads to inefficiency as well as resulting in greater administrative and bureaucratic burdens for partner countries.

As pointed out above, however (dilemma 3), this conception of aid quality is closely linked to the MDG agenda focused on certain developmental deficiencies typical of LDCs, which generally require massive investments in educational or social macro-projects. With the SDGs, this view of aid effectiveness would necessarily be nuanced or extended to other forms of carrying out aid activities in different contexts.

As mentioned above, the SDGs promote institutional, social, environmental, technological, political and economic goals for global development; this leads to development aid in Latin American, or North African (or even, for that matter, sub-Saharan) contexts that may require small-scale projects (ignoring the macro-project premise), in diverse fields (therefore not focusing on particular sectors) and more and more (not fewer) aid instruments.

In this respect, if Spanish aid policy opts to align itself with the SDG agenda, adopting a higher international profile (dilemmas 2 and 3), in areas of global governance that transcend that of international cooperation (dilemmas 4 and 5), simultaneously underpinning its presence in Latin America, North African and the Middle East and West Africa (dilemmas 6 and 8), the forms of cooperation employed are unlikely to lead to high levels of sector and/or instruments concentration; and they would quite likely give rise to small projects in financial terms (think, for example, of institutional reinforcement projects). In short, such a combination of choices would inevitably lead to levels of aid dispersion greater than those prescribed by the international agenda. It would also require a significant effort of communication directed towards the combined international community (which takes us back to the third dilemma) and above all an effort to consolidate a strategic vision, which would guide this more or less fragmented aid (and not the other way round).

On the other hand, it is also possible to take a strategic view of Spain’s role in the world and Spanish cooperation with a less ambitious approach (dilemmas 2 and 3) and greater selectiveness whether in terms of geographical areas, sectors or instruments (dilemmas 4-8). In this respect it is worth pointing out that there is a series of sectors and programmes where Spanish aid tends to exhibit a certain degree of added value, track record or accumulated experience such as those involving gender, global health, renewable energies and food security.

10th dilemma: multilateral or bilateral?

International development aid channelled via multilateral organisations tends to have, in principle and from the perspective of its development impact, a series of advantages over bilateral aid. In theory it is more difficult for a particular donor to ‘contaminate’ its aid with national interests if it goes via the multilateral route. Furthermore, multilateral instruments reduce the transaction costs for the recipient to the extent that the participants (and therefore its procedures and administrative burden) are reduced to only one, thereby maximising the impact of the aid.

There are, however, cases (such as the World Bank programmes devised in the wake of the September 11 attacks in 2001) that rather undermine the argument regarding the independence of multilateral programmes vis-à-vis the interests of a specific donor. In terms of the administrative burden, the great proliferation of multilateral organisations and global funds in the last two decades also tends to cast doubt on the idea that the multilateral route necessarily reduces, in all sectors and contexts, the transaction costs for the partner country.

From the perspective of the donors’ foreign policy, the argument is frequently made that the bilateral route, unlike multilateral channels, facilitates the donor’s influence through international development aid (effectively the same line of reasoning that considers that multilateral institutions are more independent). This is questionable, as multilateral channels are platforms for dialogue with the entire aid community. Such platforms would seem to be indispensable for participants that aspire to policy making in the setting of the development and global governance agenda (dilemmas 2 and 3).

As far as the combination of multilateral and bilateral tools is concerned, it is also difficult to identify a technical ‘first-best’. To the extent that both multilateral and bilateral channels form part of the international development aid toolkit, the appropriate formula for multilateral and bilateral instruments will depend, on the one hand, on the goals that are established for this public policy (dilemmas 1-9) and on the other hand on the policy objectives being sought by the use of such tools.

11th dilemma: more Europe?

In the same vein as the above, it is also possible for aid policy to place its emphasis on more Europe and indeed there is already a consensus to improve the coordination of all European aid (both of the Union and its Member States) on the part of Europe’s institutions.

In reality this dilemma is present in almost all aspects of foreign policy (including international development) and the arguments in one direction or the other are therefore similar.

On the one hand, joint action gives rise to added value. In the aid arena, for instance, according to the consensus in the field, concentration reduces management costs and increases efficacy in terms of development (in a way that is similar to the effect produced by multilateral route). Moreover, in the context of aid fragmentation, the political influence of each donor may be minimal, whereas jointly it could be highly significant.

On the other hand, greater integration may entail that it is European institutions, not Spanish ones, that make direct use of this influence22 and it may also be that the development goals they achieve, while being more effective, are not the most important for Spain.

12th dilemma: reimbursable cooperation, yes or no?

One of the adaptations suggested by the 2030 Agenda23 for international aid in middle-income contexts (such as Latin America and North Africa) is the greater use of reimbursable aid instruments (loans, guarantees, capital investments and equity funds), rather than non-reimbursable aid (grants).

Once again, to the extent that this dilemma refers to the instruments of cooperation, it will be resolved in one direction or another depending on how the dilemmas regarding the goals of international cooperation are resolved. For example, the geographical and sectorial stance (dilemmas 6-9) will in large measure determine which instruments are preferred.

Nevertheless, if it is decided to go down the road of innovative reimbursable cooperation (where Spanish aid, in contrast to other donors, lacks extensive experience), it will also be imperative to address its institutionalisation, in light of the clear limitations of the current model (which does not allow minimum annual levels of expenditure ratios to be reached). It would require, for example, fostering the expansion of multilateral development banking or even contemplating the setting up of a national development bank (similar to the French Development Agency or the German KfW).

13th dilemma: which actors of cooperation?

In addition to the lead agency in development policy, the Spanish Agency for International Development Cooperation (AECID), which manages 28% of net bilateral aid,24 various ministries (48%) and regional governments, local authorities and universities (24%) participate. Development NGOs are traditionally important actors in this system (channelling 24% of the aforementioned public bodies’ funds) and in recent years companies have increased and diversified their participation. By any reckoning it is a diverse and indeed complex policy in terms of the participating actors.

It is in this context that the dilemma arises of what is the appropriate combination of actors in order to fulfil the mission (whatever it is) of international cooperation policy. It is difficult, however, to pose this dilemma in instrumental terms. While all of them are instruments of international development cooperation, they are also subjects of the aid, configuring the map of actors who will finally mould this set of strategic goals.

Indeed, this apparently instrumental debate is connected with the first dilemma regarding views of development. A more positive assessment of the role of private initiative in development will result in greater progress being made in instruments designed for companies (venture capital funds, for example), while development efforts centred around public institutions or around organised civil society will logically tend to be served more by State-to-State donations or NGOs applying for funding.

14th dilemma: what institutional model?

Alongside the debate on the ideal volume of ODA, the institutional design of Spanish cooperation takes up a large part of the analysis of Spanish aid policy. Almost invariably taking the much-admired British system as a model –in 1997 its own ministry, the Department for International Development (DfID), was established– the proposals for the institutional reform of Spanish cooperation range from the reform and strengthening of the Spanish Agency for International Development Cooperation (AECID)25 to the creation of a Sustainability and Equity Office that would answer directly to the president’s office.26

Virtually all the institutional options that are currently on the table would provide development cooperation with more weight and influence in the structural framework of the Spanish administration, which would tend to solve one of its main problems (identified in previous studies and in the first section of this document). Furthermore, all these options bring their own risks, limitations, advantages and possibilities –it remains to be seen for example whether development aid fostered by DfID helps or hinders the UK’s fulfilment of the SDGs–.

Once again it will be the decisions taken with regard to the political goals and missions of cooperation that will determine the best institutional solution from all the possibilities: the institutional design, which takes up so much of the debate about cooperation, should be the natural outcome of the more strategic decisions and choices taken at the highest political level.

The institutional dilemma is not limited to the executive branch. The Congress of Deputies could be called upon to act as the body responsible for ensuring accountability when it comes to fulfilling the SDG agenda. The question would then arise of what would be the best institutional format (a sub-commission, answering to the Cooperation Commission, or a more cross-cutting body?), especially bearing in mind the structural and operational problems of the Congress as well as the lack of connection between the commissions and the lack of accountability regarding the agreements that are reached.27

Conclusions

Spanish development policy is not only the outcome of technical decisions but also political choices. Dilemmas such as the ones set out above cannot be resolved at the technical level and make it more difficult to overcome the weaknesses attributed to this policy in various analyses with their recurring conclusions and recommendations. Parliament could take advantage of the international stimulus of the 2030 Agenda and, in the domestic context, the drawing up of the next Master Plan for Spanish Cooperation to give a policy steer to the executive in the development arena. To this end these 14 policy dilemmas, among others, will need to be tackled in a process of dialogue.

Iliana Olivié
Senior Analyst in International Cooperation and Development, Elcano Royal Institute
| @iolivie

Aitor Pérez
Associate Analyst, Elcano Royal Institute
| @aitor_ecoper


1 Details of the 17 Sustainable Development Goals (SDGs), approved by the United Nations General Assembly in September 2015.

2 This initiative on the future of Spanish cooperation was coordinated by the Elcano Royal Institute with the support of the Bill and Melinda Gates Foundation. It consisted of a series of five debates between politicians and policy analysts addressing development issues from a political perspective. The debates focused on several analyses produced in the framework of this same initiative which are available in Spanish at the Elcano Institute webpage. The analyses covered the following topics: the role of national parliaments in international development; development challenges in Latin America and the Mediterranean region with a focus on potential Spanish cooperation in the regions; and the contribution of Spain to the means of implementation of the development Agenda, both bilaterally and as a member State of the EU.

3 See the website on Sustainable Development Goals.

4 SGCID (2015), ‘Reflexiones sobre la política española de cooperación internacional para el desarrollo ante los retos del nuevo escenario global. Un compromiso renovado para una agenda transformadora de desarrollo humano sostenible’, Estudios 3, Secretary-General for International Development Cooperation, Ministry of Foreign Affairs and Cooperation.

5 OECD (2016), ‘OECD Development Cooperation Peer Reviews. Spain 2016’, Organisation for Economic Co-operation and Development.

6 See, for example, Oxfam Intermón (2016), ‘2016-2020: El regreso de España a la comunidad de donantes’, La Realidad de la Ayuda, Oxfam Intermón; ISGlobal (2015), ‘La cooperación española más allá de 2015: razones éticas y prácticas para el cambio. Una contribución de ISGlobal a la elaboración de los programas electorales’, Institute for Global Health Barcelona, September; J. Pérez & G. Fanjul (Coord.) (2012), ‘Hacia un Libro Blanco de la política española de desarrollo’, Centre for Research and Studies into Trade and Development, January; and Iliana Olivié (coord.) (2011), ‘Nunca desaproveches una buena crisis: hacia una política pública española de cooperación internacional’, Elcano Reports, nr 13, Elcano Royal Institute, December.

7 Law 23/1998, dated 7 July, regarding International Development Cooperation, BOE-A-1998-16303, BOE nr 162, II Estado actual de la cooperación.

8 N. Birdsall & H. Kharas (2014), The Quality of Official Development Assistance (QuODA). Third Edition, Center for Global Development, Global Economy and Development at Brookings.

9 Commitment to Development Index 2015, Center for Global Development.

11 The Cooperation Commission of the Congress of Deputies is the parliamentary body in charge of the preparation of legislation on development policy and international cooperation.

12 In this context it is worth noting the launch of the Cooperación Española website and the info@od statistical tool. These and other initiatives explain the improvement in Spanish cooperation’s ranking from a ‘very poor’ position in 2013 to ‘intermediate’ in 2016 in the Aid Transparency Index.

13 The emphasis on geographical questions (with less attention paid to debates on the sectorial orientation) is the outcome of the initial proposal for this initiative, which focuses on Spain’s participation in distinct regions.

14 Spain’s official development assistance (ODA) dropped by 68% between 2010 and 2014, as the government’s priority during these years was to keep national accounts under control.

17 J.A. Sanahuja (2005), ‘La securitización de la ayuda tras el 11-S: ni seguridad ni desarrollo’, in Intermon-Oxfam, La Realidad de la ayuda 2004-2005, Intermon-Oxfam.

18  J.A. Núñez Villaverde (2016), ‘La Agenda 2030 en el Mediterráneo: un reto para España’, ARI, nr 34, Elcano Royal Institute, April.

19 For the development challenges facing Latin America, see, within the framework of this project, D. Sánchez-Ancochea (2016), ‘Los desafíos del desarrollo sostenible en América Latina: estableciendo prioridades y definiendo la contribución española’, ARI, nr 30/2016, Elcano Royal Institute, April.

20 J. Núñez (2016), ‘La Agenda 2030 en el Mediterráneo: un reto para España’, ARI, nr 34/201, Elcano Royal Institute, April, offers a broader analysis of the combination of policies needed to address the region’s development challenges.

21 See OECD (2008), ‘The Paris Declaration on Aid Effectiveness and the Accra Agenda for Action’, Organisation for Economic Cooperation and Development.

22 For a deeper analysis of the role of Europe within the framework of this debate about the 2030agenda, see A. Pérez (2016), ‘España y la UE ante la Agenda 2030: ¿quién hace qué?’, ARI, nr 36/2016, Elcano Royal Institute, May.

23 To be more precise, this idea formed part of the Addis Ababa Action Agenda which addresses the financial aspects of the SDGs with a view to 2030.

24 See SGCID (2015), Comunicación 2014 al Parlamento y al Consejo de Cooperación. Plan Director de la Cooperación Española 2013-2016, Secretary-General for International Development Cooperation, Ministry of Foreign Affairs and Cooperation.

25 B. Novales & J. López-Dóriga (2015), ‘Los ODS, una oportunidad de cambio para la cooperación española’, Planeta Futuro, El País, 17/VII/2015.

26 G. Fanjul (2016), ‘Objetivos de Desarrollo Sostenible: manos a la obra’, Blog 3.500 millones, El País, 1/IV/2016; and G. Fanjul (2016), ‘Los medios de ejecución de la Agenda 2030: la contribución de España’, ARI, nr 37/2016, Elcano Royal Institute, May.

27 A detailed analysis can be found in J. Pérez & M. Segovia (2016), ‘El papel de un parlamento nacional en el desarrollo internacional: análisis de la X legislatura en España’, ARI, nr 26/2016, Elcano Royal Institute, March.

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<![CDATA[ Panama Leaks and the Tide of Tax Reform ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/commentary-seabrooke-wigan-panama-leaks-tide-tax-reform 2016-04-12T03:02:46Z The leak of the ‘Panama Papers’ has created an enormous scandal and, more importantly, a great deal of political momentum for the international tax-reform agenda.
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The leak of the ‘Panama Papers’ has created an enormous scandal and, more importantly, a great deal of political momentum for the international tax reform agenda. The leak of 11.5 million files from Mossack Fonseca, reportedly the world’s fourth-largest law firm providing offshore financial services, has exposed a range of politicians, their families and many celebrities. The leak is unique due to its size, but the news story of political elites stashing their wealth offshore is an old one. It has been exposed over time through various leaks, including those in recent years from Luxembourg, Singapore and Switzerland. The Panama Papers differ simply due to the size of the leak and how many key political figures have been targeted, leading to the resignation of the Icelandic Prime Minister and to the application of intense pressure on the British Prime Minister. While the Panama Leaks reveal the nefarious activities of individuals, and will lead to pressure to improve rules governing individuals, an equally important outcome will be an accelerated policy agenda on corporate avoidance activities.

“Now there is an opportunity for the EU and International Economic Organisations to take a tougher line on both corporate transfer pricing as well as individual tax avoidance and evasion”

We have just seen this week some political action from the European Commission on tax transparency, which calls on large firms to make their tax affairs within Europe more transparent. This is a partial measure, which could be greatly improved, but signals the flow of reform. A stronger push from International Economic Organisations (IEOs) on Country-by-Country Reporting is needed. This has been integral to the OECD’s Base Erosion and Profit Shifting agenda, and now there is an opportunity for the EU and IEOs to take a tougher line on both corporate transfer pricing as well as individual tax avoidance and evasion.

We should also be aware that the IMF-World Bank Spring meetings are this week. There is a good opportunity for the IMF and World Bank to put their irons in the fire on tax avoidance and evasion. The IMF’s job is to build stable fiscal revenue systems. The World Bank’s job is to encourage robust businesses. Tax avoidance and evasion undermine these goals. A recent Oxfam report suggests that most sub-Saharan African recipients of World Bank investments use offshore financial services. When this undermines the amount of taxes paid in the jurisdiction where the businesses actually operates, the use of offshore financial services is damaging. The issue of whether the World Bank should support businesses that undermine fiscal capacity (and welfare) in the countries where they are based needs to be on the table.

Focusing on such issues is vital for global tax reform to continue apace. It could also focus on the practical aspects of reform. A key issue is simply a lack of bureaucratic and technical capacity on cross-border tax issues, even within advanced OECD countries. International carrots and sticks can be created for authorities to speed-up traces on suspected illicit capital flows, as well as how to best use the intensifying Automatic Exchange of Information regime. The IMF has a long-term stake in providing technical assistance to its member states on fiscal matters. Such assistance could be given a shot in the arm by coordinated action with the OECD, whose Global Forum is establishing itself as the leader on fighting tax evasion and avoidance for both individuals and corporations. From the leaks in Panama, Luxembourg and elsewhere, the tide on tax reform is rising.

Leonard Seabrooke
Professor at the Copenhagen Business School, Research Professor at the Norwegian Institute of International Affairs and Vice Director of the SkattJakt tax research network
| @LenSeabrooke

Duncan Wigan
Associate Professor at the Copenhagen Business School, Research Associate at the Norwegian Institute of International Affairs and author, with Leonard Seabrooke, of the book Global Tax Battles, to be published by Oxford University Press

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<![CDATA[ ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/arteaga-perez-europe-beyond-aid-europes-commitment-international-security 2015-07-10T11:38:07Z ]]> <![CDATA[ Are the new rules of play between States and Multinationals in Latin America beneficial? An analysis of the impact of extractive multinationals in Bolivia ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/wp18-2013-macias-states-multinationals-latin-america-extractive-bolivia 2013-12-27T04:43:25Z This paper provides a step forward in the ongoing analytical assessment of the presence of foreign investment companies and investment projects in Bolivia, and toward that purpose it applies the Elcano Royal Institute’s Foreign Direct Investment (FDI-D) analytical framework. ]]> Click on "Download PDF" to read the full document

Changes in the recent history of Bolivia have drawn attention to the role that Foreign Direct Investment (FDI) has in development, and to the impact of new rules that are redefining the relationship between the State and transnational corporations. These changes in the rules of play represent a trend that has appeared in various countries in the region and which could continue to deepen, as demonstrated by recent events concerning Repsol in Argentina and Red Eléctrica Española (REE) in Bolivia. As a result of the accumulation of their investment and the strategic relevance of the sectors in which they concentrate, Spanish multinationals play a crucial role on the continent, and it is therefore imperative to analyze the impact of their activity when checking the consistency of their claims to legitimacy, in both past and potential disputes. This paper[1] provides a step forward in the ongoing analytical assessment of the presence of foreign investment companies and investment projects in specific developing countries (in this case, Bolivia), and toward that purpose it applies the Elcano Royal Institute’s Foreign Direct Investment (FDI-D) analytical framework. We analyze three sectors that have been major recipients of foreign investment in Bolivia and which play a crucial role in the economy: hydrocarbons, mining, and agribusiness. In addition to contributing to the theoretical reflection on methodological and epistemological capabilities when evaluating such phenomena, this paper provides some practical conclusions for the country. Although the effects vary, there is tension between an increasingly positive contribution in areas easily modified by legislative action, such as fiscal action, and the need (at the expense of generating risk for development if it fails) of a greater contribution to development-related aspects, more specifically those linked to the domestic market.

Carlos Macías, Former Analyst at the Elcano Royal Institute.


[1] English version of ‘¿Son beneficiosas las nuevas reglas del juego entre Estados y multinacionales en América Latina?: análisis del impacto en el desarrollo de multinacionales extractivas en Bolivia’ (DT 6/2012, Real Instituto Elcano), originally published on 28 May 2012.

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