Alternatives To Government-Sponsored Aid Increasing Post-Recession

Memo To The World Bank: There Is A New Kid On The Block
At a conference this week in South Africa, the nations of Brazil, Russia, India, China and the host country opened discussions about potentially forming a development bank that would serve as an alternative to the International Monetary Fund and World Bank.

The conference is the first in a cycle of meetings focused on ways to increase opportunities for business and scientific collaboration, particularly in Africa.

According to The New York Times, a mere 2.5 percent of foreign investment by BRICS countries goes to member nations with 40 percent of their foreign investment goes to the developed world’s largest economies, the European Union, the United States and Japan.

Alternatives To Old Funding Methods On The Increase
As the financial crisis places increased pressure on the economies of Europe and the US, there also has been a rise in the demand for development aid throughout the world. The combination of these factors is driving the creation and bolstering of alternative means of providing aid to nations in need. With governments feeling the financial pinch, many are looking to the private sector and businesses to carry more of the weight.

The Center for Strategic and International Studies released a report, Our Shared Opportunity: A Vision for Global Prosperity, which provides a set of recommendations on ways the government and private sector might collaborate to achieve better development outcomes.

The report is the work product of CSIS’ Executive Council on Development, a group of leaders from government, business, nongovernmental organizations, and philanthropy formed in 2012.

In an accompanying op-ed, CSIS President John Hamre and Rhonda I. Zygocki, vice president of the Chevron Corporation, contend that it is crucial to US foreign policy that the resources of the private sector be “strategically and systematically” deployed “in combination with our government efforts around trade, investment and development.”

Effort To Increase Private Sector Involvement Not Limited To US
A group of business representatives, including the Business and Industry Advisory Committee (BIAC) of the Organisation for Economic Co-operation and Development and the International Chamber of Commerce, recently sent a letter to the United Nations seeking to play a larger role in the formulation of the next steps the Millennium Development Goals.

The US Council for International Business has set forth a broad agenda designed to increase both trade with and investment in the developing world.

Nongovernmental Organizations Express Concerns
Some aid providers have recently raised concerns about a shift mixing loans and grants, also known as “blending,” as a means to achieve private-sector growth.

In a open letter, a coalition of nongovernmental organizations expressed skepticism that the European Union’s “new cooperation mechanisms that promote the private sector address the main objective of EU development cooperation – which is the eradication of poverty and, in the case of Latin America, social cohesion.”

Jesse Griffiths, director of Eurodad, a signatory of the letter, told EurActiv that most private investment flows into middle-income countries rather than the poorest nations “where there is a huge infrastructure needs gap”.

“Very little foreign private investment flows to the poorest countries,” he said, adding that there is little alternative to donor aid to address the “huge infrastructure gaps” in the least developed nations.

 

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