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Emerging economies as global development partners

April 2014

Müller, U. 2014. Emerging economies as global development partners. GREAT Insights, Volume 3, Issue 4. April 2014.

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Taking the long-term view and investing in development

For any observer of the headlines of reports and newspapers on the increasing role and power of emerging economies, the past few years must have resembled a rollercoaster ride. From the “Rise of the South”[1] and “Shifting wealth”[2] the headlines changed to doubts and social unrest, “hard awakenings”, the “demystification” of models, “emerging economies in a trap” and “the end of the dream”. The overall mood seemed to swing as fast from one extreme to the other as the structural outlook of companies, currencies and countries at the stock markets.  However, development experts need to take the long-term view. We know through sometimes hard learning and experiences in the course of more than 50 years of development cooperation, that sustainable progress and structural change can only be achieved in the medium to long term, that there is always the risk of fallback and that good plans do not necessarily or automatically lead to good results.

Need for development cooperation to adapt and take a differentiated view

The long-term view tells us that relevant and enormous changes have been taking place in parts of the developing world over the course of the past 10 to 20 years, economically, socially and politically. We know that this has even helped those developing countries where structural change has not yet taken place.  We also know that there are great opportunities in the changes that have taken and are taking place. And that there are risks too that need to be addressed. But what is also important, is that we see and analyse the differences between individual emerging economies and do not throw all middle income countries into the same pot based on one criteria: “The simple crossing an artificial per capita income threshold is not an indicator of structural change”.[3] Emerging economies and middle income countries have many faces to them and – depending on the side of the face you look at – it can mirror their modern, industrialised country image or the side depicting their status as a developing country.[4] Differentiation within the group of middle income countries still makes sense.

BMZ’s approach

Development cooperation also has to adapt to these changes and needs to anticipate future trends that follow.  Already in 2004, the German Federal Ministry for Economic Cooperation and Development (BMZ) presented the results of intensive research work on development cooperation with emerging economies in its position paper “Anchor Countries – Partners for Global Development”. It set out a path on development cooperation with a selective number of mostly larger emerging economies. Programmes such as the Managing Global Governance Programme were set up to build a network of emerging partners with Germany to jointly work on global governance issues. In 2010/11, BMZ wrote and published its “Strategy for Development Cooperation with Global Development Partners (2011 – 2015)”, even before the German government agreed on its overall framework for working with emerging economies called “Shaping Globalization – Expanding Partnerships – Sharing Responsibility” in 2012. The BMZ strategy from 2011 outlined its development cooperation with five major emerging economies: India, Indonesia, South Africa, Brazil and Mexico.  It set out two dimensions of cooperation: a) cooperation in the countries themselves through bilateral projects and programmes (this was reserved for the mentioned five countries);  b) international cooperation with global development partners to shape regional and global development agendas (this extended both to the core group of five and to other emerging countries such as China). The term “global development partner” nicely captures this new direction. Development cooperation with these countries was to focus on three main areas of activity:

  • mitigating climate change, preserving the environment and thus making development ecologically sustainable;
  • promoting sustainable economic development, for example through the creation of appropriate economic and trade policy, education policy or legal and institutional frameworks;
  • shaping global development agendas.

This new and more equal partnership had also to be translated in the modalities, instruments and procedures needed for this type of cooperation (like a particular budget title for technical cooperation for new types of partnership, for better networking and global dialogues like an Emerging Economies Think Tank Alliance, the Global Dialogue of Agencies and Ministries for International Cooperation and Development, cooperation with emerging market multinationals on sustainability issues or a global alliance for social security). It also had to take account of a larger set of potential partners that included the private sector and civil society, scientific institutions, as well as other German ministries with interest in this partnership or multilateral actors and the EU.

Outlook

The debate on addressing the Millennium Development Goals (MDGs) and looking at poverty in the post-2015 world includes discussions on how to address the “new bottom billion” of poor people in middle income countries.[5] It seems obvious, that – differing from Least Developed Countries (LDCs) – middle income countries not only have the primary responsibility but also the resources and capacities to address their major internal poverty issues.[6] But we also should not disregard the challenges, potential backfalls and new transformative problems – such as increasing inequality – that Middle-Income Countries (MIC) will encounter in the post-2015 era. And not to forget the opportunities that exist in facilitating joint learning North-South, South-North and South-South. Just think of Brazil’s and China’s successes on poverty and hunger or other emerging countries’ experience with social security systems or regulatory issues.[7]  BMZ always felt it to be important to keep a good mix of low and middle income countries on its list of partner countries of development cooperation, even though we also were and are in favour of focusing our support more strongly on poorer and fragile countries. BMZ has also always invested heavily in global public goods like climate change, which makes no sense, if you limit it to LDC. Therefore, continuing to have MIC in our list of partner countries of development cooperation and implementing the global poverty and sustainable development agenda is not a contradiction.

Germany’s trilateral cooperation projects can be seen in that light, too. It is not so much a matter of resources, but of learning, knowledge transfer, using intelligent financing methods and adapting the way of cooperating with emerging economies. And the post-2015 development world will certainly not be a one-goal agenda. The international development community needs to address global governance issues, find ways to invest in global and regional public goods, and address peace, security and governance as well as training, jobs etc. more strongly. To do that, we need to partner between the Development Assistance Committee (DAC) members, middle income countries and emerging economies and low income countries.

The flourishing “beyond aid” and “beyond ODA” literature could give the wrong impression that no stone rests on the other anymore. I do not think that will be the case. The South has become much more diverse, but there are still plenty of old-fashioned problems of the South around. This will not change only with the growth of the emerging economies. We need to build on what we have, build on trust and networks we have established over the past 50 years rather than disconnect development without a realistic and comprehensive alternative (an issue the Global Partnership for Effective Development Cooperation will surely pick up). Minister Gerd Müller of Germany will host discussions about a Charta for the future in Germany in 2014. I am sure that these kinds of discussions will come up and will also play a role in Germany’s G7-Presidency 2015.

Ursula Müller is Director General for policy issues and political governance of bilateral development cooperation and sectoral affairs at the Federal Ministry for Economic Cooperation and Development, Germany.

This article was published in GREAT Insights Volume 3, Issue 4 (April 2014).

Footnotes

1. Title of the Human Development Report 2013.

2. OECD Report on Perspectives on Global Development 2010.

3. Loewe, M./Rippin, N. Changing global patterns of poverty, DIE Briefing Paper 3/2012.

4. Two quotes from the Financial Times Europe and the Economist from 2012 nicely paraphrase t
he hybrid nature of many emerging economies: “India: poorer than Africa and richer than Britain…After 20 years of strong economic growth, India is simultaneously a rich and a poor country. Its sheer size means that India is the 10th largest economy in the world…It now has more mobile phones than toilets…India will be indirectly funding the bailouts in the Eurozone – through its contributions to the IMF. Yet living standards in Greece or Ireland remain unimaginably lavish by the standards of rural India” (Financial Times Europe, 25 Sept. 2012); “Poor countries tend to grow faster than rich ones…’’. But that does not mean that every poor country of five decades ago has caught up….In fact, most countries that were middle income in 1960 remain so in 2008….Only 13 [of the 101 countries deemed to be middle-income countries in 1960….] escaped this middle income-trap” (Economist, 27 March 2012).

5. See for example Sumner, A. 2013. What will it take to end extreme poverty, in: OECD: Development Co-operation Report 2013 – Ending Poverty, Paris, or the Report of the UN Secretary-General’s High-level Panel of Eminent Persons on the Post-2015 Development Agenda.

6. The coalition agreement 2013-17 in Germany clearly states (own translation): ‘’The bilateral governmental cooperation with emerging economies must take into account their higher capacities and their grown international responsibility. Emerging economies must be called upon their own responsibility to put into practice the human rights of their people regarding nutrition, health and education. We will concentrate on the protection of global public goods, the search for sustainable development paths that save natural resources as well as – from case to case – on trilateral cooperation to the benefit of poorer developing countries.

7. See also the OECD Development Co-operation Report 2013 and the Report of the UN Secretary-General’s High-level Panel of Eminent Persons on the Post-2015 Development Agenda: “Developing countries are much more diverse than when the MDGs were agreed – they include large emerging economies as well as countries struggling to tackle high levels of deprivation and facing severe capacity constraints. These changing circumstances are reflected in changing roles. Developing country links in trade, investment, and finance are growing fast. They can share experiences of how best to reform policy and institutions to foster development. Developing countries, including ones with major pockets of poverty, are cooperating among themselves, and jointly with developed countries and international institutions, in South-South and Triangular cooperation activities that have become highly valued. These could be an even stronger force with development of a repository of good practices, networks of knowledge exchange, and more regional cooperation. “

Economic Transformation and TradeEmerging Players in Africa

External authors

Ursula Müller