Aid

Aid quality is just as important as aid quantity, so the CDI measures gross aid as a share of GDP adjusted for various quality factors: it subtracts debt service, penalizes “tied” aid that makes recipients spend aid only on donor goods and services, rewards aid to poor but relatively well-governed recipients, and penalizes overloading poor governments with many small projects.

Luxembourg’s aid performance

• Score: 13.0
• Rank: 1

Strengths

• High net aid volume as a share of the economy (1.04%; rank: 2)
• Small share of tied or partially tied aid (0.1%; rank: 4)
• Large share of aid to poor and relatively well-governed recipients (selectivity rank: 3)

Weaknesses

• Allows project proliferation; small average project size (rank: 17)

Trade

International trade has been a force for economic development for centuries. The CDI measures trade barriers in rich countries against exports from developing countries.

Luxembourg’s trade performance

• Score: 5.3
• Rank: 20

Strengths

• Low tariffs on textiles (6.4% of the value of imports; rank: 3)
• Low tariffs on apparel (6.4% of the value of imports; rank: 3)
• High level of manufactures imports from poorer countries (10.1% of GDP per capita; rank: 4)

Weaknesses

• High agricultural subsidies (equivalent to a tariff worth 15.1% of the value of imports; rank: 24)

Investment

Rich-country investment in poorer countries can transfer technologies, upgrade management and create jobs. The CDI includes a checklist of policies that support healthy investment in developing countries.

Luxembourg’s investment performance

• Score: 4.2
• Rank: 21

Strengths

• Employs foreign tax credits to prevent double taxation of corporate profits earned abroad
• No restrictions on pension fund investment in emerging markets

Weaknesses

• Denies foreign investors tax benefits in developing countries
• Loopholes in domestic legislation permit bribe payers to circumvent the OECD Convention
• Weak leadership in extractive industry transparency initiatives

Migration

The movement of people from poor to rich countries provides unskilled immigrants with jobs, income and knowledge. This increases the flow of money sent home by migrants abroad and the transfer of skills when the migrants return home.

Luxembourg’s migration performance

• Score: 6.8
• Rank: 7

Strengths

• Bears share of the burden of refugees during humanitarian crises (rank: 12)
• Tuition for foreign students the same as for nationals

Weaknesses

• Small share of foreign students from developing countries (16.3%; rank: 27)

Environment

Rich countries use a disproportionate amount of scarce resources, and poor countries are most vulnerable to global warming and ecological deterioration, so the CDI measures the impact of policies on the global climate, fisheries and biodiversity.

Luxembourg’s environment performance

• Score: 5.5
• Rank: 21

Strengths

• No fishing subsidies (rank: 1)
• Low fossil fuel production rate per capita (0.0 tons of carbon dioxide equivalent; rank: 1)

Weaknesses

• High greenhouse gas emissions rate per capita (23.7 tons of carbon dioxide equivalent; rank: 26)
• Low gas taxes ($0.67 per liter; rank: 26)
• Poor compliance with mandatory reporting requirements under multilateral environmental agreements relating to biodiversity (rank: 25)

Security

Since security is a prerequisite for development, the CDI rewards contributions to internationally sanctioned peacekeeping operations and forcible humanitarian interventions, rewards military protection of global sea lanes, and penalizes arms exports to poor and undemocratic governments.

Luxembourg’s security performance

• Score: 5.0
• Rank: 15

Strengths

• Few arms exports to poor and undemocratic governments (rank by share of GDP: 4)
• Participates in major international security treaties and regimes

Weaknesses

• Low personnel contributions to internationally-sanctioned peacekeeping and humanitarian interventions over last decade (rank by share of GDP: 25)

Technology

Rich countries contribute to development through the creation and dissemination of new technologies. The CDI captures this by measuring government support for R&D and penalizing strong intellectual property rights regimes that limit the dissemination of new technologies to poor countries.

Luxembourg’s technology performance

• Score: 4.2
• Rank: 21

Strengths

• No government R&D expenditure on defense (rank by share of GDP: 1)

Weaknesses

• Low tax subsidy rate to businesses for R&D (rank: 24)
• Offers patent-like proprietary rights to developers of data compilations, including those assembled from data in the public domain
• Does not revoke unused patents