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The Commitment to Development Index (CDI) is a multifaceted index that aims to highlight the strengths and weaknesses of OECD countries' policies with respect to how they help poorer countries to develop and grow. The Index comprises seven components: aid (both quantity, as a share of gross national income, and quality), trade, finance, migration, environment, security, and technology. Each component is underpinned by a series of indicators of policy effectiveness in these areas. A country receives points for policies and actions that support poor nations in their efforts to build prosperity, good government, and security. We use thousands of data points across more than a hundred indicators to come up with overall rankings and for each policy component. Click on the seven components above to learn more.
Aid is likely the first policy that comes to mind when considering how rich countries help development beyond their borders. Aid remains to be an important source of development finance for many developing countries. The OECD report on Fragile Statesconcludes that aid has been the largest and most reliable financial source for the least developed fragile states over the past decade. In 1969, thePearson Commission proposed that rich countries should spend 0.7% of their Gross National Income on foreign aid. Almost fifty years later, only a handful of countries are meeting this target.
Quantity is not the only aspect that matters in the provision of aid. How aid is provided can have a significant impact on achieving development results. This has been acknowledged by donors in a series of High Level Meetings on Aid Effectiveness, the last one taking place in Busan in 2011. These fora contributed to establishing key principles for improving the effectiveness of development assistance. Today, ownership, harmonization, managing for development results, and mutual accountability are standard criteria based on which donors and recipients implement development assistance interventions.
The CDI uses the Quality of Official Development Assistance (QuODA) as the main input for calculating an Aid Quality Score (AQS) to assess countries on the quality of their aid. The full background and methodology for QuODA is available here.
Why is financial transparency and support to investment important for development?
Foreign direct investment is the largest source of external financing for many developing countries. Rich countries’ policies that either support or impede investment beyond their borders can have a substantive effect on the wellbeing of many developing country citizens. Foreign investment can contribute to the development of infrastructure, housing, transport, energy supply and many other areas. However, the quantity of investment is not the only important dimension of investment as a development tool. It is also important that measures are in place which ensure that the environment and the general welfare of those affected by the investment is properly safeguarded.
International financial flows can also be used to facilitate crime, corruption and tax evasion; with illicit financial flows from developing countries ending up as assets held in the financial institutions and property markets of rich countries. States now have legal duties to screen, trace, freeze, seize and return illicit wealth, and to detect, prevent and punish foreign bribery. This supports the integrity of investment, public accountability and revenue raising in developing countries. There is therefore a clear case for including an assessment of whether countries are making and meeting effective commitments on financial integrity and combating illicit financial flows as part of the CDI.
Why is technology creation and access to it important for development?
Technology is an essential factor in economic and human development, and not just for the poor. Advances in medicines, information and communication technology, sustainable energy, for example, contribute to improving the lives of all of us. Rich countries have an important role to play in this - the internet, mobile phones, vaccines, and high-yielding grains were all invented by rich-country researchers and exported elsewhere, where they have improved—and saved—many lives. Accessing such knowledge is one way in which poor countries can catch up with the wealthy ones. Donor country governments can contribute to technological development and diffusion of knowledge and innovation by publicly funding research and development activities and incentivizing private research through tax incentives.
Although technology can help development, innovations and technologies that could help poorer countries to develop are often protected by intellectual property rights (IPR), which can restrict developing countries’ access to them. IPRs aim to incentivize research and innovation by granting producers of new technologies a monopoly over that technology for a specified period. But a developmental IPR regime should balance this incentive with the need to sufficiently enable others to make use of technologies, to assist developing countries in accessing important technologies, and contribute to the advancement of human knowledge.
For more information on intellectual property rights, please consult CGD’s paper on technology and knowledge transfer.
Why is protection of the environment important for development, and for all of us?
A healthy environment is a necessity for all, poor countries and rich. While wealthy countries bear the most responsibility for creating anthropogenic climate change, the impact on poor countries is much more damaging. Many of these countries are in regions where the most adverse effects of climate change manifest.
Many of the world’s poor depend heavily on their surrounding environment and ecosystems to meet their daily needs. Healthy ecosystems are source of clean water and energy, they provide income opportunities and shelter, they are a source of treatment and protection, and biodiversity plays a central role in sustaining food security. Logging as well as increasing demand for arable land are among the main causes of deforestation.
Rapid depletion is a particular problem for global fish stocks, which are becoming increasingly overexploited, partly because demand for fish remains high in rich countries. Fishing subsidies provided by rich countries result in overfishing, which has a negative impact not only on ocean’s decreasing biodiversity, but also on the livelihoods of communities dependent on these resources.
Why is trade important for development, and for all of us?
International trade and trading relationships are changing very rapidly. According to a 2015 UNCTAD report , international trade grew by USD 20 trillion from 1990 to 2014 (from $4 to $24 tr.). Rich countries’ policies have a significant impact on the trading prospects of developing countries. Trade provides important opportunities for countries to attract investment, create jobs, and reduce poverty.One recent study , for instance, suggests that the African Growth and Opportunity Act, the US trade agreement with Sub-Saharan African countries, has reduced infant mortality by about 9%. Rich-countries opening themselves to trade with developing country partners is critical for such development prospects. But despite a wide consensus on the positive effects of trade, many goods which poor countries are relatively better at producing—including agricultural goods—still face trade barriers in rich countries.
Rich countries also affect the development prospects of trading partners beyond their borders when they subsidize domestic agricultural production. This lowers production costs for rich-country farmers, which causes overproduction and the ‘dumping’ of the excess supply onto world markets. This in turn lowers the global prices of agricultural produce and thus hurts poor-country farmers. Also, trade in services is becoming increasingly important for development, but regulatory barriers remain.
Besides these direct measures, there are also high administrative costs to trading with many countries, which has the effect of disadvantaging especially poorer trading partners.
For more information on rich countries’ trade policies, please consult CGD’s paper.
Security and development are closely interlinked. War and political violence devastate government infrastructure and public resources and harm civilians and their homes and livelihoods. War decimates public capacities and political institutions and devastates citizens’ lives. This causal link also works in reverse: poverty and institutional weakness make it easier for both challengers and incumbents to gain support for political violence and war. Conflicts also do not respect borders and it is therefore in the interest of all countries to support peace and international security beyond their borders.
International mobility of workers is potentially the most powerful tool for poverty reduction and income redistribution. Migration policies of rich countries therefore greatly affect citizens of poor countries. When workers migrate from poor to rich countries they broaden their opportunities to earn higher incomes, access knowledge and gain valuable skills. Expatriate workers collectively send billions of dollars back to their countries each year, a flow of remittances that surpasses foreign aid several-fold. Emigrants returning to their home countries, especially students, bring their new knowledge and skills and often capital which they can employ by opening businesses, and enhance the knowledge base of the country. In contrast to the ‘brain drain’ argument, there is very little evidence that skilled migration hurts the sending countries. On the contrary, migrants can strengthen and build trade networks, transfer technologies, and provide investment resources for their home economies.