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The Commitment to Development Index (CDI) ranks 40 of the world’s most powerful countries on policies that affect more than five billion people living in poorer nations. The Index covers seven distinct policy areas: Development Finance, Investment, Migration, Trade, Environment, Security, and Technology. Each component is underpinned by a series of indicators of policy effectiveness in these areas, which are standardised and weighted according to their importance in development. The CDI aims to provide comparable information to policymakers on how their countries’ policies can accelerate development. It provides a comparable quantitative measure of effort in policies that support or inhibit development, especially in areas beyond aid. Click on the seven components above to learn more.
Why is Development Finance Important for Development?
Development finance is likely the first policy that comes to mind when considering how countries help to promote development beyond their borders. It remains an important source of assistance for many developing countries. The OECD report on fragile states concludes that aid has been the largest and most reliable source of finance for the least developed fragile states over the past decade. In 1969, the Pearson Commission proposed that rich countries should spend 0.7% of their gross national product (GNI) on foreign aid, for which the definition of official development assistance (ODA) was provided by the Development Assistance Committee (DAC) of the OECD in the same year. This 0.7% target was enshrined in a UN resolution on October 24, 1970. In 1993, following the revision to the UN System of National Accounts, GNI replaced GNP as the denominator for the target. More than 50 years after it was set, only a handful of countries are meeting this target.
Quantity is not the only aspect that matters in the provision of development finance. How it is provided can have a significant impact on achieving development results. This has been acknowledged by donors in a series of High Level Fora 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 cooperation. Today, ownership, focus on results, inclusive development partnerships, and transparency and mutual accountability are standard criteria which donors and recipients use to implement development assistance interventions. These criteria were agreed upon by 160 countries, including new and emerging cooperation providers.
Why Are Investment and Financial Transparency Important for Development?
Foreign direct investment (FDI) is an important catalyst of economic growth in many developing countries, in many cases constituting a significant part of capital formation. Rich countries’ policies that either support or impede investment beyond their borders can have a substantive effect on the well-being of many developingcountry 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 be in place which ensure that the environment and the general welfare of those affected by the investment are properly safeguarded.
International financial flows can also be used to facilitate crime, money laundering, tax evasion, international bribery, corruption and tax evasion. Ultimately, illicit financial flows from developing countries may end up as assets held in the financial institutions and property markets of rich countries instead of contributing to developing countries’ own development. In this way, illicit financial flows deprive the concerned country of urgently needed resources for private and public investment, thereby hampering infrastructure building and economic growth. 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. So, we consider whether countries are making and meeting effective commitments on financial integrity and combating illicit financial flows as part of the CDI.
International mobility of workers is a source of opportunities for people to improve their lives, as well as those of their families. The available evidence suggests that gains to development from lowering barriers to emigration appear much larger than gains from further reductions in barriers to goods or capital flows, and may be much larger than those available through any other shift in a single class of global economic policy.
When workers migrate from poor to rich countries, they often broaden their opportunities to earn higher incomes, access knowledge and gain valuable skills. Meanwhile, returning migrants may often bring technical know-how back to their home countries, contributing to the wider knowledge base in their societies. What’s more, migrant workers from low- and middle-income countries collectively sent over $550 billion back in 2019, helping increase incomes and smooth consumption in their countries of origin. This flow exceeds official aid by a factor of 3 and is similar to levels of FDI.
In addition to the economic aspects of migration, social remittance effects have often been observed. Returning migrants may contribute to changing social norms at home, pushing for better political accountability, transparency and more equal gender norms. In particular, when women have more opportunities for migration, there may be even larger social remittance impacts. Therefore, the stronger the opportunities for migrants to integrate into their host societies, and the better their rights are protected, the more they are able to enjoy the opportunities available to them, and the better their life chances are.
Why is Trade Important for Development, and for All of Us?
International trade and trading relationships are changing very rapidly. According to a 2015 UN Conference on Trade and Development (UNCTAD) report, international trade grew by $20 trillion from 1990 to 2014 (from $4 trillion to $24 trillion). Rich countries’ trade policies have a significant impact on the trading prospects of developing countries. Trade provides important opportunities for countries to develop dynamic export sectors, tap into global supply chains, attract investment, create jobs and reduce poverty. The human impacts of these benefits are very real. One study, for instance, suggests that the introduction of the African Growth and Opportunity Act, the US trade agreement with sub-Saharan African countries, has reduced infant mortality in the latter group of countries by about 9% of the sample mean. It is therefore critical for such development prospects that rich countries open themselves to trade with developing-country partners. But despite a wide consensus on the positive effects of trade, many goods for which poor countries have a relative production advantage, such as agricultural goods or textiles,36 still face tariffs and other trade barriers in rich countries.
Rich countries also affect the development prospects of trading partners beyond their borders when they subsidise domestic agricultural production. This lowers production costs for those countries that can afford to subsidise, 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, with about 17% value share of total exports from developing economies, but regulatory barriers remain.
Besides these direct measures, there are also high administrative or logistical costs to trading with some countries, which is a particular disadvantage to poorer trading partners, exporting low value-added items, and less able to absorb additional costs.
Why Is Protection of the Environment Important for Development, and for All of Us?
Several elements of the environment are true global public goods. No country can be prevented from consuming the atmosphere, the air, or its forests. Conversely, though many countries have contributed to global environmental problems, no individual country can effectively address these by acting alone. This presents a huge and rising challenge for policymakers and industry alike, as countries must act collectively to address issues like climate change.
Though all must act, the main contributors to environmental problems are not equally distributed across the globe. As countries develop economically, they consume more resources – adding CO2 and other pollutants to the atmosphere, cutting down forests to make way for agricultural activities and paving over natural habitats. Historically, it is the economically more developed nations which have contributed most to global environmental issues. This apparent marriage between economic growth and a larger environmental footprint is being re-evaluated as policymakers and academics focus on possibilities for decoupling and green growth in industrialised countries, and on avoiding the high‐carbon development pathway established by industrialised countries through low-emissions development strategies in emerging economies.
Meanwhile, it is the poorest countries – who have contributed least to global environmental challenges – which bear the brunt of their impacts. Climate change – arguably the key global environmental challenge – will raise sea levels, threatening island economies and low-lying countries the most. Likewise, while climate change will affect agricultural outputs in all countries, it will disproportionately affect farms in lower latitudes, where many developing countries are located. The health risks resulting from changing climatic conditions (chiefly malaria, waterborne diseases and other diseases transmitted through insects) are also likely to also higher there. Rising temperatures in lower latitudes are not the only worrying factor: evidence shows that the poor rely disproportionately on ecosystem services for their security and livelihoods. Agriculture forms the bedrock of employment in the world’s poorest regions. Biodiversity plays a central role in sustaining food security. Healthy ecosystems are a source of clean water and energy, provide income opportunities and shelter, and are a source of treatment and protection.
Global oceans are also under threat. Rapid depletion of global fish stocks is a particular problem, as these are increasingly overexploited, partly because demand remains high in rich countries. As 10%–12% of the world’s population relies on aquaculture for their employment, this directly affects livelihoods. Fishing subsidies provided by rich countries often result in overfishing, which has a negative impact not only on the ocean’s decreasing biodiversity, but also on the livelihoods of communities dependent on these resources. As in most situations where collective action is required, global treaties can help to set binding norms and standards for international collaboration. This is the case for the Paris Agreement, as well as a number of other treaties on species conservation, logging and forestry, as well as biodiversity.
For more information on why rich countries’ policies matter for the environment, please see our paper with the Ecologic Institute.
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. It is unsurprising that fragile and conflict-afflicted states are the most behind on the SDGs.
Within security we consider both the traditional security aspects outlined above and, for the first time, nontraditional, ‘human’ security approaches. Specifically, in 2020 we add a health subcomponent to the security component. The COVID-19 pandemic and ensuing global crisis have brought into sharp focus the transboundary nature of threats to human health. However, it is not only viruses which we should guard ourselves against. Likewise, the risks posed by antimicrobial resistance threaten human health beyond any domestic borders.
We measure a country’s commitment to global security by focusing on four categories: contributions to international peacekeeping efforts, participation in international security treaties, avoiding damaging arms sales and efforts in global health.
Why Is Technology Creation and Access Important for Development?
While technology may be embodied in physical products, the broader definition of technology includes knowledge, techniques, processes, skills and methods. Seen this way, it is a critical factor in economic and human development, and not just for the poor. New technologies reduce the prices of goods and services, making them more accessible to everyone. Advances in medicines, information and communication technology, and sustainable energy contribute to raising the quality of life worldwide. Rich countries, which have strong research networks and technological bases, have an important role to play in both new knowledge creation and its diffusion worldwide. 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. Promoting both the transfer and the diffusion of such knowledge is key to addressing many of the persistent and emergent challenges that developing countries face.
Governments can contribute to global innovation and technological development by stimulating the production of new technologies through direct funding or through granting tax incentives to stimulate private-sector research. They can encourage technology diffusion beyond their borders in various ways: international academic collaborations allow developing-country researchers to gain skills and gives exposure to their ideas; opening the doors to foreign students allows them to gain new knowledge, skills and often economic and intellectual capital, which they can employ or share back home or in international innovator networks. This process can be particularly empowering for female students, who are so often underrepresented. But governments can also impede the diffusion of their technologies through imposing excessively restrictive intellectual property rights (IPR) terms on foreign trade and investment partners, which can limit developing countries’ access to vital technologies.