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Jonathan GlennieSenior research fellow

Seoul, 13-15 May 2013

MICs and the future of development cooperation

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1. The MIC category in a changing international context

2. Implications for international development cooperation: 2 scenarios

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)

1. The MIC category in a changing international

context

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Human development and income/capita (Hans Rosling)

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Arbitrary (and stingy) cut-off points

Middle income countries

Low income (LIC)

Lower middle income (LMIC)

Upper middle income (UMIC)

High income (HIC)

$1000 or less

$1000 -

$4000

$4000 -

$12500

$12500 or

more

“Is it not time for these arcane

income thresholds for ‘graduating’

from ‘low-income’ status to be laid

to rest?”

Martin Ravallion, Director, Development

Research Group, The World Bank

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Countries graduating to MIC status since 2000

(There are now only about 30 LICs left)

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Historically, progression has not been linear

  1978 1990 2003 2012LIC 27 48 61 36LMIC 54 50 56 54UMIC 40 35 37 54HIC 30 44 54 70LDC 30 43 50 48World 151 177 208 213

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Annual world GDP (PPP) growth rate (3-year moving average)

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The end of poverty?

(Source: World Bank)

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Where do poor people live?(Sumner A, “Another bottom billion”,

2010)

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Poverty is persistent in fragile states

(Kharas and Rogerson, “Horizon 2025”, 2012)

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Aid from MICs is about $15bn and rising (plus much non-monetised)

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SSC and private funds are complementing traditional “aid”

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Post 2015 = Sustainable development

(Green D. From Poverty to Power, Oxfam, 2012)

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An expanding set of objectives

Already agreed goals

Possible future goals

MDGs Climate

finance

SDGs Broader

Poverty eradication

Adaptation and mitigation

Equitable use of natural resources and ecosystem management e.g. forests, oceans

E.g. technological connectivity, security

“Development only really begins

when extreme poverty is

eradicated.”

Adolf Kloke-Lesch, former managing director

at GIZ, Germany

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2. Implications for development cooperation

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Development cooperationFinancial and non-financial

Development cooperation (broadly defined)

Financial development cooperation

Innovative

MultilateralBilateral

Private

Non-financial development cooperation

(Glennie J, “From Poverty Eradication to Sustainable Development”, 2012)

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Recap

1. New context (power and poverty)

2. New actors/flows (public and private)

3. New challenges (planetary limits)

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Scenario 1: Traditional viewAid declines in the medium term

• Half of remaining LICs likely to “graduate” in next ten years, leaving only fragile states (and making MIC category even less useful)

• MICs will graduate from grants towards loans and blended finance, private flows

• Normal trading relations emerge between countries

• Aid becomes history

“There is basically no role for

international development

cooperation in middle income

countries.”

Paul Collier, author of “The Bottom Billion”

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Scenario 2: Challenging orthodoxyA transformation in international public

finance

• Orthodox definitions of poverty are narrow, the MIC category is arbitrary; global inequalities are still vast; most poor people today live in middle income countries

• International presence (incl. civil society) can prove crucial for incentivising the kind of progress necessary in MICs

• Sustainable Development and Global Public Goods emerge as the major framing theories of the 21st century – MICs need to develop more sustainably = more expensive

• “Non-traditional” sources of development finance continue to proliferate including: South-South Cooperation; Innovative sources (taxes); Private funds

“the evaluation [of aid to Colombia] found that in certain

fields – such as the environment, institutional

strengthening, and productive system support, as well

as problems related to the struggle against inequality,

internal displacement and human rights violations –

the selective use of aid financing, expertise and

shared experience was ‘a determining factor in

achieving better development results’”

(Wood et al, 2011)

“What is relevant is not so much the direct effect

of the amount of resources channelled by aid,

but the role that international cooperation may

play in modifying the framework of incentives

in which agents operate.”

Jose Antonio Alonso, Complutense

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The vast majority of poor people continue to live in Low Aid Countries

(Glennie J, What if ¾ of the world’s poor live (and have always lived) in Low Aid Countries”, 2012)

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10 most poor-populous countries

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Aid to MICs is likely to be increasingly effective (VFM)

LIC

UMIC

Need

LMIC

Effectiveness

(Glennie J, “The role of aid to MICs, 2011)

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A global public sector: mutual benefit, mutual cost

odi.org.uk

Thanks for listening.