How Committed are Rich Countries to Development in Poor Countries?

Global Development

Key points

  • Recently, this year’s Commitment to Development Index was released, which ranks rich countries based upon a number of factors, such as Aid, Trade and Environmental policies.
  • Northern European Countries, such as Denmark, Sweden and Norway continue to be on the top of the list. While South Korea, Japan and Switzerland are at the bottom.
  • Interestingly, New Zealand substantially outperforms Australia, while the United States and Germany are on par with Greece and Spain respectively.
  • The index shows that all rich countries could be doing much more to contribute to international development.

Background

Each year the Centre for Global Development, an international development think tank, ranks rich countries based upon how their policies enable or inhibit development in poor countries. The seven factors included in the index relate to Aid, Trade, Finance, Migration, Environment, Security and Technology. The latest rankings released in early January are shown in the Figure below.

CDI Figure

The index measures rich countries commitment to international development beyond comparing aid levels alone, which dramatically alters the rankings of some countries. Luxembourg falls from 1st place based upon aid as a share of GNI to 18th place based upon the more comprehensive index. While Portugal moves much higher up the list to 6th place compared to 12th place when comparing just aid.

Importantly, this index shows that rich countries could be doing much more to contribute to international development. Every country performed poorly in at least one of the seven factors included in the index.

Source:

Centre for Global Development 2015 <http://www.cgdev.org/publication/commitment-development-index-2014>

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Revised Commonwealth Games Medal Tally

Global Development

As the 2014 Commonwealth Games come to end have you ever wondered how fair the playing field is?

Most members of the Commonwealth are developing countries and many are small islands. Only a few countries, like the United Kingdom, Australia and Canada, are rich enough and have sufficiently large populations to have well nourished populations that have time to hone their skills in competitive sports. This significantly reduces the competition at the top of the medal tally. For example, to illustrate the inequality between Commonwealth countries compare the richest and poorest countries. The richest country, Australia, has over 125 times more income per person than the poorest country, Uganda.

Countries rankings would change dramatically if the medal tally were revised to adjust for differences in income per person and population size, as has been done for the table below. This removes disparities in wealth and population and allows for a fairer comparison of how countries have performed.

 

Rank Country Revised Medal Tally Change in Ranks
1 Nauru 1482 24
2 Samoa 459 15
3 Kiribati 373 23
4 Grenada 253 16
5 Jamaica 148 4
6 Saint Lucia 77 21
7 Kenya 61 1
8 Bahamas 39 10
9 Trinidad and Tobago 38 4
10 New Zealand 27 -5
11 Cyprus 27 1
12 Uganda 26 3
13 Fiji 26 15
14 Cameroon 25 0
15 Isle of Man 24 14
16 Barbados 23 14
17 Namibia 22 2
18 Papua New Guinea 14 3
19 Mozambique 13 3
20 United Kingdom 11 -19
21 South Africa 10 -15
22 Zambia 9 1
23 Australia 9 -21
24 Mauritius 8 7
25 Nigeria 8 -18
26 Botswana 6 6
27 Malaysia 6 -17
28 Singapore 5 -17
29 Canada 4 -26
30 Ghana 4 -6
31 India 3 -27
32 Pakistan 2 -16
33 Sri Lanka 2 0
34 Bangladesh 1 0

Small islands countries and some African countries perform substantially better when the medal tally is revised to take into account income per person and population size. Nauru, Samoa and Kiribati take the top three places because they are middle-income countries with tiny populations and still managed to get five medals between them (including a gold and three silver). While Australia, the United Kingdom and Canada fall to the bottom third of the rankings.

Sources

Commonwealth Games 2014 <http://results.glasgow2014.com/medals.html>

World Bank 2014 <http://data.worldbank.org/data-catalog/world-development-indicators>

Australian Aid mainly goes to Middle Income Countries

Australian Aid Policy

Key Points

  • Almost 90% of Australia’s country program aid goes to middle-income countries.
  • Middle-income countries have higher average living standards than low-income countries and are typically less reliant on aid. For example, aid accounts for less than 2% of Vietnam’s economy.
  • Almost all low-income countries in the world are in Sub-Saharan Africa. This is the region where Australia provides the lowest level of aid in per person terms.

Background

The World Bank defines a middle-income country as having over US$1045 income per person (2013 GNI Atlas Method). These countries are considered to be rich enough to be able to begin to access forms of finance other than grant aid, such as private sector loans.

Australia provides almost 90% of country program aid to middle-income countries. This is significantly higher than most other aid donors. The chart below shows that almost all of Australia’s top aid recipients are middle-income countries.

Income per person

Aid is typically only a small share of the economy in middle-income countries. The chart below shows how most of Australia’s top aid recipient countries are not very reliant on aid. In the case of Indonesia and Philippines, aid is actually a negative share of GNI because more money is spent paying off aid loans than they receive in new disbursements of aid.

Aid as a share of GNI

High economic growth rates in Asia in recent decades have meant that there are only a few low-income countries in the region. Sub-Saharan Africa is home to almost all low-income countries in the world and the region is the most reliant on aid. However Sub-Saharan Africa receives the lowest level of Australian aid in per person terms.

Should the region with the poorest countries in the world, which rely the most on aid and have the highest proportion of people in extreme poverty, receive the lowest levels of Australian Aid?

 

Sources

 

OECD 2014 <http://www.oecd.org/dac/stats/idsonline.htm>

World Bank 2014 <http://data.worldbank.org/data-catalog/world-development-indicators>

 

Are Developing Countries too dependent on Aid?

Global Development

Key Points

  • Aid as a share of Gross National Income (GNI) in developing countries has remained below 1% for the last 20 years. In 2012, it reached the lowest level ever recorded.
  • Least Developed Countries receive more than ten times as much aid as a share of GNI as Middle Income Countries.
  • The Pacific receives the highest level of aid as a share of GNI for any region in the world.

Background

A great deal of attention is given to the level of aid as a share of GNI that developed countries provide, however less attention is given to aid as a share of GNI that developing countries receive. This measure is important to examine because it provides insight into how dependent developing countries are on aid. While there is a considerable variation between countries, the chart below shows that on average aid to developing countries has remained below 1% of GNI for the last 20 years.

Aid as a share of Developing World GNI

Least Developed Countries (LDCs) receive significantly more aid as a share of GNI than Middle Income Countries. However on average aid as a share of GNI is still below 5% in LDCs. As the chart below shows as countries’ incomes increase they tend to become considerably less dependent on aid.

Aid as a share of GNI (Income level)

There is tremendous variation in the level of aid as a share of GNI across regions. The chart below shows that the Pacific region receives almost 10% of GNI in aid. The low level of aid as a share of GNI for East Asia is partly due to high economic growth in the region in recent decades that has reduced dependence on aid.

Aid as share of GNI (Regional)

On average, there is little reason to believe that developing countries are too dependent on aid. However for some countries this concern may be more valid. For example, the Solomon Islands have received around 40% of GNI in aid for the last decade.

Source

OECD 2014 <http://www.oecd.org/dac/stats/idsonline.htm>