As the world approaches its 2015 deadline for achieving the Millennium Development Goals outlined in 2000, development aid by the 26 members of the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development declined in 2012 for the second year.
Preliminary data indicates that official development assistance (ODA) totalled $128,4-billion (in 2011 dollars) that year, down 4% from 2011’s $133,7-billion. The 2012 figure marks a 6% decline from 2010, when global ODA peaked at $136,7-billion, according to Worldwatch’s latest Vital Signs Online.
The US provided the largest amount of ODA, with a total of $29,-billion in 2012, which was 23,3% of the DAC total. Trailing the United States are the United Kingdom, Germany, France, and Japan.
When tracking ODA as a%age of gross national income (GNI), however, a different picture emerges. Since 1970 the United Nations has set 0,7% of GNI as the target for ODA: in 2012, only Luxembourg, Sweden, Norway, and Denmark exceeded this target.
In comparison, the US figure was only 0,19%. Not surprisingly, given the severity of the Eurosone crisis, the 15 European Union members of DAC decreased their assistance by a total of 7,4%, with the most severe cuts coming from Spain, Italy, Greece, and Portugal.
It should be noted that DAC governments are not the only ones that provide development assistance: according to a 2012 UN report, non-DAC countries donated a total of $7,2-billion in development aid in 2010, with Saudi Arabia providing almost half of the total. Furthermore, assistance from private sources was estimated at $56-billion that same year, but reporting on such flows is much weaker than for government funds.
Humanitarian assistance, or short-term aid provided in response to disasters and humanitarian crises, is a numerically small but highly visible portion of ODA. Preliminary data indicate that in 2012 assistance provided by governments for such purposes fell 6,5% from the previous year, from $13,8-billion to $12,9-billion. (When including non-governmental sources, humanitarian aid fell by 7,7%.)
This decline is not totally unexpected, as many of the world’s leading economies are still recovering from the financial crisis. Also, in 2012 the United Nations categorised 76-million people as in need of humanitarian assistance, fewer than the 93-million in 2011.
“ODA is far from the only mechanism of international capital flows to or from developing countries and emerging markets,” says Cameron Scherer, report co-author and programme associate at Internews.
“A multitude of vehicles – private and public, bilateral and multilateral – fill the global finance landscape. And against this broader canvas, ODA involves relatively small amounts of money.”
Among public funds, outflows have actually exceeded inflows into developing countries and emerging markets for most of the past decade. According to the International Monetary Fund, net outflows of more than $180-billion in 2006 turned into net inflows of close to $140-billion in 2009, but by 2012 there was once again a net outflow of close to $42-billion.
Among private flows, the largest amounts are accounted for by foreign direct investment (FDI). Net FDI rose from under $100-billion per year in the 1980s and early 1990s to a peak of $480-billion in 2008. The financial crisis then caused a dip to $335-billion in 2009, but 2011 saw a recovery to $473-billion.
The bulk of FDI flowing to developing countries is going to Asia and Latin America. In East Asia and South Asia, almost 90% of FDI goes to China and India; in Latin America and the Caribbean, about half goes to Brasil. Only 10% of global FDI is destined for Africa.
“In general, FDI is more stable than other forms of private investments, especially where “greenfield” investments in new productive capacity are concerned, FDI is usually undertaken with a longer time horison in mind, and happens mostly where macroeconomic conditions are stable,” says Michael Renner, trend co-author and Worldwatch senior researcher.
“In contrast, portfolio investment and cross-border interbank lending are often driven by short-term considerations such as changes in interest rates.”
However, the United Nations points to evidence that a growing portion of FDI in recent years is going to investments in financial companies or to intra-company debt. Also, a considerable portion of FDI relates to mergers and acquisitions – and thus represents a transfer of ownership rather than fresh investment.
These shifts imply that capital can be moved more easily among countries, and indeed the share of short-term and more volatile financial FDI flows has increased.
Further highlights from the report:
* The United States tops the list of assistance in absolute amounts, with $3,8-billion in 2012, or 29,4% of all humanitarian aid (a number that was $483-million below the figure in 2011). Luxembourg (at 0,16% of GNI) and Sweden (at 0,14%) top the relative standings.
* In 2011, the most recent year for which data are available, Pakistan, Somalia, and the West Bank and Gasa Strip were the three areas to receive the greatest amount of humanitarian assistance, together taking in over a quarter of global assistance.
* In 2002, FDI to Africa stood at just $15-billion; in 2012, it totaled $50-billion, having peaked at $59-billion in 2008. China is behind much of this FDI, providing at least $14,7-billion in 2011.