Tectonic shift in donor countries
New Chinese premier Xi Jinping’s statement of intent underscores a ‘game-changing’ shift in aid , according to a report by a leading global development think tank.
The Overseas Development Institute (ODI) in the Centre for Aid and Public Expenditure says new ODI research reveals aid could be heading for a tipping point where the majority of funds are ‘non-traditional’. Developing countries are entering an ‘age of choice’ where they can turn down traditional aid, and finally that aid donors may face competition to disburse funds.
The ODI said this week’s speech by Premier Xi Jinping underscores the reasons why many poorer countries face a ‘game-changing’ opportunity to finance their development in other ways than taking aid from western governments and institutions.
‘The Age of Choice’ reveals that according to the latest figures available non-traditional aid has hit US$53.3 billion, which is almost a third of all aid and has risen ten-fold since 2000, leaving the industry nearing a tipping point where the majority of funds would come from non-traditional sources such as the BRIC economies, philanthropic foundations and social impact investors.
This changing composition of aid flows will have a dramatic effect on the aid industry, according to ODI Research Fellow Romilly Greenhill who said: “These new forms of financial assistance will have a game-changing effect on aid. The rapid increase in alternative forms of finance for development will have a game-changing effect for both the givers and the receivers in the aid industry. Many countries will find themselves with more chance than ever before to assert their own visions for their future development by shopping around and compiling the best package to meet their specific needs – often avoiding the need to jump through hoops or wait a few years to get funds as has often been the case.”
“For those giving aid, the challenge will be one of increasing competition, they will need to present their aid as the most effective and the most adaptable to local needs.”
The report titled The Age of Choice was presented at an event chaired by ODI Director Alison Evans on Wednesday.