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Navigating new dynamics

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Disparities between ‘developing’ and ‘developed’ countries are narrowing. In 1990, 65% of the world’s population lived in low-income countries. Thirty years on this figure is less than 10% and aid funding has become less significant to recipient countries – as an overall proportion of GDP. These changes are reshaping donor-government dynamics.

A new dynamic is emerging between donors and national governments. We see this in the changing language used by donors and governments alike. The Australian government has moved from ‘development partnerships’ to ‘strategic partnerships’. Germany has chosen to speak of a Marshall Plan with Africa, that’s focused on smaller and more interest-based partnerships. As this new dynamic emerges, based on an economic and strategic relationship, partnerships between donor and recipient governments are increasingly being redefined. Understanding this new dynamic requires us to look at the relationship between donors and recipients – between ‘developed’ and ‘developing’.

Transactional versus transformational

The form of these new dynamics is established by the relationship between donor and recipient. In short, the relationship between two states. This relationship sets the rules of the interactions; it structures the economic, social and political interactions between the two parties.

The different type of relationships that could emerge between two states could be mapped within a spectrum that goes from a transactional to a transformational relationship (analogous to the Acemoglu’s and Robinson’s framework of institutions) in the table below.

Transformational relationships are partnerships of mutual trust, where the interests of both parties are considered. Power is distributed between donors and recipients, and focuses on long-term gains for both parties. The tensions that emerge between the two sides tend to be a catalyst for positive outcomes. Transformational partnerships are rare, especially when thinking about traditional aid through a traditional power dynamic. However, cooperation between ‘developing’ countries – such as the ‘South-South Cooperation (SSC)-’ where developing countries exchanges resources, knowledge and technology – is based on trust, mutual learning and conceived as a long-term relationship according to an OECD study.

Transactional relationships will likely be dominated by the donor’s agenda where aid would be given in exchange for specific actions and commitments. Given the nature of the relationship, when there are tensions it generates conflict and could cause damage to the relationship. Examples of transactional relationships are far more common. They might be obvious, such as resources for infrastructure, or less obvious, such as security investment in Afghanistan.

So, what are the factors that influence the dynamics of a donor–recipient relationship? We’ve identified three:  

  1. The development context: economic and social conditions on the ground. In some countries, development interventions are clearly identifiable and economic and social conditions enable aid programs to be embedded quite quickly. In other countries, access could be challenging and dangerous.
  2. Political feasibility: recipient government’s standing and stability in country. This can include the stability within a country; the appetite a government may have in the run up to, or after elections; how donor funding and its stipulations play out with opposition parties and with the electorate (if a democracy).
  3. Donor wants: strategic objectives. The power disparity between the donor and recipient is a determining factor. Where donors tend to have more power, economic and political, they will drive the relationship with recipient countries. Donors make decisions on ‘what is best for the country’ based on their strategic objectives for the country, or region.

With an understanding of the factors at play and where potential tensions could emerge, there are useful examples of where these power dynamics have worked.

The bi-national cabinet meetings held between some countries in Latin America (for example, Ecuador with Peru, Colombia, Chile and Venezuela; Peru with Chile, Colombia and Bolivia; and Chile and Argentina) are a good illustration. These meetings were created to consolidate a long-term relationship between the parties. It is usually co-led by the Presidents of the respective countries involved with the presence of Cabinet Members. A review is undertaken annually to monitor progress of previous agreements and to identify new opportunities for collaboration. There is political will and it is mutually beneficial for both parties to learn from each other given similarities in social and economic contexts; successful interventions in one country can be adapted quite easily.

Meanwhile donors are revisiting how they deliver development assistance. The decision of where to work to deliver the greatest development impact is a critical policy choice for all governments, particularly with reducing donor funding. The evaluation of the success of those interventions has to be given equal importance. Rachel Glennester, the UK’s Department for International Development’s Chief Economist, has suggested that donors should move to evaluating the success of their engagement with a country on a portfolio basis, conscious that not every project will be a success. Dealing with complex development problems, in difficult circumstances, requires space to assume risks, to try new things – and to fail. It is here where the emerging new dynamics have the greatest potential to be transformative.

Development partners will add the greatest value when they enable and support risk taking, and fund innovation, where otherwise resources may not enable this. This creates space for policy reform and transformative change.

Where do we go from here?

Recognition of these new dynamics is a good starting point. We need to improve our shared economic and social analysis of countries – using and utilising better diagnostic tools to inform our understanding of the politics within and between countries. This analysis needs to form the basis for an honest and equal partnership.

And we need carefully structured dialogue. Dialogue between government institutions, and between implementers and funders, needs to be informed and purposeful with an understanding of how to get the most out of these crucial interactions. This dialogue needs to be based on robust analysis to enable choices about where to work, how best to engage and how to evaluate successes (or failures). Most importantly, we need to make informed decisions on where funding is supporting policy innovation that could be transformative.

Development can be a struggle and evolving dynamics make it no less so. Tensions are at the centre of human interaction and international cooperation is no different. However, development cooperation in these new dynamics has the potential to provide constructive challenges. To be a good struggle, one where tensions between donors and recipient countries generate positive forces towards growth and development. To achieve this, we need to recognise these new dynamics, build shared analysis that recognises the development context, what is politically feasible, and the wants of the donor. This can only be achieved through dialogue.

Power dynamics do not change overnight, but these actions will move us towards the creation of transformative and sustainable partnerships.