Old powers, new players

10th October 2016 Mythili Sampathkumar

The International Development Finance Club (IDFC) has issued a report sponsored by one of their members, the Development Bank of South Africa (DBSA), on the move from using more traditionally defined models of development financing like ‘south-south’ or ‘triangular cooperation’ to one of ‘cooperation for development’ (CfD) because members felt the old terms “insufficiently described the universe of their cooperation with partners.” The shift signals a new way of approaching the relationship between donor and recipient, and a more accurate lens through which to view finance for development projects across the globe.

Triangular cooperation
The report, entitled Moving from Triangular Cooperation to Cooperation for Development: New Initiatives for Deepening IDFC Collaboration, found that when defining what ‘cooperation’ is, history plays a big part. As the report states “the development sector needs to take into consideration any prior sensitivity related to those terms and attempt to forge new definitions that more aptly describe the current relations.”

The common definition of triangular cooperation is “North-North-South, South-South-North, South-South-South, and so on,” as stated in the report. However, this is problematic because the definition is limited to the parameters set by the United Nations Development Programme (UNDP) and Organisation of Economic and Development (OECD) and leaves out the unique compositions and relationships between other development finance institutions (DFI) including members of the IDFC.

A source from the DBSA explained that the term also excluded relationships and knowledge sharing capabilities between different development finance institutions themselves. ‘Triangular cooperation’ focuses more on geographical identifiers or countries rather than at the institutional level.

The source also said: “triangular cooperation was sometimes [more] bilateral” at its core and so the categorisation was inaccurate on a basic level. For instance when the Japan International Cooperation Agency (JICA) is a ‘facilitator’ in relationships as it was in the Japan-Brazil Partnership Program, the real knowledge of agriculture practices was shared between Brazil and Mozambique, which had a growing agriculture sector.

South-South cooperation
This term has been defined by the United Nations Office for South-South cooperation as “collaborative” effort among equals in the Global South.

Members surveyed thought the term ‘south-south’ was rife with politics and implied that north-south partnerships were not as effective or perhaps outdated. The reality for members is that their development financing partnerships encompass a far more nuanced set of geographic, economic, and institutional players.

As Jurek Seifert from the Institute of Development Research and Development Policy in Germany said at the World Social Science Forum in 2015 in Durban, South Africa, there are a few problems with the term ‘south-south cooperation’ because there is no strategic framework for what it encompasses. The term, according to Seifert, implies that all actors in the Global South are equal when there are certainly more developed countries like Brazil and China than others, particularly on the African continent. As a result, Seifert noted on his panel at the Forum, “it is very difficult to assume there will be horizontal collaboration.”

The new era of CfD
These issues with old terms prompted IDFC members to come up with the new term CfD. The purpose of defining CfD was to overcome old colonialist constructs as well as being an effort by IDFC members to bring “more equal footing” amongst themselves.

Branding the definition makes financing development feel less like aid and more like a cooperative engagement. Rather than donors just ‘helping’ recipients in developing countries within their regions, the relationship becomes more collaborative like a business partnership across regions, according to the DBSA source.

They explained that CfD is also a more inclusive and broader definition of IDFC partners’ activities than the previously mentioned terms. These new development-focused business relationships can be carried out between partners in the Global South, for instance when DBSA replicates renewable energy projects with several development banks and actors in neighbouring southern African countries. However, this is not always the case as DBSA also has projects with the German Development Bank (KfW) and others in Europe and the Americas.

The bigger picture reason to come up with the term CfD, however, was to make it more inclusive of what is expected of development finance institutions in the era of the Sustainable Development Goals (SDGs), the Paris Agreement on Climate Change, and the Addis Ababa Action Agenda on financing for development – all agreed to in 2015.

The three agreements not only define development goals but how to reach these goals and the role of developed and developing country financing. Multinational development banks have said they would finance at least US$400 billion over three years toward achieving the SDGs but financing gaps in climate adaptation and green infrastructure alone go into the trillions, according to former executive secretary of the United Nations climate change body, Christiana Figueres.

‘South-South cooperation’ and ‘Triangular cooperation’ can no longer serve as accurate terms to describe the kinds of partnerships IDFC members will have to take on in order to meet the targets set out for United Nations member states and their own country’s citizens.

New actors can participate in CfD
Given the massive need for financing and complex nature of partnerships that will more than likely arise, CfD is a term that also allows for changing what kinds of institutions can play a role in global development efforts. Multinational development banks are not the only institutions that can contribute to financing goals. Regional and local development banks, local and city governments, private companies, and philanthropies are also taking a more active part and bridging the gap between on-the-ground implementation of development projects and the country-level funding needed for them.

CfD is more inclusive a term for cooperation among these actors and larger development finance institutions, many who are IDFC members. KfW, for example, already uses private channels to distribute funding for domestic projects in Germany. Gail Hurley, a policy specialist in the Development Finance Bureau at UNDP, spoke at an event highlighting the use of national development banks in development financing at the Ford Foundation in New York, ahead of the UN General Assembly. Hurley said there is a “need to change the narrative on public finance, the private sector isn’t the only place innovation is happening” and IDFC’s new definition is a good example of that.

It also illustrates what Dr. Chantal L. Carpentier, chief of the UN Center for Trade and Development (UNCTAD)’s New York Office, said during the same event: “local development banks have much better knowledge” of national and regional specific issues. The use of the CfD is more inclusive of not just financial and project partnerships but sharing of best practices and local knowledge to help target financing.

The IDFC’s call for research and a framework for CfD beyond the traditionally defined relationships is, as the report states, an attempt to move “beyond the geography of countries and the status of their economies (traditional/emerging/ recipient) to a system of shared values, mutual benefit and clear development objectives.”

Head of sustainable development finance at the Sustainable Development Solutions Network Aniket Shah says the key to the new path to financing gaps in infrastructure and making use of innovative mechanisms like green banking is through local, national, and regional development banks not just at the country level. “I believe all development banks need to be scaled up [and out] for the SDGs” Shah said at the Ford Foundation event. IDFC members’ new definition of cooperation is a necessary component of that.

DBSA’s source also said an important aspect of CfD is that a partner can “mitigate weaknesses and threats.” Shah noted that one of the issues with smaller regional and national development banks is that they are risk-averse, but the type of change needed to achieve the SDGs requires some level of risk. By partnering with multinational banks and other institutions risk can be shared and the burden lessened.

The new CfD framework can also be a way to open up new pathways for funding essential projects that are usually turned away because of a perceived high risk or lack of tangible, short-term impact. These projects are often climate-related and have longer-term benefits. Rob Youngs, programme director at the coalition for Green Capital, says that green banks are one of those alternative avenues to financing that are not being used as much as they could.

Using the term CfD instead of ‘triangular’ or ‘south-south’ may sound only like a change in terminology, but the term is a transformation for IDFC members. Their roles are different, larger and more important, in the post-2015 era. Shohei Hara, head of office of Global Issues and Development, Operations Strategy Department at JICA, roundly concludes the need to mobilise domestic resources and private funds for achieving SDGs, towards which CfD is helping to sharpen focus.
“The concept of North-South or even South-South may have become obsolete.”

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