In many parts of Eastern Europe, the transition towards stronger political institutions and democratic deepening has been slow and uneven. Weak political checks and balances, corruption and authoritarianism have threatened democracy, economic and social development and adversely impacted peace and stability in Europe at large. This policy brief summarizes the insights from Development Day 2019, a full-day conference organized by SITE at the Stockholm School of Economics on November 12th. The presentations were centred around the current political and business climate in the Eastern European region, throwing light on new developments in the past few years, strides towards and away from democracy, and the challenges as well as possible policy solutions emanating from those.
The State of Democracy in the Region
From a regional perspective, Eastern Europe has seen mixed democratic success over the years with hybrid systems that combine some elements of democracy and autocracy. Based on the V-Dem liberal democracy index, ten transition countries that have joined the EU saw rapid early progress after transition. In comparison, the democratic development in twelve nations of the FSU still outside of the EU has been largely stagnant.
In recent years, however, democracy in some of those EU countries, such as Bulgaria, the Czech Republic, Hungary, Poland and Romania have been in decline. Poland, one of the region’s top performers in terms of GDP growth and life expectancy, has experienced a sharp decline in democracy since 2015. Backlashes have often occurred after elections in which corruption and economic mismanagement have led to the downfall of incumbent governments and a general distrust of the political system. Together with low voter turnout, this created fertile ground for more autocratic forces to gain power helped by demand for strong leadership.
An example from Ukraine illustrated the role of media, both traditional and social, for policy-making. In some countries of the region, traditional media is strictly state-controlled with obvious concerns for democracy. This is less the case in Ukraine, where also social media plays an important role in forming political opinions. The concern is that, as elsewhere, opinions that gain traction on social media may not be impartial or well informed, affecting public perception about policy-making. A recent case showing the popular reaction to an attack on the former governor of the Central Bank suggests that those implementing important reforms may not get due credit when biased and partial information dominates the political discourse on social media.
Another case is the South Caucasian region: Armenia, Georgia and Azerbaijan. The political situation there has been characterized as a “government by day, government by night” dichotomy, implying that the real political power largely lies outside the official political institutions. In Georgia, the situation can be described as a competition between autocracy and democracy, with a feudalistic system in which powerful groups replace one another across time. As a result, trust in political institutions is low, as well as citizens’ political participation.
In the case of Azerbaijan, there is an elected presidency, but in reality, power has been passed on hereditarily, becoming a de facto patrimonial system. Lastly, in Armenia, the new government possesses democratic credentials, but the tensions with neighbouring Azerbaijan and Turkey have given increasing power to the military and important economic powers. Overall, democratisation in these countries has been hindered by a trend for powerful politicians to form parties around themselves and to retain power after the end of their mandates. Also, the historical focus on nation-building in these countries has led to a marked exclusion of minorities and a conflict of national identities.
The last country case in this part of the conference focused on the current political situation in Russia and on the likely outcomes after 2024. The social framework in Russia appears constellated by fears – a fear of a world war, of regime tightening and mass repressions, and of lawlessness – all of them on the rise. Similarly, the economy is suffering, in particular from low business activity, somewhat offset by a boost in social payments. Nonetheless, it was argued that it is not economic concerns, but rather political frustration, that has recently led citizens to take to the street. Despite this, survey data shows that trust in Putin is still over 60%, and that most people would vote for him again. However, survey data also points out that the most likely determinant of this trust is the lack of another reference figure, and that citizens are not averse to the idea of political change in itself. Lastly, Putin will most likely retain some political power after 2024, transiting “from father to grandfather of the nation”.
Voices from the civil society in the region also emphasized the importance of a free media and an active civil society to prevent the backsliding of democracy. With examples from Georgia and Ukraine, it was argued that maintaining the independence of the judiciary, as well as the public prosecutor’s office, can go a long way in building credibility both among citizens and the international community. The European Union can leverage the high trust and hopeful attitudes it benefits from in the region to push crucial reforms more strongly. For example, more than 70% of Georgians would vote for joining the EU if a referendum was held on the topic and the European Union is widely regarded as Georgia’s most important foreign supporter.
Weak Institutions and Business Development
The quality of political and legal institutions strongly affects the business environment, in particular with regards to the protection of property rights, rule of law, regulation and corruption. Research from the European Bank for Reconstruction and Development (EBRD) highlights that the governance gap between Eastern Europe and Central Asia and most advanced economies is still large, even though progress in this area has actually been faster than for other emerging economies since the mid-‘90s. This is measured through enterprise surveys as well as individual surveys. In Albania, for instance, a perception of lower corruption was linked to a decrease in the intention to emigrate equivalent to earning 400$ more per month. Another point concerned the complexity of measuring the business environment and the benefits of firm-level surveys asking firms directly about their own actual experience of regular enforcement. For example, in countries such as Poland, Latvia and Romania the actual experience of business regulation measured via the EBRD’s Business Environment Enterprise Performance Survey, is far worse than one would expect from the World Bank’s well known Doing Business rating.
From the perspective of Swedish firms, trade between Sweden and the region has remained rather flat in the past years, as the complexity and risks of these markets especially discourage SMEs. Business Sweden explained that Swedish firms considering an expansion in these markets are concerned with issues of exchange rate stability, and the institutional-driven presence of unfair competition and of excessive bureaucracy. Moreover, inadequate infrastructure and the presence of bribery and corruption make everyday business operations risky and costly. It was generally emphasized that countries have to create a safe investment environment by reducing corruption, establishing a clear and well enacted regulatory environment, having dependable courts and strengthening domestic resource mobilization. Swedish aid can play a part, but there is a need to develop new ways of delivering aid to make it more effective.
An interesting example is Belarus, that has seen more economic and political stability than most neighbours, but at the same time a lack of both economic and political reforms towards market economy and democracy. Gradually the preference towards private ownership, as opposed to public, has increased in recent years and the country has seen a rising share of the private sector, even without specific privatization reforms. Nonetheless, international businesses are still reluctant to invest due to high taxes, a lack of access to finance as well as to a qualified workforce, but most importantly due to the weak legal system. An exception has been China, and Belarus has looked at the One Belt One Road Initiative as a promising bridge to the EU. Scandals connected with the two main Chinese-invested projects have damped the enthusiasm recently, though.
The economic and political risks of extensively relying on badly diversified energy sources, as is the case with natural gas imports from Russia in many transition states were also discussed. It was shown how some countries such as Ukraine, Poland and Lithuania have improved their energy security by either benefitting from reverse-flow technology and the EU’s bargaining power or building their own LNG terminals to diversify supply sources. However, either of these, as well as other energy security improving solutions are likely to come with an economic cost, though, that not all countries in the region can afford.
A Government Perspective
The main focus of this section was the Swedish government’s new inspiring foreign policy initiative, “Drive for Democracy”. Drawing from a definition of democracy by Kerstin Hesselgren, an early Swedish female parliamentarian, democracy enables countries to realize and utilize the forces of the individual and draw them into a life-giving, value-creating society. It was emphasized that the values of democracy are objectives by themselves (e.g. freedom of expression, respect for human rights) but also that democracy has important positive effects in other areas of human welfare. The Swedish government views democracy as the best foundation for a sustainable society, equality of opportunity and absence of gender or racial bias.
The “Drive for Democracy” specifically identifies Eastern Europe as one of the main frontiers between democracy and autocracy, and the Swedish government promotes human rights and stability through various bilateral programmes through the Swedish International Development Cooperation Agency, Sida, and multilateral initiatives within the EU, such as the Eastern Partnership. It was also emphasized that democracy is a continuous process that can always be improved, as indeed experienced by Sweden. Political rights were granted to women only in 1919 followed by convicts and prisoners in 1933 and to the Roma people only in 1950. Political and democratic rights are thus never once and for all given, and it is crucial that the dividends from democracy are carried forward to the younger generation.
In sum, the day illustrated clearly how democracy engages all segments of society, from the business sector to civil society, and the potential for but also challenges involved for democratic deepening in Eastern Europe. To get more information about the presentations during the day, please visit our website.
Participants at the Conference
- PER OLSSON FRIDH, State Secretary, Ministry for Foreign Affairs.
- ALEXANDER PLEKHANOV, Director for Transition Impact and Global Economics at EBRD.
- TORBJÖRN BECKER, Director, SITE.
- CHLOÉ LE COQ, Associate Professor, SITE and Professor of Economics, University of Paris II Panthéon-Assas.
- THOMAS DE WAAL, Senior Fellow at Carnegie Endowment for International Peace.
- NATALIIA SHAPOVAL, Vice President for Policy Research at Kyiv School of Economics.
- ILONA SOLOGUB, Scientific Editor at VoxUkraine and Director for Policy Research at Kyiv School of Economics.
- KETEVAN VASHAKIDZE, President at Europe Foundation, Georgia.
- MARIA BISTER, Senior Policy Specialist, Sida.
- HENRIK NORBERG, Deputy Director, Ministry for Foreign Affairs.
- YLVA BERG, CEO and President, Business Sweden.
- LARS ANELL, Ambassador and formerly Volvo’s Senior Vice President.
- ERIK BERGLÖF, Professor in Practice and Director of the Institute of Global Affairs, London School of Economics and Political Science.
- KATERYNA BORNUKOVA, Academic Director, BEROC, Minsk.
- ANDREI KOLESNIKOV, Senior Fellow, Carnegie Moscow Center.
It’s increasingly being acknowledged that gender inequality is not just a human rights issue, but of first order importance for economic development. It is also an issue of high priority for the Swedish government, with the feminist foreign policy gaining a lot of attention worldwide. This policy brief shortly summarizes presentations held during a full day conference at the Stockholm School of Economics on June 1, 2018. The event focused on how gender discrimination negatively impacts the productivity of low and middle income economies, but also how reforms and specific initiatives can better the situation. The perspective was both long term, how norms and laws governing women’s rights have evolved over time, and short term, illustrating the current challenges women and societies face, with a particular emphasis on the situation in Eastern Europe. This was the 7th installment of SITE Development Day – a yearly development policy conference organized with support from the Swedish Ministry for Foreign Affairs.
From Research: Causes, Costs and Remedies
Cross-country differences in gender equality are often explained by variation in formal institutions such as laws and policies, and informal institutions such as social norms, religion and culture. A recent literature has focused on understanding the underlying drivers behind the variation in gender norms, arguing that these norms themselves may be functions of predetermined fundamentals such as geography, language and external shocks such as wars, revolutions or the slave trade. An influential line of research has emphasized that certain agricultural conditions have given prominence to technologies that require more muscular strength (the plow), whereas in shifting agriculture, hand-held tools like the hoe and the digging stick, require less upper body strength, are more labor intensive and easier to combine with child care. The former conditions are therefore associated with a stricter gender division of labor that generated a norm that the natural place for women is in the home. That these differences still linger have been empirically shown looking at cross-country variation in outcomes such as female labor force participation, political representation, inheritance rules, polygamy, parental authority and women’s freedom of movement. The variation is also found among second generation immigrants, where the attitudes from the parents’ ancestry are reflected also among those born and raised in western societies with more equal gender norms.
There has been an increasing emphasis on trying to estimate how gender inequality inhibits economic development, and to put numbers on the foregone economic development and growth from continuing inequality. A key indicator of inequality in this respect is the gender gap in labor force participation. There has been progress globally in this respect, but we are still far from equality and outcomes vary dramatically across regions and countries. Traditional approaches to estimate the benefits of increased female labor force participation (flfp) has assumed perfect substitutability between men and women. New evidence suggests that this may not be true, that men and women are complementary, which implies that increased flfp increases production beyond just the fact that more people are put to work. This also means that more women in work increases the productivity of men, in other words a win-win situation. This complementarity effect can take place at the workplace (think of diversified company boards), but recent research suggests that this is particularly true at the macro level. This is likely because men and women tend to work in different sectors and occupations that are themselves complementary, yielding the additional benefit at the macro level. Estimates of welfare gains of eliminating barriers to female labor force participation to levels seen in the US, suggest improvements of on average 22 % in South Asia and 18 % in the Middle East and North Africa region.
One important policy tool to influence gender outcomes, and sometimes also gender norms, is tax and benefits policy. These sets of policies are almost never explicitly gender biased, but the impact of details of policies in areas such as inheritance law, parental leave, pensions and taxes all affect the incentives that men, women and couples face. It is also important to understand that these policies often operate in an environment that is far from being without a gender bias, suggesting that there may be motivation for government intervention to correct outcomes and also lead the way to slowly change norms. As models of household decision-making suggest that partners may not operate as a unitary actor maximizing joint welfare, and women typically have lower bargaining power within the household, policies that leave discretionary power to the couple may lead to highly unequal outcomes. Instead policies may need to be individualized, such as tax policy and parental leave policy.
The conference also contained a panel specifically focusing on Eastern Europe. The communist legacy meant that these countries, in some dimensions such as flfp, started from much more equal levels than other countries at comparable levels of income in the 1990s. The most immediate gender crisis in some ways was on behalf of men, whose life expectancy dropped dramatically. This crisis for men also created externalities in the form of domestic violence and orphaned children. Since 1990, there has therefore been some reversals in gender outcomes, and in some areas, such as political representation, the region on average performs quite poorly. Individual countries also face very different challenges. In Georgia the sex ratio at birth increased dramatically in the 1990’s as economic hardship and conflict coincided with the introduction of new technology to determine the sex of a child in utero. In Belarus inequality strikes both ways, with men having more than 10 years lower life expectancy, have higher retirement age and are drafted to military service. On the other hand women are under-represented in politics and largely responsible for unpaid homework, partly due to a very generous 3 year-long paid maternity leave policy. The tradition of bride kidnapping in parts of Central Asia (as high as 10-25 % of women in parts of rural Kyrgyzstan) was brought up, and research showing birthweight losses of children to kidnapped mothers equivalent to those measured elsewhere in conflict zones (100-200 g) suggest that this is indeed a real violation of these women.
To Action: Policies for gender equality
The SDG 2030 agenda and the concurrent finance for development process both emphasize the importance of having all sectors of society onboard in the quest of achieving the new development goals. The event therefore included representatives of both the private, public and civil societies, and featured a range of different initiatives across these sectors. A sector in which many women work for foreign companies in developing countries is textile. Here foreign companies can lead the way through initiatives beyond direct wage and employment policies that improve women’s welfare, such as information campaigns devoted to personal hygiene or policies that transfer salaries directly to the personal account of the employees (an approach that matters when there is unequal bargaining power within the household, as shown through research). Also initiatives to reduce harassment and support female careers can make a difference. A sector on the other side of the spectrum is the telecommunications sector, which is very male dominated. This bias typically start from an early age, and is reinforced by gender stereotypes. Active work in the community to early on reaching out with tech programs explicitly targeting girls can make a difference, and so can making people aware of unconscious biases.
Aid agencies and NGOs also play an important role in promoting gender equality in partner countries. Research shows that women in relative terms tend to spend resources in ways that benefit the family more, and discrimination can be counteracted through policies specifically targeting women and trying to strengthening their situation both outside and inside the household. Initiatives that give women access to credits, and foster collective action and political engagement have been tested on large scale in for instance India. Aid financed investment funds target female entrepreneurs, and engage in programs to integrate women into the investment process. Investors also have the leverage to stress the importance of partner companies investing in their female employees, for instance though education, safe transportation and separate changing rooms. A major player like Sida can engage in a dialogue also with partner governments to incentivize them to live up to commitments made in conventions and treaties, but also empower change agents that can put pressure on patriarchic structures. In the health sector, priority is given to sexual and reproductive rights, but beyond targeted interventions it is also important to mainstream a gender perspective into all types of projects and programs. It’s acknowledged that measuring impact is a challenge, and some partners are perceived as more receptive than others, but the perception is that attitudes are changing.
A Government Perspective
From the Swedish government’s side it was emphasized that gender equality is a goal in itself, as well as a prerequisite for economic development. The by now well-known feminist foreign policy is based on three R’s: that all women and girls should have access to rights, representation and resources. The policy is backed up by an action plan with clearly expressed goals in areas of peace and violence, political representation, economic empowerment and sexual and reproductive health rights. These goals will be evaluated for results (a fourth “R”) and, due to international demand, the foreign ministry is currently preparing a handbook for feminist foreign policy to document the process and the lessons learned. In the collaboration with Eastern Partnership countries, gender equality became part of the summit declaration in 2015. There’s an increasing willingness to talk about gender in the partnership countries, but many challenges remain, as also exemplified by recent experience from working in the government of Ukraine. Swedish initiatives are often a catalyst for change, though, with EU politicians and administrators slowly following pace. It was emphasized that to argue for the case of women and girls, data and research is crucial, so the FREE initiative to create a center of excellence in gender economics (FROGEE) was received with much appreciation.
To get more information about the presentations during the day and references to the data and literature discussed above, please visit this page.
Participants at the conference
- Ann Bernes, Ambassador for Gender Equality and Coordinator of Sweden’s Feminist Foreign Policy, Ministry for Foreign Affairs.
- Raphael Espinoza, Senior Economist, IMF.
- Paola Giuliano, Associate Professor of Economics, UCLA, Anderson School of Management.
- Michal Myck, Director at CenEa, Poland.
- Anna-Karin Dahlberg, Corporate Sustainability Manager at Lindex.
- Richard Nordström, General Director at Hand in Hand.
- Karin Kronhöffer, Director Strategy and Communication at Swedfund.
- Anne Larilahti, VP Head of Sustainability Strategy at Telia.
- Jesper Roine, Deputy Director, SITE.
- Charles Becker, Research Professor of Economics, Duke University.
- Tamta Maridashvili, Researcher, ISET-PI, Georgia.
- Lev Lvovskiy, Research Fellow, BEROC.
- Elsa Håstad, Director at the Department for Europe and Latin America at Sida.
- Inna Sovsun, Vice President at Kyiv School of Economics (KSE), Ukraine.
- Anna Westerholm, Sweden’s Ambassador for the EU Eastern Partnership.
- Carin Jämtin, Director General at Sida.
- Torbjörn Becker, Director at SITE.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
At the Third International Conference on Development Finance in Addis Ababa on July 13—16, 2015, the world committed itself to an action agenda to raise resources to realize the 2030 sustainable development goals. The question is how much progress the world has achieved two years down the road, when the initial enthusiasm and commitments are no longer in the immediate spotlight. This policy brief reports on the discussion from a conference on this topic, Development Day 2017, held in Stockholm on May 31.
The year 2015 has been lauded as a landmark year for sustainable development. As many as three major global agreements were negotiated and signed: the 2030 Agenda for Sustainable Development; the Paris Agreement on Climate Change; and the Addis Ababa Action Agenda (AAAA) on Financing for Development. The latter may be less known, but is essential to the ambition to achieve the first since it concerns how to finance the necessary investments to achieve the Sustainable Development Goals (SDG). The AAAA identified seven action areas spanning both the public and the private sectors, and involving both domestic revenues and international transfers (domestic public resources, domestic and international private business and finance, development cooperation, trade, debt and debt sustainability, systemic issues and science, technology and innovation). This event focused primarily on international commercial private capital flows, and indirectly on development cooperation as a facilitator and catalyst for such private transfers.
Combining good business and good development
A major theme of the conference was combining good business with good development. Should private companies also take responsibility for environmental and social sustainability, or is the “only business of business to do business”? If firms do engage in sustainability investments, does it eat into profits or does it rather create a competitive edge? Reading business journals, it is easy to get the impression that there is a win-win situation. This picture is, however, based on rather limited information and the relationship is fraught with methodological challenges as both profitability and sustainability investments may be driven by other factors (such as competent leadership), and firms performing well may have the capacity and feel the obligation to invest part of their surplus into corporate social responsibility (CSR). Hence, there may be a question of reverse causality.
At the conference, new research was presented using data on investments in low and middle-income countries from the International Finance Corporation that includes both measures of financial rates of returns and subjective ratings of environment, social and governance (ESG) performance. Simple correlations suggested a significant positive relationship, or a win-win situation. However, once care was taken to identify a causal effect from ESG on profits, the results became insignificant. That is, the causal effect of ESG investments on profits seemed neither positive nor negative. However, when looking at broader measures of private sector development, the results suggest that both profits and ESG investments have a positive impact on sector development. This implies that there are good reasons for the public sector to encourage ESG activities even beyond the direct sustainability benefits through for instance public-private partnerships but also regulations that encourage good behavior.
How should results like these be interpreted? The presentation spurred an interesting debate on what are reasonable expectations and whether “the glass is half full or half empty”. It was emphasized that systematically beating the market should not really be expected from any group of investments, so a half-full interpretation seems more plausible.
This debate also came up in a panel discussion on institutional investments in developing countries, and where the growing success of green bonds was presented. Though still small in absolute size (1-2% of the bonds coming to the market are green bonds), there has been an impressive growth in the last 3-4 years. Currently, the Swedish bank SEB is cooperating with the German government in developing a green-bond market in emerging markets. Some of the lessons emphasized from the green-bond market were the importance of being clear towards investors about the motivation and the value proposition, to package the information in a credible way emphasizing independent verification, and to continuously monitor and give feedback to investors.
From the institutional investor side, it was mentioned how important it is to tell investors a compelling story. This may be easier with regards to environmental sustainability relative to social sustainability, both in terms of conveying the urgency and in developing indicators that can be monitored and communicated. It was also argued that even though there are initiatives out there, emphasizing how sustainable investments can be competitive in terms of profitability (such as green bonds), it would also help to change the relative price on the other end of the spectrum, i.e. through regulations, taxes or other instruments that can make investments with particularly negative externalities less profitable.
Finally, an overarching theme of the discussion was the challenge to have institutional investments reach the places with the most needs, i.e. the fragile and least developed countries. If this is to happen, pension funds and insurance companies have to be allowed to take on more risks, and it would be essential to reduce the corporate risk in public-private partnerships (more on this below).
In a second panel discussion, different Swedish corporate initiatives, emphasizing sustainability, were showcased. For example, the Swedish steel producers’ association, Jernkontoret, showcased the Swedish steel industry’s vision 2050 with the target of domestically based steel production using hydrogen and with zero CO2 emissions. Another example is the Sweden Textile Water Initiative, launched in 2010 by major Swedish textile and leather brands together with the Stockholm International Water Institute, has created the first guidelines for sustainable water and wastewater management in supply chains. Currently working with 277 suppliers in 5 countries, the initiative features clear win-win situations and is now self-sustaining and in the process of going private.
Skandia, a major Swedish insurance company, emphasized the business costs of socially unsustainable situations with examples from the costs in Sweden of sick leave, and the costs for protection and security for Swedish retailers and mall developers. Positive preventive work focusing on rehabilitation and the development of blossoming and inclusive neighborhoods were featured. These examples showcased how the SDGs are feeding into the thinking and planning of the private sector in Sweden, and how important it is to identify the business cases for thinking about sustainability in order for this to become mainstream.
However, the case for private capital to be the panacea for reaching the SDGs is by no means obvious. The non-governmental organization Diakonia pointed out that for every dollar flowing into a developing country, more than two dollars are lost. The biggest loss is coming from illicit financial flows, and within this category, tax evasion is the biggest problem. While the private sector is key to development, the main contributions this sector can do for development is to pay taxes where they are due, abide by international standards, and be transparent and accountable to the citizens and governments in the countries where they operate.
Swedwatch, used two examples from Borneo and what is now South Sudan, to illustrate how investors at times turn a blind eye towards human rights and environmental abuses by private multi-national companies. Transparency, due diligence in evaluating human rights risks prior to investment decisions, and a readiness to push for compensation and remedy if abuse is still unearthed were pointed out as key components to avoid this type of malpractice.
Development cooperation as facilitator for private flows
The second main theme of the day dealt with the ability to use development cooperation as a catalyst for private investments.
Swedfund, the Swedish government’s development financier, emphasized the need to move fast and find a business model in which one dollar spent becomes ten dollars on the ground. Based on a business model around three pillars (societal impact, sustainability and financial viability) Swedfund focus on areas with relatively high risk and where private capital are in short supply, with the hope to foster job creation, inclusive growth and poverty reduction.
Sida, the Swedish main aid agency, showcased their guarantee instruments. Through partnerships with bigger actors such as the International Finance Corporation (IFC) of the World Bank group as well as local banks in developing countries, Sida can shoulder part of the default risks involved when trying to reach more high-risk investors (such as small and medium sized enterprises) with great potential development impact. In this way, one dollar from the public aid budget can lure a multiple of dollars in private capital towards sustainable development.
The OECD Development Assistance Committee (DAC) emphasized that governments generally lack a policy for how to deliver official development assistance (ODA) in a sustainable way and a strategy for how to enable capital flows from the private sector. A DAC initiative to better track all financial flows going towards development, beyond just ODA, was presented.
From the Center for Global Development, the case for using public resources to facilitate private sector insurance mechanisms against human disasters was presented (concessional insurance). Benefits emphasized from explicit insurance contracts included faster and better-coordinated payouts, more certainty that compensation will come, incentives to invest in disaster prevention (to reduce premiums) and involvement of commercial insurance professionals.
Importantly, though, it was emphasized that it is crucial that aid money are truly complementary in the sense that they crowd in private investments that otherwise would not have taken place (and not end up subsidizing private investors in donor countries). It was also emphasized that donors must not forget about the focus on the poorest and people in fragile states.
In some environments donors must shoulder 100% of the risk to lure private capital. In those cases alternatives must be considered. Sida emphasized the importance to match financial instruments with the appropriate context, i.e. there is a need to identify where different instruments should be used. For instance, big institutional investors need investments that are manageable, predictable, and of a reasonable size. Aid agencies can help through subsidized risk management, but also by helping build strong institutions in partner countries that can work as counterparts, and encourage public-private collaborations to package investment deals and reduce information asymmetries.
Where are we now?
Turns out that this is not a simple question to answer. The Ministry for Foreign Affairs presented the Swedish government’s priority areas – strengthening the implementation of SDG 5, 8, 14 and 16 (all goals can be found here: https://sustainabledevelopment.un.org/?menu=1300) – and reported from a recent follow-up meeting at the UN.
In principle the Addis Agenda identifies action areas and connects areas and actors, which makes it possible for systematic follow-ups, and an inter-agency task force produces an annual report of the general state of the implementation of the Addis Agenda. The Swedish government has produced a report on the implementation of the AAAA covering all seven action-areas with examples of progress. This initiative was commended at the UN meetings, and together with the private sector engagement, as showcased during the 2017 Development Day, it paints a rather positive picture of progress and engagement in Sweden.
However, globally, there are many uncertainties and challenges. The Center for Global Development reported on the budget proposal of the US president, which among other things includes a 32% cut to topline funding for the Department of State and Foreign Operations. There are also plans to eliminate the Overseas Private Investment Corporation and to zero out US food assistance. On the other hand, in this fiscal year, the US Congress (controlled by the Republicans) increased the amount going into foreign aid compared to what previous president Obama suggested. What will eventually come out of the current president’s budget proposal for the coming fiscal year is thus highly unclear.
Participants at the conference
- Rami AbdelRahman, Sweden Textile Water Initiative
- Frida Arounsavath, Swedwatch
- Owen Barder, Center for Global Development
- Eva Blixt, Jernkontoret
- Magnus Cedergren, Sida
- Penny Davies, Diakonia
- Raj Desai, Georgetown University and the Brookings Institution
- Ulf Erlandsson, Fourth Swedish National Pension Fund (AP4)
- Måns Fellesson, Ministry for Foreign Affairs
- Charlotte Petri Gornitzka, OECD-DAC
- Anna Hammargren, Ministry for Foreign Affairs
- John Hurley, Center for Global Development
- Lena Hök, Skandia
- Måns Nilsson, Stockholm Environmental Institute
- Mats Olausson, SEB
- Anders Olofsgård, SITE
- Anna Ryott, Swedfund
- Elina Scheja, Sida