Financing for Sustainable Economic Development

Recession in many industrialized countries has led to pressure on global official development assistance (ODA) budgets, the total spend for which declined in 2011 for the first time since 1997.
On the other hand, MICs are rapidly increasing their own development cooperation and particularly triangular (North-South-South) and South-South cooperation are recognized as potential drivers of future development finance. According to some estimates, South-South cooperation already accounts for about $15 billion in development cooperation each year and could provide over $50 billion by 2025. Some analyses of South-South cooperation spending indicate a firmer emphasis on industry and economic activity generally, compared to the tendency of traditional donors to fund the social, humanitarian and governance sectors.

Although it remains to be seen how it will operate in practice, the fact that key non-OECD donors such as Brazil, China and India have joined with their traditional counterparts in a new Global Partnership for Effective Development Cooperation may herald a new era for South-South cooperation for development. That Partnership’s embrace of the private sector also highlights the relatively small size of ODA as a subset of all global financial flows.