Last month, representatives at the United Nations Third International Conference on Financing for Development agreed to a number of proposals to fund the upcoming Sustainable Development Goals. Collectively known as the Addis Ababa Action Agenda, these proposals cover a range of financing sources, from domestic tax revenues and official development assistance to private sector financing and philanthropy. The Agenda also included measures to support international trade and capacity building. World leaders now hope that the financing mechanisms laid out in the AAAA will encourage countries to adopt both the SDGs and a climate change accord scheduled for negotiation in Paris this December.
The SDGs are a proposed set of 17 goals that are meant to provide benchmarks for a variety of development issues over the next 15 years. The goals cover poverty, hunger, health, education, gender equality, energy, the environment, and a host of other global challenges. Each goal is accompanied by a number of targets that serve as tangible metrics of a country’s progress towards the SDGs. These new goals are a follow up to the Millennium Development Goals, a 15-year set of eight benchmarks that world leaders agreed to back in 2000. To improve their drafting process for the new goals, the UN organized the largest consultation program in its history that combined government input with surveys of the general public.
The Addis Ababa Action Agenda, a vital part of the new development goal drafting process, is a step towards recognizing the role of international philanthropy and the private sector in supporting global development. The agreement makes several references to the importance of the private sector in economic growth, particularly the role of the financial sector in enabling small businesses. Furthermore, Article 10 of the agreement explicitly lists philanthropies and foundations as vital members of the “global partnerships” that are required to meet the SDGs. This is a substantial improvement over the funding section of the MDGs, which overwhelmingly relied on official development assistance and did not reference to international philanthropy.
However, there is still a lot more that the Addis Ababa Action Agenda and the SDGs could do to support philanthropy’s vital role in development. In June, the CGP cohosted the Conference on Policy Coherence for Mobilizing Private Financial Flows for Sustainable Development with the OECD Development Center. The purpose of this conference was to discuss how to best utilize private funding for the SDGs in the lead up to the Third International Conference on Financing for Development. Dr. Carol Adelman, director of the CGP, provided a number of recommendations, summarized below:
- Efforts to measure private financial flows and to publicize philanthropic best practices should be increased
- Private and philanthropic actors should be included in drafting the SDGs
- Innovation should be the primary criteria for creating public-private partnerships as part of the SDG targets for global partnerships
- Philanthropy should be recognized as a unique source of development practices rather just an additional funding source for official development goals
- Countries should strive to improve their legal environments for investing in both for-profits and not-for-profits
- Intergovernmental organizations should facilitate the distribution of private resources to developing countries by evaluating best practices and identifying successful ventures
Though these suggestions were not explicitly included in the Addis Ababa Action Agenda, countries looking for ways to finance their SDG efforts should still consider them. Many of these suggestions simply entail engaging with the private and philanthropic sectors, and collecting new data. However, some countries may balk at evaluating their legal environments. A major finding of the CGP’s new Index of Philanthropic Freedom is that laws created to serve the legitimate interests of the state, such as capital controls and illicit financial flows legislation, often hinder philanthropic efforts as well. Examining their legal requirements will require states to evaluate the benefits of combating illicit finance or managing volatile financial flows against the benefits that come from international philanthropy.
As Dr. Adelman noted in her comments, 80% of the developed world’s economic engagement with the developing world comes from the private sector, philanthropy, and remittances. The Addis Ababa Action Agenda is an important first step in acknowledging these essential flows and how they can help meet the SDGs. But the international community needs to go further in developing a more holistic funding plan for the SDGs, and the recommendations made at the Conference on Policy Coherence are an excellent place to start.
On April 30, 2013, the Indian Social Action Forum (INSAF)—an umbrella organization of over 700 civil society organizations—received a non-descript notice from the Ministry of Home Affairs that revoked the INSAF’s registration and froze its assets in an effort to allegedly protect “the public interest.” This was not the first time that the INSAF had encountered resistance to its activities. Both the INSAF and its member organizations had often sparred with the Indian government over issues of environmental policy including the construction of nuclear power plants and the legalization of GMOs. Thanks to an ambiguous new section of the legal code, however, the Indian government has the authority to freeze assets and rescind the registration of organizations that receive unapproved foreign funds and/or pose a threat to “the public interest.” The true motivation behind the deregistration of the INSAF was immediately obvious to the organization’s leadership: they were being targeted for their activism.
The notice delivered to the INSAF in April was issued in accordance with Sections 13(1) and 14(1-2) of the Foreign Contribution Regulation Act of 2010. Based on an older 1973 law designed to shore up foreign currency reserves, the ambiguity of the amended FCRA allows for nefarious government overreach. Section 13(1) states: “Where the Central Government, for reasons to be recorded in writing, is satisfied that pending consideration of the question of canceling the certificate on any of the grounds mentioned in sub-section (I) of section 14…[it may] suspend the certificate for such period not exceeding one hundred and eight days.” Section 14 is more severe: “The Central Government may, if it is satisfied after making such inquiry as it may deem fit cancel the certificate if, in the opinion of the Central Government, it is necessary in the public interest to cancel the certificate…”
Objecting particularly to the ambiguity of Section 14, and drawing significant support from the American Bar Association’s Center for Human Rights as well as the international CSO community, the INSAF filed a strongly worded petition with the High Court of Delhi. In September, five months after the Ministry’s notice had been delivered to the INSAF, the High Court finally dismissed the deregistration and thawed the organization’s accounts. The FCRA, however, was upheld.
The attack on the INSAF was just the beginning. In the last two years, Modi’s government has used the FCRA to target thousands of CSOs that have criticized government policies. On June 9, 2015, 971 organizations, including several prominent public universities and local chapters of international NGOs, were stripped of their registration for accepting unapproved funds. Greenpeace activist Priya Pillai, herself a recent victim of FCRA regulations, noted that “The issue is not related to the source of our funding or FCRA. It is a larger political issue under which NGOs are being targeted and persecuted for working, as well as, raising the voice of the poor, weak, and the deprived.” Ms. Pillai is partially correct. While the government’s use of the FCRA is, indeed, a reflection of larger political issues, repeal of the amended FCRA would be an appropriate first step on the road to philanthropic freedom in India.
In the 2015 Index of Philanthropic Freedom, India maintains a mid-range composite score of 3.2, but in the area of cross border flows it scores just 2.1 out of a possible 5. In his justification of this low score, Noshir Dadrawala of the Centre for Advancement of Philanthropy emphasized the onerous requirements of the FCRA: “It is important to note that no CSO operating in India whether registered or not can receive foreign contributions without first obtaining prior permission from the Home Ministry.” In order for civil society to thrive and international philanthropic funds to flow into India, the government must amend the FCRA and end its attack on the third sector.
In the near future, the countries of the Gulf Cooperation Council (Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain, and Oman) could become a new and influential new source of international philanthropic activity. In all of these countries, a strong culture of giving exists alongside rapidly expanding wealth. Some of the GCC’s most affluent citizens are already realizing this philanthropic potential. But in order for all segments of these societies to effectively engage in philanthropy, the governments of the GCC need to create a more conducive environment for giving.
The Islamic tradition of philanthropy provides a strong foundation for such an environment. Zakat, one of the five pillars of Islam, requires Muslims to give 2.5% of their annual income to charitable causes. Sadaqa, voluntary giving above the level of Zakat, is also considered one of the foremost virtues in Islam. The influence of these religious practices on giving is reflected in the data, which estimates that Muslims worldwide give between $200 billion and $1 trillion in Zakat and Sadaqa annually, though most of this money is given locally through unofficial channels. The six countries of the GCC account for a substantial share of this giving, and as they continue to grow wealthy through oil, their impact on global philanthropy could also grow accordingly.
Among political and business elites, the GCC already gives on a level comparable to the elites of similarly sized developed nations. In 2013, donations of over $1 million in the GCC totaled $1.84 billion, compared to $2.24 billion from the United Kingdom. Furthermore, most of these philanthropic activities are international in nature, with $1.75 billion of these large donations going to overseas charities. Although the GCC still lags behind developed nations in the number of donations per capita over $1million, wealthy citizens of the GCC clearly don’t face significant restraints to their charitable giving.
But the real potential for philanthropic growth comes from the growing middle class of the GCC countries. Although there is no data on philanthropic flows for each country, economic data suggests a huge potential for middle class giving. According to the IMF, Qatar, the UAE, Kuwait, Bahrain, Saudi Arabia, and Oman all have per capita GDPs comparable to those of countries in the OECD’s Development Assistance Committee.
Yet philanthropic data would probably show that the countries of the GCC lag behind the DAC in terms of international giving, largely due to the governmental obstacles to philanthropy that non-elites face. The Center for Global Prosperity recently surveyed the giving environments in Saudi Arabia and Qatar as part of its new Index of Philanthropic Freedom. Of the sixty-four countries surveyed for the index, none scored lower than Saudi Arabia and Qatar, ranking 64th and 63rd respectively. In both countries, and most likely in the other countries of the GCC, civil society organizations face an intimidating legal environment, in which government regulators have complete authority to shut down any CSO they view as subversive. CSOs are a primary destination for donations from middle class citizens looking to give, and so environments like those in Saudi Arabia and Qatar diminish the giving potential of these citizens.
The philanthropic potential of the GCC should not be underestimated. These six countries have the resources to make a significant humanitarian impact, thanks to their growing wealth and charitable culture. However, while the wealthiest citizens in the GCC are already supporting philanthropy with billions of dollars in donations, the rest of the region’s citizens need their governments to provide better support for the development of CSOs before they can give with the same freedom as those at the top.
The numbers that came out of Nepal in the aftermath of the April earthquake paint a picture of almost complete ruin. According to government reports, 8,789 people are dead and 22,309 have been injured. Nepal’s infrastructure has been devastated. Almost 800,000 homes have been completely or partially destroyed. Close to 1,000 health facilities and over 30,000 classrooms have been fully or partially damaged. The cost of rebuilding these buildings, along with destroyed bridges and roads, is estimated to be about USD 5 billion, with a further USD 5 billion needed to fully offset the disaster’s damage. Taken together, this USD 10 billion in total economic damages represents more than half of Nepal’s GDP.
International philanthropies are playing a central role in helping Nepal cope with this fallout. The Nepal Red Cross has been on the frontlines of disaster relief efforts, providing medical care to those afflicted by the earthquake and mobilizing over 300 Nepali staff and 1,500 Nepali volunteers. The International Federation of Red Cross and Red Crescent Societies has supplemented these efforts by bringing in personnel and supplies from Red Cross and Red Crescent societies around the world. Doctors without Borders has sent eight teams of staff accompanying 3,000 kits of non-food and medical supplies. A range of other international philanthropies, including CARE, Mercy Corps, and Catholic Relief Services, have also been providing integral food and living supplies, as well as personnel on the ground.
One of the more innovative—and invaluable—contributions of the philanthropic sector has been “crisis mapping.” Through a global mapping platform called OpenStreetMap, volunteers across the globe have helped create maps of disaster-stricken areas, detailing obstacles such as broken bridges and blocked roads. For Nepal, volunteers have used satellite imagery and drones to map everything from impassable roads to structurally sound buildings to patches of land that could be used as helipads or drop zones. These maps have allowed NGOs and IGOs, as well as the Nepali Army, to quickly determine routes to remote villages in need of aid.
Destroyed infrastructure hasn’t been the only obstacle facing aid workers, however. The Nepali government’s Prime Minister’s Disaster Relief Fund was established as a way to coordinate aid efforts and catch fake aid organizations. But the rollout of this fund has created confusion as to which NGOs have to route their aid through the government. Aid was also delayed by the Department of Customs’ insistence that it inspect every single aid package flown into to the country. However, the Nepali government has since taken action to correct these initial stumbles, creating a more flexible environment for private relief aid.
Still, Nepal needs to do more to improve its environment for private philanthropy. This week, the Center for Global Prosperity released its first ever Index of Philanthropic Freedom, which uses surveys from country experts to measure how easy it is to carry out philanthropic efforts in 64 countries. Nepal has the third lowest ranking of the entire index, ahead of only Qatar and Saudi Arabia. The Nepali government puts strict registration requirements on all civil service organizations. The government also restricts on the flow of philanthropic funds, both into and out of the country. Last, civil service organizations must deal with a sporadically enforced tax system in order to take advantage of any tax exemptions offered for philanthropic activity.
Already underdeveloped and reliant on foreign aid, Nepal will need the support of international philanthropies more than ever as it attempts to overcome staggering economic and human losses. But in order to maintain this support, the government must open up its giving environment and provide philanthropies with the space and stability they need to help rebuild Nepal.
The dominant position of economics in the field of social science has long been recognized, but Marion Fourcade, et al. recently published a new paper investigating this phenomenon in greater detail. By presenting evidence of the hierarchy that effects job prospects, getting published, and establishing influential connections, Fourcade argued that economists’ objective supremacy is intimately linked with their subjective sense of authority and entitlement. “Economists may advise governments, but they do not convince the people.”
Whether or not that is a problem depends on its unintended consequences. William Easterly has expressed concerns for the “tyranny” of economists in international development. The “tyranny of experts” in development posited the belief that poverty is due to a lack of technical expertise, and that autocrats are best at delivering this. The support for a benevolent authoritarian approach to development is not overt but implied, and is often altruistic rather than self-serving. Easterly sympathized with economists who, in their zeal to help the world’s poor, unwittingly favor autocracy, because he used to be one of them himself. Economists choose to advise governments on how to alleviate poverty through a top-down approach, but for Easterly the real cause of poverty is exactly the unchecked power of the state against the poor.
According to Fourcade, 57.3% of American university economics professors disagree with the statement that in general, interdisciplinary knowledge is better than knowledge obtained by a single discipline. But as Easterly noted, at least for development, other than national policies of technical solutions to poverty, such as fertilizers, antibiotics, or nutritional supplements, history, non-national factors, and spontaneous solutions also matter. Therefore development may have to give up its authoritarian mindset to avoid tragedies such as the one that happened to the farmers in Mubende District, Uganda, detailed in the beginning of Easterly’s book. Soldiers marched more than 20,000 farmers away from their land at riflepoint in 2010. Some of those farmers died and the rest never returned, because they were told the land no longer belonged to them. Four years later, the whole event has been forgotten by almost everyone except the victims.
However, it is not always wise to label people and attack economists as a homogeneous group, because criticism or compliment could be just a matter of opinion. Fourcade consented to the notion that most modern economists are talented. They simply believe in the ideal of an expert-advised democracy, in which their competence would be utilized. Unfortunately democratic societies are often deeply suspicious of expertise as described by Alexis de Tocqueville:
“When the ranks of society are unequal…there are some individuals invested with all the power of superior intelligence, learning, and enlightenment, whilst the multitude is sunk in ignorance and prejudice. Men living at these aristocratic periods are therefore naturally induced to shape their opinions by the superior standard of a person or a class of persons, whilst they are averse to recognize the infallibility of the mass of the people. The contrary takes place in ages of equality. The nearer the citizens are drawn to the common level of an equal and similar condition, the less prone does each man become to place implicit faith in a certain man or a certain class of men.” That is what Fourcade meant by saying, “democratic societies are deeply suspicious of (non-democratic) expertise, and economic advice, unlike dentistry, can never be humble.” It is our own inclination to believe in practical and results-oriented views (instrumental rationality) from objective data (quantitative research) more than value-based (value rationality) statements from our peers (qualitative research).
That being said, the perceived superiority of economists and their supposed lack of humbleness may also be a kind of resignation. In other words, are we talking about the pride and prejudice of the economists or ourselves?
Over the last five years, the Russian Federation has been criticized by international NGOs over the administration of elections, the national ban on “gay propaganda,” and the seizure of Crimea. NGOs are needed now, more than ever, to prevent human rights abuses and independently monitor the actions of Vladimir Putin’s government. Unfortunately, recent amendments to Russian federal law have placed substantial restrictions on the organization and development of NGOs.
Signed on July 20, 2012, Federal Law 121-FZ–colloquially referred to as the “Foreign Agent Law”– requires NGOs that receive funds from abroad and/or engage in “political activities” to register with the Ministry of Justice (MoJ) as an “organization carrying the function of a foreign agent.” According to the federal law, organizations that meet these vague requirements are required to submit biannual activity reports and quarterly expense reports and cooperate with authorities during mandatory annual inspections. In the event that an NGO “carrying the function of a foreign agent” does not voluntarily register with the MoJ and/or fails to comply with NGO regulations, the organization may be fined and/or closed.
In mid-February 2013, President Putin addressed officers of the FSB (Russia’s intelligence agency) and noted that 121-FZ “should certainly be executed.” Shortly thereafter, surprise inspections on hundreds of NGOs were carried out by the MoJ. As the smoke cleared from this fusillade last year, Human Rights Watch reported that 55 groups had received “warnings,” 20 had received official “notices of violation,” and the prosecutor’s office and MoJ had filed 12 suits against the administrators of offending organizations. These NGOs were some of the first victims of the “Foreign Agents Law.”
Among the many groups recently targeted by the MoJ, the experiences of Golos, Rakurs, and Man and Law serve as a kind of representative sample of the types of organizations involved in these investigations.
Golos Deputy Director Grigory Melkonyants (Source: Ivan Sekretarev Associated Press)
The first organization prosecuted under 121-FZ was the award winning voter rights organization Golos (Voice). In the months leading up to the 2012 election, Golos’ monitors reported multiple violations and rampant voter fraud. Shortly thereafter, the MoJ accused the organization of “receiving foreign funds” and “engaging in political activity on Russian territory.” While Golos received funding from USAID in the past, it has not received foreign funding since the amendments were effected. Furthermore, it argued that it was not involved in political activities, since it works “on behalf of the people rather than specific political forces.” In spite of this, Golos was still fined 300,000 Roubles (~10,000 USD), placed on the MoJ’s registry, and closed for six months in June 2013. Following the decision, Golos closed some of its regional arms and, in September, lost its most recent appeal.
Rakurs Director Tatyana Vinnichenko (Source: Alexander Borisov)
Rakurs (Perspectives), an oft profiled and well-respected LGBT organization based in Arkhangelsk, was founded in 2007 to provide “socio-psychological and legal support to the LGBT community.” According to the group’s leader Tatyana Vinnichenko, the MoJ conducted a nearly month long investigation of Rakurs’ organizational activities in November and December 2014. The final report from the MoJ linked Rakurs to the political activism of Nikolai Alekseev, allegations that Vinnichenko has firmly denied: “We have a community center… We provide advisory services, training and so on. In my opinion, it is impossible to call us [a] political organization.” As in the Golos case, the MoJ ignored these objections and, on December 15, 2014, Rakurs was involuntarily placed on the Registry. Although the organization’s operations continue and it plans to appeal the decision, Vinnichenko is not optimistic: “It is clear that we will probably not be able to work with the label of ‘foreign agent.’ We don’t have much faith. But it’s necessary to use all the legal mechanisms.”
Man and Law, an NGO focused on combating corruption in the Mari-El Republic, has also run afoul of the “Foreign Agents Law.” On April 24, 2013, Man and Law’s leaders received a warning from the Prosecutor’s Office that cited political elements of the organization’s charter including its efforts to “participate in elaboration of policy by state institutions, organize public gatherings, meetings and demonstrations, and come up with propositions for state institutions and to take part in election campaigns.” The warning also explained that foreign funding necessitated registration with the MoJ. Man and Law refused to alter its charter and, on December 15, it was cited with an “Administrative offense under Part 1, Article 19.34 of the Administrative Offences Code of the Russian Federation” which criminalizes activities carried out by an NGO acting as a foreign agent. The local Constitutional Court ruled against the organized and imposed 300,000 Rouble fine. While Man and Law still operates today, it filed an appeal with the Magistrates court on January 12, 2015 in which it condemned the “illegal” actions of the MoJ and the arbitrary nature of the “Foreign Agents Law.” The court has not yet heard the case.
The issue here is clear. With its bureaucratic burdens, mandatory inspections, and hefty fines, the “Foreign Agents Law” handicaps the development of civil society in Russia and strongly discourages international investment. While only a few of Russia’s 220,000 NGOs have been investigated so far, more inspections, fines, and closures will surely follow. Once again, an Iron Curtain is descending, but this time it is falling over Russia’s NGOs.
Developing countries are often characterized by deficiencies in institutional security, infrastructure, and market openness. Among such emerging states, Landlocked Developing Countries (LLDCs) are set apart by their lack of direct access to the world’s oceans and seas. While landlocked European nations are on average 170 km away from the nearest port, their LLDC peers average nearly 1,370 km, placing them at a distinct disadvantage. The inability to access maritime transportation networks creates additional burdens that most developing countries do not have to face, including additional border crossings and significantly higher costs of doing business and transporting goods.
The plight of LLDCs is not, however, unknown to the international community. In November 2014, the United Nations held its Second Conference on LLDCs in Vienna, Austria. At the conclusion of the conference, the General Assembly adopted a 10 year action-plan for LLDCs, identifying six key priorities that need to be addressed in development efforts:
- Fundamental transit policy issues
- Infrastructure development and maintenance
- International trade and trade facilitation
- Regional integration and cooperation
- Structural economic transformation
- Means of implementation
These priorities may be boiled down into two major issues that need to be addressed vis-à-vis development in LLDCs: transportation infrastructure and trade relations between bordering countries.
While efficient and reliable transportation and logistics are important issues in all nations, they are essential in LLDCs. To date, only nine LLDCs have more than 50% of their roads paved. Recent research conducted by Paras Kharel (of the South Asia Watch on Trade, Economics & Environment) and Anil Belbase (of the Institute for Policy Research and Development) used data from the World Bank’s Logistics Performance Index (LPI) to determine the correlation between LLDC logistics performance and exports. The LPI is determined on a scale of 1 to 5 “based on efficiency of customs clearance process, quality of trade- and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics services, ability to track and trace consignments, and frequency with which shipments reach the consignee within the scheduled time.” Kharel and Belbase discovered that, all else being equal, a 1% increase in the LPI performance of LLDCs is associated with an average increase of exports by 2.84% – 3.27%. Similarly, a 1% increase on the LPI in transit nations (nations that lie between LLDCs and port access) is associated with a 1.1% – 1.2% average increase in LLDC exports, all else being equal. However, if LLDCs do not share positive relations with their neighbors, a relatively high LPI score is essentially meaningless.
A common thread between many LLDCs is a lack of positive diplomatic relationships with major neighbors. Ethiopia’s relationships with Eritrea and Somalia, for example, are frosty at best. Newly minted South Sudan shares most of its border with other landlocked nations and Sudan, from which it declared independence in 2011 after a long, bloody conflict. For meaningful and sustained development, improving relationships with border nations is essential in order to allow and obtain greater access to the world’s ports—and by extension the world’s markets. Many LLDCs, such as Tajikistan and Uzbekistan, must use routes that go through more than one transit nation to reach a port. Encouraging trade agreements that knock down tariffs and nontariff barriers should be a priority.
The private sector and civil society can also play major roles in the process of developing LLDCs. Civil society and the private sector can help provide more intimate perspectives of ordinary people who live in LLDCs which can lead to more specific and productive policy recommendations tailored to each nation’s unique needs. Civil Society can also advocate for streamlining procedures and eliminating barriers in order to promote more robust FDI, an important cog in LLDC development. The UN Conference on Trade and Development reported that FDI is significantly more important for GDP growth and capital formation than in developing countries as a whole.
Figure 1. FDI stock as a percentage of GDP, 2004–2013 (Percent)
Source: UNCTAD, World Investment Report 2014
Figure 2. FDI inflows as a share of gross fixed capital formation, 2004–2013 (Percent)
Source: UNCTAD, World Investment Report 2014
The report found that the share of FDI stock in GDP averages about 5% higher than in other developing countries. The report also found that “In terms of the ratio of FDI to gross fixed capital formation (GFCF) – one of the building blocks of development – FDI’s role was almost twice as high for LLDCs than for developing economies over the previous 10 years.”
As logistics performance, diplomatic relations with immediate neighbors, and engagement with the private sector and civil society improves, LLDCs will be enabled to overcome the unique barriers to development that they face.