All the World's a Development Stage

Private sector donation to foreign aid could soon outpace public investment. Canada needs to confront that challenge head-on.

Few Canadians – including those working in international development – will have heard of Frank Giustra. And yet, he has positioned himself to play an important role in development that will only increase in the future.

A successful Vancouver businessman, Giustra was, most recently, a mining financier. Although media-shy, he stepped into the limelight briefly when he spoke to the Canadian Club in Toronto in 2007. He announced the launch of a philanthropic project to support community development initiatives in mining communities first in Latin America and, eventually, in Africa.

Giustra, in his early fifties and the son of a Sudbury miner, also put his personal money where his mouth was. He committed $100 million of his existing wealth to the initiative and 50 per cent of his subsequent income.

Not only did Giustra commit his own money, he started to solicit support from others with deep pockets and influence. Mexican multibillionaire Carlos Slim Helu quickly matched Giustra's $100 million, as did European businessman Lukas Lundin. And, former U.S. president Bill Clinton agreed to run the progam through his eponymous foundation. The Clinton-Giustra Sustainable Growth Initiative, with the objective of "alleviating poverty in the developing world," is now operating programs in Columbia and Peru.

Canadian businessmen-cum-philanthropists have not historically demonstrated much interest in international development. But Giustra is not alone. Le Cirque du Soleil founder, Guy Laliberté, has committed to raising $100 million to support his creation, the One Drop Foundation, which promotes access to clean water in developing countries. Of course, this is not unique to Canada. Bill Gates and his wife, Melinda, are now devoting themselves full time to running their foundation which allocates the majority of its resources to international development, giving priority to global health initiatives.

While the $300 million (at least) that Giustra has so far secured for his initiative is impressive, that amount needs to be placed in context; it is a fraction of what the Canadian government allocates annually to development assistance. The most recent federal budget projects 2010-11 spending of $5 billion on the International Assistance Envelope most of which will support ODA – Official Development Assistance.

But the Gates Foundation's expenditures entail a whole other order of magnitude. The 2008 annual report of the foundation reported grants for Global Development and Global Health of almost $2.3 billion. By way of comparison, the OECD reported 2008 ODA expenditures for some of its members as follows: Denmark - $2.8 billion, Switzerland - $2 billion, Ireland - $1.3 billion.

The development role that wealthy individuals like Giustra and Gates are now playing highlights one of the greatest challenges facing the Canadian government and other traditional donors; there has been a huge proliferation in the number and range of actors playing on the development stage. And some of the new actors are getting the better roles.

In the aftermath of the Second World War, there were only about four or five countries engaged in development as we would know it today. In the '60s, Canada joined the ranks of about 20 or so affluent, western OECD countries to form a kind of donor's club. The International Development Association estimates that there are now approximately 60 nation states that should be considered development donors.

The mix and diversity of donor states is even more interesting than the absolute growth. It includes countries like Saudi Arabia and the Czech Republic. It includes countries like India that are both donors and recipients. And, of course, it includes China which is playing an increasingly important, though controversial, development role especially in Africa.

Added to this mix are those countries that are recipients of aid and development spending. Since the adoption of the 2005 Paris Declaration on Aid Effectiveness, it is increasingly understood that development will only be effective if recipient countries shape priorities and take "ownership" of development activities.

The World Bank has historically played a key role in development. But the range of multilateral actors is far greater today with the emergence of the huge, special purpose "vertical funds" like those set up to fight AIDS or promote vaccination.

The development stage has always included actors from civil society, but international development NGO's have become development players in their own right. The growth of the remarkable Bangladeshi organization, BRAC, which now provides development programs to more than 110 million people in Asia and Africa, highlights the growing role being played by indigenous NGOs.

Individual citizens are also becoming more significant, direct actors in development with remittances being a prime example.

While some question the development impact of remittances, it is foolish to ignore their impact – positive or negative – given the capital flows involved. A 2006 study by the Canadian Defence and Foreign Affairs Institute estimated that total remittance flows leaving Canada in 2005 ranged between $10 and $15 billion. That compares with 2005 Canadian ODA expenditures of approximately $4 billion in that same year.

And finally, emergent technologies will continue to provide new development opportunities for individual citizens, especially members of the "net" generation. Anyone with internet access can now become a micro-credit lender to entrepreneurs in developing countries through Kiva.org. And, one of the co-founders of Facebook is launching a new start up this fall called Jumo.org. It will have an explicit development-like focus intended "to bring together everyday individuals and organizations to speed the pace of global change." In the same way that changing technologies have led to "citizen journalists," we may be witnessing the emergence of "citizen aid-workers."

The implications of these changes are profound and responsibility for adapting to them goes well beyond CIDA; it extends to other key development actors in Ottawa, especially DFAIT and Finance, and to Canadian-based development NGOs. But Canada is not unique in needing to confront these changes. The days of a small group of western countries and multilateral institutions having a virtual monopoly over development are over. The domestic and global institutional framework that has guided international aid and development for the past 40 years needs a fundamental re-think and overhaul.

This essay was originally published on the Canadian International Council's Foreign Exchange blog.