As we look ahead, let’s not leave fragile states behind

by Tom Pesek, Partnership Officer, IFAD’s North American Liaison Office

As we bid farewell to 2012, it’s useful to reflect on the themes that dominated international development discourse this year. There was considerable focus on inequality, climate change, the agriculture-nutrition nexus, energy, water and land. The continuing effects of the global economic crunch and fiscal austerity were impossible to ignore. The role of partnerships and the private sector was also a recurring theme. Last week, the OECD, World Bank and USAID co-sponsored an event in Washington, DC on another major issue - responding to the complex and rapidly evolving needs of fragile states and middle-income countries. As the development policy agenda for 2013 begins to take shape, it’s worth considering the findings of a new OECD report entitled Fragile States 2013: Resource flows and trends in a shifting world, which was launched at the event.

The report highlights a number of trends that should keep policymakers awake at night. Chief among them is the report’s projection that global poverty will soon become significantly more concentrated in fragile states than it is today. Fragile states are currently home to one-third of the world’s poor. However, the OECD projects that by 2015, half of the world’s people living on less than USD 1.25 a day will be in fragile states. The report classifies 47 countries worldwide as fragile. These countries, including population giants such as India, Pakistan and Nigeria, have a collective population of 1.5 billion. In 2008, former World Bank President, Robert Zoellick observed that “fragile states are the toughest development challenge of our era.” Well, it seems this toughest of challenges is about to get even more difficult.

The report also asserts that approximately half of world’s fragile states will likely suffer reductions in programmable aid between 2012 and 2015. ODA is the largest financial flow to the average fragile state, followed by remittances and FDI. This projected drop-off is of particular concern in countries that are already chronically “under-aided”, aid dependent or confronting slow economic growth. Although per capita ODA to fragile states grew by 46 percent between 2000 and 2010 (USD 50 billion in 2010, or 38 percent of total ODA), this trend is expected to be interrupted by the ongoing fiscal crunch in OECD countries.

Another notable finding is that the profile of the average fragile state is beginning to change. A mere ten years ago, the majority of fragile states were low-income countries. Not anymore. Today, almost half of the world’s fragile states – 21 out of 47 – are middle-income countries, according to the report. If this shift continues, it will change the profile of the typical fragile state from low-income and highly aid-dependent, to middle-income and less aid-dependent. This is likely to further complicate efforts by development institutions to become more responsive to the needs of middle-income countries.

Despite the report’s mostly gloomy findings, there are some glimmers of hope. While ODA to fragile states is falling in terms of overall quantity, the number of actors engaging in these states is beginning to multiply. Multi-pronged engagement (development, investment and trade) has accelerated amongst countries beyond the DAC membership, notably Brazil, China, India, South Africa and the Gulf States. There has also been growth in terms of global funds and philanthropic giving to fragile states. In addition, multilateral engagement remains an important means through which emerging countries are directly interacting with fragile states.

Furthermore, there is already a paradigm shift underway within the development community, as demonstrated by the 2011 New Deal for Engagement in Fragile States, which was one of the outcomes of the Fourth High-level Forum on Aid Effectiveness in 2011 in Busan, South Korea. The initiative commits fragile states and their international partners to “do things differently” – by designing and implementing interventions with far greater consideration for the unique characteristics of fragile states; and to focus on “different things” – by building their interventions around peace-building and state-building objectives.

As Stewart Patrick pointed out this month in the Council on Foreign Relations, there may be a critical role for the G20 to play in getting the international community to prioritize fragile states. Many G20 countries, such as Brazil, China, India, Saudi Arabia, South Africa and Turkey, have already been steadily increasing their engagement in fragile states. In addition to providing development assistance, G20 countries increasingly represent key trading partners and sources of FDI for fragile states. The G20 could potentially play a critical role in harmonizing global approaches to poverty reduction in fragile states, including by leveraging support and resources for the New Deal for Fragile States.

At the event in Washington last week, Juana de Catheu, co-author of the OECD report, indicated that numerous bilateral and multilateral development institutions have begun to prioritize fragile states, choosing to fight poverty where it is most concentrated. This will require them to confront the tension between quickly delivering results versus making the long-term, context-specific commitments required to build the capacity and strengthen the resilience of fragile and conflict-affected states. Ms. De Catheu also observed that investing in fragile states is a high risk, high reward endeavor. One might also argue that the risk of not investing in fragile states is substantially higher.

Read more: Fragile states: Working to build resilience