Sources of development Domestic economy Trade—imports and exports Development requires capital Comes from international banks Comes from “official development assistance” Comes through “foreign direct investment” From “nongovernmental organizations”

Domestic economies Severely limited Focused on subsistence Capital generation limited Demand side limited—small market Supply side limited—lack of capital, expertise, technology Government policy often prohibits growth Foreign participation a must to succeed

Private & ODA debt in LDCs Source: UNCTAD

Not as bad as it looks Source: UNCTAD

Poverty distribution Source: UNCTAD

NGO spending

Lack of NGO data No centralized source on how big No central source on what they’re doing OECD estimates $26.9 billion in 2005 $16.5 billion from private donations $10.4 billion from governments Ireland, Norway: large % to NGOs Japan, France: small % to NGOs % means of total ODA spending

Biggest NGOs World Vision International: $2+ billion/yr Gates Foundation: $1+ billion/yr Save the Children: ~$500 million Care USA: ~$500 million Oxfam: <$500 million Plan International: <$500 million Catholic Relief Services: <$500 million Soros Foundation: <$300 million

The role of big business

Leaving profits in LDCs

FDI growing easier

The world’s largest TNCs

Largest TNCs from dev. countries

TNCs: Exploiters or partners? History of exploitation, disaster Shell in Nigeria Union Carbide in India Nike in Indonesia Assumption: TNCs are bad Reaction is “corporate social responsibility” Reaction is “resource nationalism”

CSR Companies adopting rules, policies on: Human rights Health care Environment Education Job health and safety Labor rights

Examples of CSR Extractive Industries Transparency Initiative Construction Sector Transparency Initiative Medicines Transparency Alliance Critics call all this “greenwashing” Many government requiring CSR Hey, it can’t be all bad

FDI in perspective Official development aid is diminishing Bank credit is hard to find, expensive FDI is growing in importance Development=foreign direct investment How to balance costs and benefits? How to ensure developing countries get their share from FDI? Major issue in coming years

Doha again Doha round of WTO will define FDI rules Failure of Doha means not many rules Agriculture remains at core of disputes Meanwhile, TNCs go their own ways Resource nationalism causing conflict Global industry not united Some for, some against

The impact of financial crisis Protectionism on the rise LDC export earnings fell 44% in last year FDI down as much as 50% Millenium Development Goals look iffy Recent FAO conference considered a failure U.N.: 1 billion people going hungry Crisis hurting poorest the most