In early December of 2013, The Hudson Institute released its Global Philanthropy and Remittances report. This report detailed aid and philanthropic trends with a special report which included data from the last eight years on the recently emerging economies of Brazil, India, China, and South Africa.
This was the institute’s first attempt to systematically measure financial flows from emerging economies to the developing world. The overall philanthropic investment included government aid, private investment, as well as remittances sent back home by migrant workers. Two of the main discoveries were cited on The Hudson Institute’s website from the 2013 report.
- China, India, Brazil, and South Africa alone account for a disproportionate $103 billion in private flows compared to $577 billion from the 23 developed donor countries.
- More than 95% of these emerging economies’ financial flows to developing countries are private, and less than 5% is government aid, a higher private proportion than developed countries.
These findings along with others within the report led the Hudson Institute to hypothesize that “Emerging economies are closer to the challenges of economic growth than developed countries and are thus closer to finding solutions to overcome these challenges.” While this hypothesis may very well be true, the details of the report still require a further analysis.
The Development Assistance Committee (DAC) consists of 29 developed donor nations who all share a common definition of what they classify as Official Development Assistance (ODA). ODA for these 29 nations are “flows of concessional financing with a grant element of at least 25%, and are provided by official sectors with the primary objectives of promoting the aid recipients’ economic development and public welfare” (OECD.org). This common definition and understanding of philanthropic aid allows for measurements and comparisons between the countries and allows for increased coordination and efficiency. However, the newer and recently emerging economies are not bound to the same guidelines of ODA which means each country outside of the DAC may have a vastly different notion of what constitute as developmental assistance.
To provide a few concrete examples highlighting the disconnect between the BRIC (Brazil, Russia, India, and China) and the DAC member states, China includes military assistance within their development assistance while India included donations towards political parties and travel expenses absorbed by the government.
These differences in definition of ODA really limit a side-by-side comparison. If we interpret the overall remittances flow of Brazil, India, China, and South Africa using the same definition of ODA that the 29 DAC countries use, we see these countries combined to pitch in $3.7 billion in ODA defined aid, which is only a fraction of the $103 billion of private investment flows cited in the study. Thus while private investment within developing nations can be something mutually beneficial for both the investor and host nation, we must also consider what sectors these funds are going to and what percentage of the funds are genuinely philanthropic. This transparency within philanthropy is something Give2Asia's partner the China Foundation Center is promoting within China. CFC's work is helping shed further insight into reports such as those by The Hudson Institute and could possibly be serving as a catalyst for other social enterprises and even nations to follow suit in increased charitable transparency. One can take the new Corporate Social Responsibility (CSR) law in India as an example.
India recently passed a law that will go into effect April 1st, 2014 which will change the regulations of and taxes regarding donations. The bill no longer allows for donations to political parties to be offered charitable status while India has also added a number of much more social and charitable issues that fall under the Indian definition of CSR. “These include projects promoting preventive health care and sanitation, livelihood enhancement projects, protection of national-heritage art & culture and steps for the benefit of armed forces veterans. Activities aimed at reducing the inequality faced by socially and economically backward groups have been included under CSR” as well (Business Standard, Feb. 28th).
While it is obviously not possible to have a universal definition of what constitutes as developmental assistance, the steps India is taking with steering its CSR and developmental assistance towards more grassroots organizations rather than political entities is a bold step. The transition may be confusing and frustrating for many, but the long term benefits of better educated, healthier, and more culturally sophisticated citizens could very well outweigh the difficulty of this transition.
A PDF of The Hudson Institute's Global Remittance Report of 2013 can be downloaded here.
Written by Dusty Cooper