Investing in a common future

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The world is facing multiple global crises. Geopolitical tensions are rising, extreme inequality is persisting, poverty reduction has stalled, and the number of violent conflicts is increasing. At the same time, we are facing a climate and nature crisis that requires immediate action. The resources being mobilised to tackle these problems are far from sufficient, and many of the responses to them are not effective.

Norway is in a unique position, with far greater financial leeway than most other countries. However, much of its wealth is closely linked to the drivers of global climate change, and Norway must recognise that this also entails responsibilities. Since Norway is a major investor with an open economy, and is highly dependent on foreign trade, it is also in the country’s own interests to play a part in risk reduction and in managing global crises. Norway has a special responsibility and the capacity to mobilise more resources than others, and to use these resources effectively to reduce poverty. Norway also has an obligation to play a greater role in efforts to address global challenges.

In this report, the expert group provides advice and recommendations that can be used in this important work. The report outlines a new framework for development policy organised under the overarching principle of ‘investment in sustainable development’. According to this framework, aid is not understood exclusively as donated resources, but as an investment in our common future. This calls for clearer goals and targets and a stronger focus on results. To ensure that we are doing the right things in the right way, the expert group proposes criteria for measuring effectiveness and a reporting system.

Key recommendations:

  • From 1 % to 2 % of GNI: given the global challenges and its own wealth, Norway should raise its level of ambition
  • Norway should adopt a more ambitious development policy, with a target of increasing total development finance – from both the public and the private sector – to about 2 % of its gross national income (GNI). This target reflects growing needs, other countries’ growing expectations about Norway’s contributions, and Norway’s financial capacity.
  • Investment rather than donation: the yield from development finance can be considerably increased by setting clearer targets and reducing costs
  • A new overall framework for development policy is proposed, based on the principle of investment in sustainable development.
  • This calls for clearer and better delimited targets and a stronger focus on effective action to achieve results.
  • We must both reduce poverty and deal with the global challenges – but the two objectives require different approaches
  • Norwegian development policy should have a clear poverty reduction profile but should also focus more strongly on dealing with global challenges, particularly the climate crisis. However, there should be a clearer distinction between these two objectives. The geographical distribution of poverty is different from that of greenhouse gas emissions.
  • Norway should intensify its global poverty reduction efforts and at the same time delimit them more clearly. The expert group proposes that 0.7 % of GNI – and more than this in the event of humanitarian crises – should be earmarked for poverty reduction and emergency aid. Parts of the current development budget are used for activities outside these areas.
  • A separate category is proposed for action to resolve the climate crisis and deal with other global challenges. Over time, funding for this category should be increased to 0.7 % of GNI.
  • The private sector should play a larger role – and the public sector can influence this more strongly
  • Norway should establish an ambition to mobilise private investment corresponding to 0.7 % of GNI in developing countries. To achieve this, it will be necessary to scale up existing instruments and tools in the development sector, establish some new ones, and improve coordination in the aid sector by building up a ‘Team Norway’ for development.
  • A new white paper on development policy should be published to establish a sound political basis for the new framework.

The expert group has reviewed Norwegian and international aid and concludes that the main weaknesses of current development policy are as follows: there are too many divergent goals, these goals are too elastic, instruments and tools are not updated as new problems arise, and systematic assessments of costs are not robust enough. As a result, aid is not effective enough and resource mobilisation is not sufficient to meet people’s needs. This report proposes two main steps to address the problems.

Firstly, the expert group proposes a new framework for assessing aid effectiveness, which is intended for general use in following up development policy goals. More specifically, this involves establishing an investment framework together with investment instructions to ensure that resources are used as effectively as possible towards sustainable development. Secondly, new categories are proposed for Norway’s international development finance, with more clearly defined targets and better differentiation of activities across the whole range of activities that will be required in the years ahead. This proposal is based on the idea that the different ambitions of development policy must be more clearly separated to enhance the effects of all activities. In practical terms, this involves a clearer split of Norway’s international development activities into two categories:

  • Category 1: main focus on poverty reduction and development in the poorest countries, together with humanitarian assistance.
  • Category 2: risk reduction and response to global challenges that affect developing countries particularly severely.

For category 1 activities, this will involve stricter application of the rules on official development assistance (ODA), whereas in category 2 there will be a more flexible approach to development-relevant global public goods, based on important principles for aid effectiveness. Most support in category 2 will qualify as ODA, but not necessarily all of it.

In addition to these two steps, the report discusses how Norway can most effectively mobilise private investment, and which specific mechanisms appear to be promising. These include using guarantees and insurance arrangements, increasing support to Norfund and Norway’s Climate Investment Fund, in addition to supporting the development banks and the proposals that have been made for boosting their loan capacity.

Overall, the expert group’s proposals provide a fresh starting point for Norway’s participation in international discussions about how new global challenges have altered the framework for development cooperation. They provide more clarity as regards objectives and the distinctions between financing for activities to achieve development policy targets and financing for global public goods, and as regards possible exceptions from the current ODA rules. The expert group believes that its recommendations will both provide some discipline in so far as public-sector investments require the use of new assessment methodology and must be more clearly based on existing knowledge and research. On the other hand, the recommendations provide more flexibility since the proposals shift the focus towards results and long-term social benefits.

As a way of enhancing Norway’s engagement at the interface between international development and the universal ambition of the SDGs, the expert group proposes that Norway should play an active part in the further development and use of the Total Official Support for Sustainable Development (TOSSD) framework as a supplement to the ODA system. This can also ensure universal participation in discussions on reporting of development finance.

A key question for the expert group has been how Norway’s financial resources and expertise can best be used in poverty reduction while at the same time helping to ensure a sustainable future for generations to come. The group points to a range of global threats to our common future, in particular the climate and nature crisis, which have a wide array of impacts. Other threats include war and conflict, faltering international cooperation and pandemics. The impacts of these threats are greatest in poor countries, but they also affect Norway – in political, social, and economic terms. The expert group proposes using a somewhat larger proportion of the Norwegian state’s financial leeway to invest in activities that will reduce global risk of this kind and ensure the production of global public goods. This proposal is based on long-term, enlightened self-interest. These activities should not be financed at the expense of but be additional to resources Norway has undertaken to provide to poorer countries.

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