From Traditional aid to Responsible Trade: the role of the private sector
By Prof. Dr. André Nijhof & Nika Salvetti
At present many governments are in a transition from traditional aid to responsible trade and the Netherlands is at the forefront of this development. What is the background of this transition and why is the private sector involved in addressing development cooperation objectives?
Traditional aid starts with the definition introduced by the OECD’s Development Assistance Committee (DAC) which in 1972 described the Official Development Assistance (ODA) as those flows of capital, goods and services to countries and territories on the DAC list of ODA recipients and to multilateral institutions with the aim to promote economic development and welfare of developing countries. At that time the formulation of a common international definition was necessary to enable the measurement and comparison of spending by donor countries. However only funding provided by public authorities could qualify as ODA. So no place for responsible trade at that time.
The approach to aid for developing countries has been since changing. A main reason is that the provision of development cooperation through aid is now part of a more vast and complex global agenda which expanded its horizon to new goals, such as climate change, migration and security, taking into account the new UN Sustainable Development goals (post 2015). Also the financial instruments used for aid provision are becoming more complex and innovative; special forms of insurances and guarantees to minimize risks for private funding as well as public private financial and technical partnerships.
Donors are also increasing in the form of private funding flows through charity, remittances and direct investments. But the most relevant reason for change, as also emphasized in Rome (2003), Paris (2005), Accra (2008) and Busan (2011), is motivated by the need to ensure aid effectiveness by mutual efforts and co-responsibility of donors and recipient countries.
The challenge at this point is to couple aid with the benefits of trade and investment to promote a sustainable and inclusive growth. How to do this is still work in progress but a promising example is the public-private partnership that resulted in an eco-system supporting business at the base of the pyramid. Since its launch in November 2014 the Inclusive Business Accelerator has grown to a global platform, assisting more than 180 ventures across 37 different geographies with the required ammunition to scale up their business and increase their benefits for low income communities (see iba.ventures). And many more examples will follow with the implementation of the “A world to Gain: A New agenda for Aid, Development and Trade” policy of the Dutch Ministry of Foreign Affairs.
About the authors:
Prof Dr André Nijhof is full professor in Sustainable Business and Stewardship and is visiting professor at Chang Gung University in Taiwan and the University for Peace in Costa Rica.
Nika Salvetti is a PhD candidate and practitioner in the field of CSR, Sustainability, Social Responsibility where she worked on in different developing countries such as Bangladesh, Uganda, Guatemala, as well as in Costa Rica, the overall Balkans and Middle East.
About Nyenrode Business Universiteit
Nyenrode Business Universiteit is the only private university in the Netherlands, founded for and by business. Nyenrode pillars of Leadership, Entrepreneurship and Stewardship are reflected in all of their programs which include undergraduate and graduate degrees in management, business, finance and accounting.
Nyenrode is a proud partner of Diplomat Magazine. Together, they have developed the Nyenrode – Diplomat Magazine Award which recognizes the talents from the diplomat network in the Netherlands and worldwide by providing them with exclusive scholarships for the programs Bachelor of Science in Business Administration, Master (MSc) in Management, full-time International MBA and part-time Executive MBA. For more information visit www.nyenrodemasters.nl/diplomat and register for the launching event on June 1st at the Carlton Ambassador Den Haag.
