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Session Overview
5-HP039 - 1/2: Between Financial Dependence and Policy Autonomy: Navigating the External Financing of Development - 1/2
Wednesday, 07/July/2021:
11:00am - 12:15pm

Session Chair: Dr. Andrew Martin Fischer, Institute of Social Studies (The Hague), Netherlands, The
Session Chair: Dr. Miguel Rivera-Quinones, University of Puerto Rico, Puerto Rico (U.S.)

Session Abstract

This panel invites papers that examine the precise mechanisms by which external finance is mobilised and utilised by developing countries governments for development purposes, whether these are focused on industrial policy or other productive activities, infrastructural financing, or else domestic social expenditures. The aim is to explore the underlying tensions between bilateral and multilateral donors on one hand, and developing country governments on the other, regarding policy autonomy versus donor attempts to influence national policy agendas, with the aim to deepen our analysis of the challenges of international redistribution as a crucial element of global solidarity. Exploration of the role of commercial sources of financing to both public and private actors is also welcome.

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The Taxonomy of International Development Cooperation in the Central American Integration Process

Laura Godoy Tobar1, Pedro Caldentey del Pozo2, Vicente González Cano3

1Universidad Loyola Andalucia, España; 2Universidad Loyola Andalucía, España; 3Universidad Loyola Andalucía, España

The Central American integration System (SICA) is a political process of regional integration created in the fifties during the first wave of Latin American integration. SICA is an integration of eight small countries and its global relevance may be less than South American integration processes like Mercosur or Comunidad Andina. However, the relevance of SICA is greater for their countries development and the international cooperation flows are much important than in other regional initiatives.

Most of actors of international cooperation works with SICA institutions and politics, from bilateral agencies (AECID, AID, GIZ) to international organizations (UUNN Agencies, World Bank, EU), from European countries to Asian or Latin American Countries. The contribution of international cooperation to SICA's achievements has been essential. Not only for the impact of financial resources and technical assistance, but also for its involvement in the construction of its regionness.

However, the evolution of this intense collaboration has created a dependent relationship because of the lack of financial contribution of the SICA countries. With international agreements on aid effectiveness as the theoretical framework of the paper, the behavior of development partners seem to be very diverse, from the countries and agencies most aligned with SICA agenda, to the specific approaches of some partners which are totally detached from the strategic vision of SICA and tend to impose their own agenda, tools and interests.

This leads to a confusion of roles and goals that is complemented by the lack of appropriation of some Central American governments and the limits of harmonization and leads to poor management by results and limited transparency. Regional instruments and policies are also lacking to enhance the progress of the region-building process, and the sustainable and inclusive development of Central America.

This paper offers a taxonomy of the agents of International Cooperation that makes possible to distinguish the nature and means of different types of SICA partners. The analysis review the cooperation flows to SICA during 2000-2014 by partners, by modalities, by strategic priorities and by some other variables. Through a cluster analysis, we develop a classification of development partners that also allows discussing the effectiveness and coherence of cooperation. One of the main objectives of Central American integration is to strengthen negotiation capacity and autonomy in international relations given the nature of its small and vulnerable member countries. The taxonomy could give orientations to redefine the politics and management of the regional cooperation to lead to an integral development of the Central American region.

Agency, Autonomy and the Mode of Financing in Infrastructural and Project Finance

Dipinder Singh Randhawa

National University of Singapore, Singapore

During periods of volatility in the external and internal environment, how does the choice and source of financing impact the agency, flexibility and autonomy for borrowers? This paper reviews the temporal evidence and determinants of infrastructure finance.

The growing global demand for multilateral finance and the limited availability of resources has highlighted the need for policymajers to launch initiatifves to enhance capabilities, the policy environment, incentives for private players, and deepend capital markets, especially bond markets.

The growing need for private infrastructure finance has highligted the importance of 1) the enabling investment climate in the country, ii) The commensurate need for coordinated initiateds to reduce the risk premium demanded by investors, iii) create conditions for public private partnerships, including iron-clad clauses safeguarding interests of private investors, iv) measures to deepen and strengthen capital markets.

The paper examines the trade-off between safeguards and autonomy and flexibility for developing country investors in infrastructure. Developing economies have received neglibile funds relative to their needs for infrastructure finance. How can developing econmies overcome these deficits by increasing the pipeline of 'bankable' projects. What are the institutional pre-requiisites for success in this domain? What can a developing econmy do in collaboration with the multilaterals to nurture and develop rmuch needed isk management instruments? This would help attract some of the large reservoir of funds vested in insurance and pension funds. The study starts with a survey of evidence, before embarking on individual case studies. It examines the factors constrainign the viability and success of innovative financing mechanisms and the reluctance on the part of instrituional funds to commit resources to infrastructure projects in developing economies. Does the Belt and Road Initiative offer a new model to deal with these challenges?

Late Industrialisation in the Sustainable Development Goals, a critical perspective

Miguel Rivera-Quinones

University of Puerto Rico, Puerto Rico

The Sustainable Development Goals has incorporated late industrialization into the global development agenda. Goal 9.2 aimed at doubling industrial output in low income countries by 2030. Nevertheless, the importance that is given to the World Trade Organization’s role in the SDGs’ makes it pertinent to revisit the debate about the policy space in which developing countries pursue late industrialisation. The premise in the SDGs’ industrial goals is that the WTO’s rules would define the policy space developing countries have to pursue industrial polices. This articles contradicts this assumption and argues that access to foreign exchange has a greater influence over the autonomy that policy makers have to pursue industrial policies. Here I look to Argentina’s re-industrialisation program that ran between 2003 and 2015 as a case study to show how being able to finance industrial imports in a context of industrial growth has a greater influence over the success industrial policies than the WTO’s agreements. The underlying premise of this article is that the SDGs are bifurcated by the existing gap between their goals and the policies validated to achieve them. The policies supported to pursue late industrialization in the SDGs reaffirm a neo-liberal variant of capitalist development.

Why Does Local Agency Matter? Enabling The Decision Space For Aid Recipients

Maia Persephone King

Blavatnik School of Government, University of Oxford, United Kingdom

The importance of local decision-making and policy leadership has long been emphasised in aid reform agendas, under the heading of 'ownership'. But in practice, this focus has often fallen victim to 'agency creep', as donors strive to retain control over the policy choices of aid-receiving countries. Even the ‘second orthodoxy’ risks being locally informed without being locally led. More recently, many factors have been reducing donors’ previous leverage over aid recipients’ policies. Given their previous difficulties with enabling local decision-making, how can donors find new ways to support, enable and embrace it, and to navigate this new world of changing hierarchies? This paper explores the potential benefits of prioritising local decision-making, as well as the risks and constraints which make it difficult. The analysis suggests a possible way forward for donors: to create an enabling environment, by providing meaningful decision space for local leaders in aid-receiving countries to make their own policy choices. This change in emphasis could enhance the accountability and responsiveness of aid-receiving governments, while managing risks and delivering results. It would involve a shift in donor focus, away from being the protagonist and trying to influence the outputs of policymaking (the policy choices that countries make) and instead, towards trying to support the process of making those choices. In short, the remedy for a perceived misuse of power may not be to usurp it, but rather to support and enable its use for good.

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