Global Policy Forum

By Jim Lobe

Commitment to Development Index

For the second time in three years, the Netherlands topped the world's wealthiest 21 donor nations for its policies to promote development in poorer countries, according to the 2006 edition of the "Commitment to Development Index" released here Sunday.

The index, a joint project of the Washington-based Centre for Global Development (CGD) and Foreign Policy magazine, placed Denmark, last year's top-rated donor; Sweden; Norway; New Zealand; and Australia in the next five posts, respectively.

Japan ranked dead last, as it has every year since the CDI was first published in 2003, behind Portugal, Spain, France, Italy, and Greece, in descending order. While CDI authors praised Tokyo for ending its long-held practice of pressing poor country governments not to enforce labour, human rights and environmental standards for Japanese-owned businesses, they also found that Japan's barriers to exports from developing countries remain the highest in the index; its foreign aid the smallest as a share of income; and its immigration policies among the most restrictive.

The index noted that total foreign aid from the major donors rose a whopping 31.4 percent from 2005 to a record 106.5 billion dollars. Of that total, however, nearly 20 billion dollars came from write-offs of old debts owed by Nigeria and Iraq that put little new money in the hands of the citizens of either country. In addition, more than 6.3 billion dollars of the 2005 total consisted of U.S. aid to Iraq, much of which was either lost to corruption or spent on security. As a result, the index, which measures the quality as well as the quantity of assistance provided by donor nations, counted only 10 cents for each U.S. aid dollar allocated to Iraq.

Overall, the U.S. placed 13th among the top 21 aid donors -- the same ranking as last year -- due to the small size of its foreign aid programme relative to the size of its economy, the amount of its aid that is "tied" to the purchase of U.S. goods and services, and its environmental and energy policies that indirectly harm developing countries by accelerating global warming.

The index, which has become increasingly influential in the international aid community, is designed to encourage donor countries to adopt policies that are more likely to promote development across a broad range of issues that define their relationships with poor countries. It assesses donor-country performance according to seven criteria -- aid flows, trade, investment, migration, environment, security and peacekeeping, and technology -- that have a major impact on the welfare of poor countries.

"The lives of a billion people could be improved in the next decade if rich countries reform their trade, migration and investment policies," according to David Roodman, the index's chief architect. "In order to be effective, improving lives must be about much more than giving money. It must be about the rich and powerful taking responsibility for policies that affect the poor and powerless."

Multiple factors may be used to determine the score for each criterion. The score for the "aid" criterion is determined not only by a donor's total official development assistance (ODA) as a percentage of their gross domestic product (GDP), but also by how much of its ODA was "tied", how much it received in debt repayments, and how much more aid flowed from the donor country through private charities.

Scores for each criterion are then added up for each country to determine its overall ranking.

In the aid criterion, Denmark scored highest of all 21, followed by Sweden, Norway, and the Netherlands. Worst performers included Japan, Italy, the U.S., New Zealand, Portugal, Spain, and Australia, in ascending order. With the exception of Japan, the worst performers on aid were the best performers on trade, according to the index. New Zealand, the U.S., Canada, and Australia scored highest, while the markets of Japan, Norway, and Switzerland were the most closed to goods from poor countries.

On investment policies -- both those that are designed to facilitate investment flows to poor countries and ensure that they promote equitable development -- the leader was Britain, followed by Norway, the Netherlands, Canada, and Switzerland. Ireland was rated worst, followed by Austria, New Zealand, and Greece.

On migration, which was based on the net inflow of people from poor countries to wealthy ones, the aid provided by host governments to refugees and asylum seekers, and the percentage of students from poor countries among the total foreign student population, Austria and Switzerland topped the list by a large margin, while Portugal, Greece, and Japan placed last, just below Britain, France, and Belgium.

On environmental policies, Britain placed first, followed by the Netherlands, Ireland, Sweden, Germany, and Finland. The U.S. ranked last, below Spain, Australia, and Japan. On security, for which points were awarded for participation in peacekeeping operations and humanitarian intervention authorised by multilateral bodies, Australia and Norway topped the list, while France ranked last, just below Switzerland and Britain.

On technology, which was based on donors' support for non-military research and development programmes, France, Canada, Finland, Japan, and Spain claimed the top positions, while Greece, Germany, Britain, Austria, and Belgium brought up the rear.

Overall, the index found that roughly two-thirds of donor countries improved their numerical scores compared to 2003, while seven -- Denmark, New Zealand, Australia, the Netherlands, Germany, France and Switzerland -- slid backwards. The most improved countries over the three-year period, on the other hand, include Spain, Britain, the U.S., Japan, Portugal, and Sweden. Compared to 2004, the average performance of all 21 countries fell by a fraction during 2005, a result that appeared to mock promises by Group of Eight (G-8) leaders that last year would be the "Year of Development."

In a companion note to the index, Foreign Policy found a correlation between those donor countries with the highest CDI scores and their "democracy" ratings -- a gauge used by the World Bank based on the compilation of a number of indices by various non-governmental organisations (NGOs) to assess the accountability of governments to their publics. "When the World Bank's data are compared to the Index, it is clear that the more accountable a government is to its own people, the more it does for those to whom it is not accountable," according to Foreign Policy.

Under the Bank's methodology, Greece and Japan have the least accountable governments of the 21 donors, while the Netherlands and the Nordic countries are the most accountable. "This pattern likely stems from the fact that in wealthy democracies with less accountable governments, special interests hold more sway," Foreign Policy argued. "They divert government spending away from foreign aid, force aid to be 'tied' to spending on donor-country companies, and promote self-interest trade barriers."

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