| Watch closely
The heavily indebted poor countries initiative did not provide enough debt sustainability for enough countries and needs further enhancement, especially given the larger financing needs of the millennium development goals. Debt relief is more efficient than aid as a way for donors to help poor countries reach the goals because debt relief provides more flexible funding. It targets countries in need. And being untied, it provides budget support that can be applied to national priorities defined under poverty reduction strategies...
The commitment to development index is a pioneering attempt to monitor how well rich countries live up to their commitments to global partnership. Created by the magazine of the Center for Global Development and Foreign Policy, the index goes beyond looking at the traditional measures of aid-dollar amounts. Instead, it examines a broader set of dimensions and policies, looking at both the quality and quantity of aid, trade barriers, the environment, investment, migration and peacekeeping.
Constructing an index that takes into account the full range of policies affecting poor countries is as difficult as it is important. While the CDI is a significant first step towards holding rich countries accountable to their commitments, a number of questions remain:
Valuation of “good” policy — The CDI is designed to measure a specific set of policies, that, it is assumed, enhance development outcomes. These assumptions inevitably entail value judgments. For example, higher scores are given for aid to countries with good governance than to those where the need may be greater. Another example is foreign direct investment, a component of the index, where lack of data has led the CDI to assume that it is good in all circumstances.
Weighting — Perhaps the biggest problem in any composite index is what importance to assign each indicator. The CDI uses a variety of methods in each policy area. But the overall index gives equal weight to each of the six components. While this is the simplest approach, it downplays aid and trade — arguably far more important than, say, peacekeeping contributions.
Measurement weaknesses — While all...components of rich country policies presented here are important for global development, some are difficult to measure. Migration policies that contribute to development are difficult to measure because there is no clear consensus on what constitutes good migration policy, and data are sparse. The environment is also a complex area that suffers from lack of adequate data.
Complexity — The CDI was designed to target policies very specifically, resulting in a multitude of indicators and a wide range of statistical methods. The cost of this complexity is that to all but the dedicated researcher with knowledge of the field, the index will be a black box: the results are clear, but understanding what lies behind them requires specialized knowledge. So for the voter, the non-governmental organization, the journalist or the policy-maker — all key audiences — the take-home message of what needs to change may not be clear.
Bias against large economies — Because key aspects of the index (aid, peacekeeping and FDI contributions) are measured as a proportion of gross national income, large economies — which often give the most in absolute terms — end up with lower scores. Indeed, the top five countries all have populations of less than 20 million.
Some of the results of the index are surprising, sometimes due to the problems discussed above. The Netherlands leads the rankings, leaving in second place Denmark — by far the most generous donor of official development assistance as a share of gross national income of the countries in the index. This result is mainly driven by the Netherlands’ extremely high scores in FDI, where Denmark scores very low. This highlights the problems of using FDI as a scorecard for policy: FDI is an outcome, arguably more affected by the structure of the private sector than by government policy...Intended to be published annually, the first edition of the CDI should sharpen the debate on rich country development policies and stimulate discussions on measuring those policies and improving data.