Sustaining Dutch commitment to development

Knowledge brokering08 Nov 2010

The new Dutch government plans to cut spending on foreign aid from 0.8% to 0.7% of gross national income. Of course, by international standards, the Netherlands will remain one of the most generous nations when it comes to foreign aid: only a handful of countries even come close to 0.7%. Still, the prospective cut raises questions: Is the Netherlands shirking its responsibilities to the developing world?

We would answer: It need not, even if aid is cut. There is more to foreign aid than quantity – the quality of that aid also matters for the lives of the poor. And foreign aid in turn is just one channel by which the Netherlands can and does help poorer nations. Nations are linked in many ways that matter for development: commerce, migration, the environment, technological innovation, military affairs, and more. Dutch policies, including many not even thought of as foreign policies, influence all of these channels.

That is why the Center for Global Development’s Commitment to Development Index (CDI) ranks wealthy nations on how much they help poorer ones in seven major areas: aid, trade, investment, migration, the environment, security, and technology. The Netherlands has consistently scored well on the CDI, ranking first in five of the last eight years. The 2010 edition, just released, places the Netherlands third, just behind Sweden and Denmark and not far ahead of Norway.

Not surprisingly, one of the Netherlands’ strongest suits is the foreign aid component, where the country scores an impressive 12.5 (and where a 5.0 would indicate average performance). Traditionally, the Netherlands has served as a leader in the development community. It is one of the only nations to reach the goal of 0.7% net aid volume as a share of their overall economy (and in fact, exceeded this guideline, providing 0.8% last year.) The Dutch government is relatively selective in who it gives money to, focusing on poor yet relatively well-governed countries that both need the help most and are most likely to use it well. And the Dutch development cooperation ministry generally avoids ‘project proliferation’, meaning that by the standards of its peers it funds relatively few, large projects rather than overwhelming recipients with hundreds of little ones.

What might the new government’s aid cuts mean for the country’s CDI score? We estimate that the Dutch would fall from 12.5 to 10.9 on aid; from 6.7 to 6.5 on the overall index; and, in overall rank, from third place to…third place. Perhaps the Netherlands’ proposal to slash aid will not have the devastating impact that some fear.

Why so little change? As the WRR report highlights, there are many ways to support economic and social development in other countries, apart from aid. So even if Dutch aid slows, there are improvements in other policy spheres that could, in a rough sense, compensate.

For example, the Netherlands lags in technology policy as the CDI measures it –meaning with an eye toward whether the country is facilitating access in poor countries to innovations in rich ones. Dutch government spending for research and development could be increased to better support innovations in healthcare, communications and other areas that affect the developing world.

There is also room for improvement in access to intellectual property rights. Currently the Dutch allow individuals and corporations to stake patent-like rights to data compilations, including ones assembled from government data. Another weakness is that, as a member of the EU, the Netherlands negotiates bilateral free trade agreements that incorporate measures which exceed Intellectual Property Right (IPR) standards negotiated within the World Trade Organization. The EU pushes for adoption of geographical indications (protection over names and logos derived from specific locations) along with accelerated adoption of the IPR standards in previous agreements. These patent laws arguably go too far in protecting the IPR owners at the expense of those who use them.

Migration is another area for change, though admittedly a fraught one. Compared to other countries – and political controversies notwithstanding – the Netherlands admits a small number of immigrants from developing countries; by share of receiving-country population, it is ranked 15th compared to other CDI countries. There is a very small share of foreign students and those that are studying at Dutch universities pay significantly higher tuition fees than nationals.

Policy improvements in areas such as these would be crucial to helping the Dutch reach goals set out in the WRR Less Pretension, More Ambition report. As the report stresses, the basic tenet of this foreign policy reform is a move from aid to investment, highlighting policy coherence, trade and private sector development. If this philosophy is put into practice, the government of the Netherlands could well demonstrate its ‘commitment to development’ – and improve its Commitment to Development Index standing – even as it reduces foreign aid.

David Roodman is a senior fellow at the Center for Global Development, currently focusing on microfinance. He has been architect and manager of the Commitment to Development Index since the project’s inception in 2002.

Julie Walz is a research assistant at the Center for Global Development. She works on the Commitment to Development Index and on failed states.