Unequal worlds: Poverty, growth, inequality and the role of international cooperation

October 31, 2012 - nr.80
Summary

Summarised answers to the central and subsidiary questions

In this summary, the AIV briefly answers the government’s central question (what are the possible consequences of observed shifting patterns of poverty for the post-2015 agenda and possibly, related changes in inequality within and between countries?) on the basis of the analytical part of the advisory report. It also addresses the subsidiary questions:

Empirical reality

  1. Does the AIV agree that poverty has indeed ‘migrated’ to middle-income countries (MICs), as described in articles like the one by Andy Sumner? If so, what are the most important causes of this? Are there reasons for rethinking the definition of poverty or the criteria for distinguishing between low- and middle-income countries?
  2. What should we realistically expect for the development of the global scope and distribution of poverty (in terms of geography, type of country, demographic trends, the rural/urban divide, etc.) in the next 5-15 years? What role will scarcity (of natural resources, energy) and environmental degradation (water pollution, soil exhaustion, loss of biodiversity) play in this?
  3. Is there any systemic connection between growth (from a low- to a middle-income country) and increased income inequality within countries? If so, what factors underlie this link, besides the government’s involvement in poverty reduction (differences between, say, China and Brazil)?
  4. In the view of the Council can middle-income countries become self-reliant with respect to poverty reduction? Is it prudent to recognise differences in fiscal and implementing capacity of governments in different (categories of) middle-income countries?
  5. Are there structural differences as regards poverty and inequality in low- and middle-income countries? Is there, for example, in one of these types of countries a greater incidence of chronic poverty? If such differences exist, do they have different impacts on the degree to which the countries in question are capable of combating poverty effectively?

Relevant principles and considerations

  1. What role can development cooperation play in reducing poverty in middle-income countries? What are the most important moral, social and economic principles and considerations that go into making such an assessment?
  2. What relevance does poverty in MICs have for the objectives of Dutch foreign policy (prosperity, stability and security, energy and raw materials security, the international legal order)?
  3. Do the different channels (multilateral, bilateral, private sector and nongovernmental sector), and possibly also the various modalities, operate from the same principles and considerations?
  4. If self-reliance and poverty reduction are both goals of development cooperation policy, and (certain) middle-income countries are deemed capable of combating poverty in their country but are partly or completely unable to do so, which of the two goals carries the greater weight? Self-reliance and thus local responsibility? Or poverty reduction and the continuation of Dutch involvement in such efforts?
  5. What role should the changing relations in international cooperation (the rise of new donors with sometimes different objectives, the decreasing importance of ODA (Official Development Assistance) in funding flows, the increasing importance of international public goods, the increasing emphasis on policy coherence, etc.) and the connection to the fundamental goals of Dutch foreign policy (security, freedom, prosperity) play in assessing the advisability of outside involvement in poverty reduction in middle-income countries?

Impact on development cooperation

  1. Have other donors (bilateral, multilateral or private) or other types of development organisation already altered their policy to reflect the fact that the world’s poor are increasingly to be found in middle-income countries?
  2. What are the possible implications for the Dutch approach to the post-2015 development agenda of the shifts in the patterns of global poverty, primarily as a result of the growing number of countries that have attained middle-income status?
  3. Is it helpful in this connection to distinguish between the various channels (or modalities)?
  4. Are the present instruments suitable for middle-income countries or should additional requirements be imposed on programmes (for example, those run by companies) in order to amplify their focus on poverty?

Regarding the central question, Dutch development policy is facing a major challenge. The traditional approach focuses on providing aid and expertise in the poorest countries. In the AIV’s view, many countries that have developed into MICs have sufficient governance and financial capacity to take on more responsibility. A first response to this is the oft-repeated call to stop providing such countries with aid. However, rather than terminating development ties with MICs, the AIV argues for a different approach. One reason for this is that the dividing line between low- and middle-income countries is very arbitrary. Countries that are just above the line are not always more developed than those just below it. MICs also include a number of fragile states and countries in conflict, where aid remains necessary. In addition, reaching deprived groups in MICs requires a constructive policy dialogue with these countries.

Such a dialogue with middle-income countries offers benefits to all parties. For these countries the AIV recommends a shift from pure bilateral development policy to a policy of international cooperation, based more on multilateral cooperation and the civil society and private sector channels. The bilateral channel can continue to be of great importance to low-income countries, though in light of rapid geopolitical changes it will need to be more flexible and less focused on rigid country choices, and where possible the aid should be provided in cooperation with a number of large middle-income countries (trilateral). The AIV advises the Dutch government to take the lead in setting up a dialogue with other donors, large MICs and low-income countries on a trilateral approach of this kind.

The summarised answers to the subsidiary questions are presented in the same order as the questions in the request for advice:

Empirical Reality

  1. The AIV believes that the image of poverty ‘shifting’ to middle-income countries requires some qualification. It is true that more than two-thirds of the world’s poor, according to the World Bank’s definition of poverty, live in middle-income countries. The reason for this shift is that a limited number of large countries are now classified as MICs, with the result that the number of poor in low-income countries has decreased as a percentage of the global population, but not in absolute terms. For example, the reduction in global poverty from 1.7 billion people in 1990 to 1.3 billion in 2008 can be attributed almost entirely to the fall in the number of poor in China. The AIV sees no reason to change the World Bank’s criteria for distinguishing between low- and middle-income countries. It is, however, important to realise that both LICs and MICs are relatively heterogeneous groups. Some middle-income countries have a sound socioeconomic basis and reasonably functioning institutions, while others are fragile states and states in conflict. The AIV also sees no reason to change the income definition of poverty of $1.25 a day, as this is internationally accepted. It does, however, consider this poverty line to be very low and highly arbitrary. In addition, the AIV observes that the concept of poverty extends much further than income poverty alone and in this report presents a number of elements illustrating this broader perspective, including cultural poverty, lack of access to social services, environmental degradation and the capacity to escape poverty through one’s own efforts. These elements are equally important when analysing poverty and pursuing development cooperation policy. The AIV therefore attaches great importance to the use of multidimensional measurements of poverty. These should be taken into account in policy decisions on which development cooperation instruments to use and which countries to provide with aid.
  2. The AIV does not consider it possible in a concise report to present realistic expectations of how the scale and distribution of global poverty will develop in the coming five to 15 years. On the basis of estimates by research institutes and the World Bank we can expect income poverty in large MICs like China, India and Brazil to decrease. Just how much poverty will decline cannot be predicted accurately, however – especially in these countries – as much depends on how rapidly income inequality decreases. It is also clear that poverty is, and will remain, a major urban problem. Some countries can benefit from having a relatively large labour force, the ‘demographic dividend’. The 2011 Human Development Report (HDR) indicates that the current trend of rising prosperity in various groups of developing countries may decline if environmental degradation and social inequality continue to increase. The HDR also points out that the poorest groups suffer most from environmental degradation and have a disproportionate lack of political power to bring about change.
  3. There is a clear link between growth and income inequality in large middle-income countries. Income inequality is rising rapidly in China and India and without a change in policy that trend will certainly continue. In recent years, Brazil has pursued an active policy of supporting the poorest groups within and outside the labour market and income inequality in the country has somewhat declined, though it remains among the highest in the world. Persistent income inequality can also present an obstacle to poverty reduction in the future.
  4. The AIV believes that the observation that middle-income countries can be considered self-reliant in terms of poverty reduction presents a distorted picture. It is true that donors’ traditional anti-poverty projects can contribute less in large middle-income countries. However, the emphasis in these countries should lie on enabling the poor to benefit from structural progress and to assert their right to a better distribution of the rising national income. That requires better access to rights for citizens, workers and small business owners and farmers. This in turn requires the introduction of a guaranteed minimum income and more balanced taxes and public expenditure. None of the current MICs have as yet taken all these measures. International cooperation, often multilateral in the areas of (human) rights, social security and fiscal instruments for redistribution, and private or bilateral in support of various specific groups, can still play a major role in these efforts.
  5. It is questionable whether there are structural differences in poverty and inequality between low- and middle-income countries. Because there are great differences among both low- and middle-income countries it is difficult to give a clear answer to that question. If a country is struggling to develop and its agricultural sector, for example, remains very undeveloped, those who work in the sector may suffer from chronic poverty. Yet chronic poverty can also occur in a middle-income country like India, where certain castes are excluded from the development process, or Pakistan, where a lack of rights and education for women mean they are restricted in their development, especially in isolated areas. As a country becomes wealthier, it can do more to address chronic poverty, but whether it actually does so depends on political, cultural and social changes which will largely have to be driven from within the country itself, but which can be effectively supported by the international community and donor countries.

Relevant principles and considerations

  1. The AIV believes that international cooperation can play a major role in poverty reduction in middle-income countries. A fundamental assumption of development cooperation is that poverty does not stop at our borders. A poor family in a middle-income country deserves our attention as much as a family in a low-income country. A world in which there is less poverty and more equality is also safer and more stable. However, as indicated above, different instruments are available (and required) to reduce poverty in middle-income countries.
  2. It is also essential to devote attention to poverty and inequality in middle-income countries in light of the goals of the Netherlands’ foreign policy, including enhancing prosperity, stability and security, energy and resource security and the international legal order. The importance of this has already been mentioned above. The significance of energy and resource security must primarily be seen in the context of the emerging debate on global public goods, a debate in which middle-income countries must play a more active part. This can be encouraged through a multifaceted and intensive development relationship – in other words by broadening development cooperation into international cooperation, as the AIV has argued in earlier advisory reports.
  3. When engaging in international cooperation with countries as diverse as large MICs and small LICs, the choice of aid channel is important. In international cooperation with middle-income countries, the AIV foresees a greater role for the non-governmental sector, the private sector and the multilateral channels, and a smaller role for traditional bilateral channels. As far as boosting the role of the private sector is concerned, it should be noted that this also includes promoting a good business climate through legislation, and promoting corporate social responsibility (supply chain responsibility). With respect to promoting individual investment and cooperative ventures between the private sector and other social groups, the preferred strategy in the AIV’s view is one of risk mitigation. In more stable economies, venture capital and modified credit are more appropriate models for risk mitigation than government grants.
  4. A focus on international cooperation also avoids the dilemma posed by some commentators between self-reliance and poverty reduction in middle-income countries. As already indicated, the key to poverty reduction, and international efforts to support it, lies not so much in income transfers to middle-income countries as in promoting the rights of poorer groups, and access to decent work and to public economic and social services. Various instruments are available, including human rights and labour rights conventions, various forms of technical cooperation in the fields of social security and taxation, as well as support through the non-governmental channel to help deprived groups in different countries assert their needs and rights. Human rights violations like discrimination and exclusion are often at the root of inequality. Increasing global interdependence means that these problems also affect us. Economic growth does not automatically lead to respect for human rights. International cooperation is therefore also concerned with people’s basic right to socioeconomic security.
  5. Geopolitical changes in the past 20 years have also resulted in changing dynamics in international cooperation, including the emergence of new donors whose goals may differ, the declining importance of official development assistance (ODA) within expanding funding flows, the increasing importance of global public goods and a greater emphasis on policy coherence. It is important for the Netherlands to maintain or promote close bilateral and multilateral relations with emerging middle-income countries in order to achieve the main goals of foreign policy. MICs will acquire an increasingly important voice in discussions on global public goods and policy coherence, as can already be seen at the G20 and climate summits. The Netherlands can play a significant role in these developments if it pursues a clear and well-founded policy of international cooperation and diplomacy. Investing in such a policy may reap rewards. Another important topic is the emerging debate on large-scale investment in agricultural land in low-income countries. Large MICs are buying or leasing land in poorer countries, often leading to poor farming families being driven from the land. Statistics show, however, that this is a worldwide phenomenon, in which Western countries are just as active. The AIV therefore considers an international approach necessary, rather than one aimed solely at middle-income countries.

Consequences for development cooperation

  1. Other bilateral, non-public or multilateral donors are currently also thinking about how to respond to the fact that the poor increasingly live in MICs. Consultations with the largest bilateral donors show that most have not yet worked out a clear policy, although it is clear that all donors are devoting greater attention to rising income inequality.
  2. The AIV indicated in its advisory report no. 74 “The post-2015 development agenda: the Millennium Development Goals in perspective” that the Netherlands’ policy should be geared more to international cooperation, strengthening economic, labour, social and cultural rights, and promoting guaranteed minimum incomes. At the same time it aimed at increasing policy coherence and securing the provision of global public goods. This can be supported financially by expenditure falling under the ODA norm for development cooperation for social public goods and by additional financing for other global public goods, for which other national resources and innovative international funding mechanisms will have to be mobilised. The AIV believes that implementing this policy is also the best policy option in respect of middle-income countries.
  3. As indicated above, it is important to differentiate choices of channel when applying policy to different countries, taking account not only of the income criterion but also of a country’s institutional and sociocultural dimensions.
  4. The development cooperation instruments currently used in MICs must be updated. As indicated above, more attention should be given to international cooperation, particularly in relation to middle-income countries. That means, for example, examining whether private-sector programmes in MICs can reach poorer groups or purely contribute to economic growth. Some components of the private-sector programme, whose impact on poverty is still assessed on a project basis, could be more specifically targeted as a whole on the poorest groups and regions.

On the basis of these considerations, the AIV foresees the following priorities with respect to policy aimed at rapidly growing middle-income countries: to work together with these countries to achieve policy coherence in international cooperation and involve them in the provision of global public goods. This could be achieved by introducing trilateral cooperation between high-, middle- and low-income countries. Such a multilateral and trilateral effort could then foster corporate social responsibility (including for the environment) and a better business climate in these countries. It could also promote human rights, including labour rights and a guaranteed minimum income, with a view to achieving a better distribution of income. Dutch policy on middle-income countries should be developed not only on the basis of an income poverty index, but also multidimensional poverty indices. These show that each country has differing needs.
 

Advice request

Mr F. Korthals Altes
Chairman of the Advisory Council
on International Affairs
P.O. Box 20061
2500 EB The Hague

Date:  March 2012
Re:    Request for advice on ‘Poverty reduction and shifting patterns of poverty’


Dear Mr Korthals Altes,

In 1990 more than 90% of the world’s poor lived in low-income countries (LICs). In that year there was a great deal of overlap between the categories ‘poor people’ and ‘poor countries’. Since then the situation has changed fundamentally. Now three-quarters of the world’s poor (as defined by the World Bank’s poverty line of USD 1.25 a day) live in middle-income countries (MICs). Most – but not all – of these countries have large populations. Two-thirds of the poor live in five very populous countries: China, India, Indonesia, Nigeria and Pakistan. Over the past decade the number of low-income countries has fallen from 63 to 40, and it seems that this trend will continue. Approximately 23% of the world’s poor live in fragile states (with a more or less equal number in low- and middle-income countries).

Generally speaking, over the past few decades income inequality within countries has been on the rise. Most studies show that the middle class in Asia, particularly in India and most likely also in China, will grow dramatically in the years ahead. At the same time, in both low- and middle-income countries, particularly in sub-Saharan African, large segments of the population are living in ‘pockets of poverty’, where they have little chance to reap the fruits of economic growth. The results of trend studies of worldwide income inequality are however less clear-cut. Half a billion people are estimated to be chronically poor.

In the relevant literature, opinions differ on the causes of these shifting patterns of poverty and their implications for policy. As an ever-increasing proportion of the poor are to be found in middle-income countries, the question arises of how capable these countries’ governments are of pursuing an effective poverty-reduction policy, given limited revenue and technical capacity. What supporting role can be played in this new situation by ODA (alongside other external sources of funding like FDI and remittances), by policy coherence and by international funding for the climate and other global public goods?

The central question motivating this request for advice is the possible consequences of shifting patterns of poverty for the post-2015 agenda – and possible, related changes in inequality within and between countries. In addressing this question, the Council is encouraged to examine developments among other donors (both ‘traditional’ and ‘new’) .

Subsidiary questions that should guide your response to the central question:

Empirical reality

  • Does the AIV agree that poverty has indeed ‘migrated’ to middle-income countries, as described in articles like the Andy Sumner piece cited above? If so, what are the most important causes of this? Are there reasons for rethinking the definition of poverty or the criteria for distinguishing between low- and middle-income countries?
  • What should we realistically expect for the development of the global scope and distribution of poverty (in terms of geography, type of country, demographic trends, the rural/urban divide, etc.) in the next 5-15 years? What role will scarcity (of natural resources, energy) and environmental degradation (water pollution, soil exhaustion, loss of biodiversity) play in this?
  • Is there any systemic connection between growth (from a low- to a middle-income country) and increased income inequality? If so, what factors underlie this link, besides the government’s involvement in poverty reduction (differences between, say, China and Brazil)?
  • In the view of the Council can middle-income countries become self-reliant with respect to poverty reduction? Is it prudent to recognise differences in fiscal and implementing capacity of governments in different (categories of) middle-income countries?
  • Are there structural differences as regards poverty and inequality in low- and middle-income countries? Is there, for example, in one of these types of countries a greater incidence of chronic poverty? If such differences exist, do they have different impacts on the degree to which the countries in question are capable of combating poverty effectively?

Relevant principles and considerations

  • What role can development cooperation play in reducing poverty in middle-income countries? What are the most important moral, social and economic principles and considerations that go into making such an assessment?
  • What relevance does poverty in MICs have for the objectives of Dutch foreign policy (prosperity, stability and security, energy and raw materials security, the international legal order)?
  • Do the different channels (multilateral, bilateral, private/voluntary sector), and possibly also the various modalities, operate from the same principles and considerations?
  • If self-reliance and poverty reduction are both goals of development cooperation policy, and (certain) middle-income countries are deemed capable of combating poverty in their country but are partly or completely unable to do so, which of the two goals carries the greater weight? Self-reliance and thus local responsibility? Or poverty reduction and the continuation of Dutch involvement in such efforts?
  • What role should the changing relations in international cooperation (the rise of new donors with sometimes different objectives, the decreasing importance of ODA in funding flows, the increasing importance of international public goods, the increasing emphasis on policy coherence, etc.) and the connection to the fundamental goals of Dutch foreign policy (security, freedom, prosperity) play in assessing the advisability of outside involvement in poverty reduction in middle-income countries?

Impact on development cooperation

  • Have other donors (bilateral, multilateral or private) or other types of development organisation already altered their policy to reflect the fact that the world’s poor are increasingly to be found in middle-income countries?
  • What are the possible implications for the Dutch approach to the post-2015 development agenda of the shifts in the patterns of global poverty, primarily as a result of the growing number of countries that have attained middle-income status?
  •  Is it helpful in this connection to distinguish between the various channels (or modalities)?
  • Are the present instruments suitable for middle-income countries or should additional requirements be imposed on programmes (for example, those run by companies) in order to amplify their focus on poverty?

I would kindly request that you submit your report on or before 1 September 2012.


Yours sincerely,


Ben Knapen
Minister for European Affairs and International Cooperation
 

Government reactions

To the President of the House of Representatives
of the States General
Binnenhof 4
The Hague


Date:   22 April 2013
Our reference:   BIS-054/2013
Re:   Government’s response to AIV advisory reports 80 and 82


I am writing in response to two advisory reports by the Advisory Council on International Affairs (AIV): Unequal Worlds: Poverty, Growth, Inequality and the Role of International Cooperation (No. 80) and Interaction Between Actors in International Cooperation: Towards Flexibility and Trust (No. 82).

I made grateful use of both advisory reports in drawing up the policy document A World to Gain – A New Agenda for Aid, Trade and Development, which I sent to the House of Representatives on 5 April 2013. Much of this response is therefore already implicit in that document, but for the record, I will explicitly elaborate on the reports’ main lines in this letter.

The Council’s most recent advisory report, Interaction, builds to an significant degree on insights presented in its earlier report Unequal Worlds, such as the desirability of being more flexible in the choice of partner countries and the shifting links between aid channels. Therefore, in what follows I will first comment on the most recent report and subsequently deal with the remaining subjects dealt with in the earlier advisory report.

In March 2012 the government sought the advice of the AIV about the complementarity of aid channels. The central question was what opportunities and limitations there are in striving for greater synergy in deploying the various aid modalities, against the background of an increasing number of actors involved in international cooperation efforts.

In its advisory report Interaction the AIV prefers to talk in terms of ‘actors’ rather than ‘aid channels’. I agree that the concept of ‘channels’ is now outdated. Indeed, as stated in the policy document A World to Gain, people now tend to work much more with alliances of actors whose composition may change over time. It seems reasonable to assume that this practice will become more common in the future. In its advisory report, the AIV distinguishes four principal groups of actors: governments, multilateral institutions, businesses and non-governmental organisations. The added value and limitations of each individual group of actors are identified in turn. Working from this basis, the AIV gives examples of combinations of actors that generate added value. However, as it indicated when presenting the advisory report to the Ministry of Foreign Affairs, it was unable to find a suitable model for ranking the various possible forms of synergy. Moreover, this is consistent with the AIV’s principal finding that reality is too complex to encapsulate in preconceived plans and rules. Synergy and complementarity can best be achieved by looking at the most appropriate combination of actors in each situation.

The AIV recommends that embassies try to improve cooperation among the actors involved, with the bilateral country policy framework as the decisive factor. I endorse this approach. The AIV also recommends working towards abolition of country lists, as each country follows its own path to transition. Furthermore, in Unequal Worlds, which is discussed in greater detail below, the AIV advocates greater flexibility in selecting partner countries. Country lists will indeed be used more flexibly and, as also recommended by the AIV, more emphasis will be placed on the regional approach. The AIV advises phasing out bilateral aid to middle-income countries, replacing it with cooperation on global public goods and strengthening rights through NGOs and multilateral institutions. We are already winding down bilateral development cooperation with these countries and will be focusing more on economic cooperation. However, there is no budgetary scope for stepping up efforts to strengthen rights through NGOs and multilateral institutions beyond the current level.

I readily acknowledge the significance of multilateral institutions for global public goods. As the AIV recommends, the Netherlands is seeking ‘value for money’. Multilateral institutions are regularly assessed with scorecards. We regularly remind the EU and our fellow member states of their accountability on coherence issues and we would like to see the European External Action Service (EEAS) play a bigger role in boosting coherence for development. In proposing that the EU play a leading role with regard to fragile states the AIV is right to add the modifier ‘in the long term’. Much of the current support to these countries is delivered within the 3-D framework, jointly with EU member and non-member states.

With reference to the revolving SME fund, now known as the ‘Dutch Good Growth Fund’, the AIV recommends that all activities financed from the Dutch development budget should continue to be in the interest of development. I fully agree. The House of Representatives will be informed of plans for the further development of private sector instruments before the summer, as indicated in the policy document.

Naturally I agree with the AIV that civil society organisations should be fundamentally independent. The AIV recommends replacing the generic cofinancing system (MFS) with financing on the basis of strategic frameworks. I intend to put this into practice. I have also noted the AIV’s point that there is a growing call for flexibility and trust within clear, but broad frameworks. As indicated in the policy document, the implementation of these strategic partnerships with civil society organisations and my position on private initiatives will be explained in a separate letter to the House of Representatives this summer. A key priority in these new partnerships will be to sharply reduce the regulatory burden.

The AIV stresses that a dynamic, high quality mission network is an important factor in the success of international cooperation. I understand this, and will of course make every effort to ensure that our cutbacks do not compromise quality.

In March 2012 the AIV was asked to produce an advisory report on the possible consequences of shifting patterns of poverty for the post-2015 agenda – and possible, related changes in inequality within and between countries.

In its report Unequal Worlds the AIV gives an extensive analysis of these shifting patterns of poverty. It argues that many countries that have achieved middle-income status have sufficient governance and financial capacity to take on more responsibility. For these countries the AIV recommends a shift from pure bilateral development policy to a policy of international cooperation, based more on multilateral cooperation and the civil society and private sector channels. I agree with this view, and this is reflected in the policy document. I also share the AIV’s interest in promoting trilateral cooperation with middle- and low-income countries, including on global public goods. This could certainly provide added value.

I share the AIV’s concern that persistent income inequality in middle-income countries could continue to impede poverty reduction in the future. We will continue to draw attention to this issue, including in the framework of the post-2015 development agenda.

I agree with the AIV that Dutch policy must continue to help reduce the income gap between the richest and poorest countries. The AIV rightly points out that the most effective way to contribute is to step up trade and investment relations on a fair basis. That is the thrust of our policy document A World to Gain – A New Agenda for Aid, Trade and Development.

Finally, I would like to thank the AIV for its advice.

Yours sincerely,


Lilianne Ploumen
Minister for Foreign Trade and Development Cooperation

 

Press releases

AIV: DUTCH DEVELOPMENT POLICY MUST CHANGE IN RESPONSE TO SHIFTING PATTERNS OF POVERTY AROUND THE WORLD
 

The Hague, 15 October 2012

Shifting patterns of poverty around the world mean that changes need to be made to Dutch development policy. This is the conclusion reached by the Advisory Council on International Affairs (AIV) in its report ‘Unequal Worlds: Poverty, Growth, Inequality and the Role of International Cooperation’. With almost three-quarters of the world’s poor now living in middle-income countries, traditional donor programmes for poverty reduction are no longer adequate. The AIV therefore recommends devoting greater attention in development policy for these countries to corporate social responsibility and the efforts of multilateral and civil society organisations, with a view to empowering disadvantaged groups and promoting human rights and labour standards.

In its report the AIV advocates a broader approach to Dutch policy on international cooperation, concentrating not only on poor countries but also on poor people in emerging countries. We also need to look beyond income and take account of other dimensions of poverty and inequality.

Almost three-quarters of the world’s poor now no longer live in poor countries, but in middle-income countries, including China and India. This trend is the result of rapid economic growth, but is often accompanied by severe income inequality. Reducing poverty therefore continues to be of great importance. In the AIV’s view, however, the traditional poverty reduction programmes of Western donors are increasingly inappropriate in middle-income countries, which have the resources to fight poverty themselves and should be encouraged to use them for this purpose.

However, the AIV concludes, international cooperation remains essential to ensure that social inequality in these countries does not lead to conflict and that their growth is sustainable in the long term. It emphasises the importance of interventions by the business community through corporate social responsibility, of promoting human rights and labour standards, and of introducing a guaranteed minimum income. The AIV believes that multilateral organisations like the United Nations and civil society organisations working to empower disadvantaged groups have an important role to play.

In addition, owing to the growing importance of global public goods the Netherlands must also maintain its involvement in emerging economies in Asia, Latin America and Africa. These countries are playing an increasingly significant role in, for example, achieving a stable financial system and combating climate change. In the view of the AIV the Netherlands could contribute to the dialogue on policy coherence so that trade policy, for example, does not have an adverse effect on the poorest countries. As a donor, the Netherlands could also promote South-South cooperation.