Comparative advantages: OECD reviews Swiss aid

The flag of Switzerland. The country "has many advantages and could be a global leader in many aspects of development assistance," according to Erik Solheim, chair of Organization for Economic Cooperation and Development’s Development Assistance Committee. Photo by: ND Supler / CC BY

Everyone should do what they are good at in life.

The same rule applies to development assistance. It makes sense for France and the United Kingdom to take leadership roles in countries with which they share history and language. Australia and New Zealand play important roles for the small island states in the Pacific. Norway is helping oil-rich developing countries negotiate good contracts and gives advice how to manage volatile oil revenues. China helps build important infrastructure in places where they have a commercial presence, and Arab donors focus their efforts on the Muslim world.

The latest peer review by the Organization for Economic Cooperation and Development of Swiss development assistance is proof that Switzerland is doing what it is good at.

Comparative advantages

Switzerland has many advantages and could be a global leader in many aspects of development assistance. We often think of other countries in terms of clichés and stereotypes, but these often have some important truths in them. Thinking of Switzerland, the Red Cross, banks, insurance, watches and direct democracy often come to mind:

  • Switzerland has a strong humanitarian tradition and is home to the Red Cross and Red Crescent, the Geneva Convention, important United Nations offices and many humanitarian organizations. This tradition is evident in Swiss development assistance, where poverty reduction is the priority and the focus is on the least developed and fragile states.

  • Switzerland is an exception at a time when the share of official development assistance to the world’s poorest states is falling. However, Swiss aid is spread rather thin around many parts of the world. Economies of scale and effectiveness could be improved by concentrating efforts on the most fragile states. Most importantly, Switzerland could provide leadership to stop the downward trend and help direct more money to the most vulnerable states.

  • Swiss banks are legendary. Switzerland has competence in banking and finance like no other. Lots of money goes through Swiss banks to developing countries, and private investments are very important for development. Billions of dollars are needed for investments in infrastructure and job creating businesses. Eradicating poverty and developing the world while reducing carbon emissions will also require a lot of money.

  • Switzerland has particular experience with using development assistance to attract more private investments. The Swiss Investment Fund for Emerging Markets is investing and leveraging other investors, while the SECO Start Up Fund is funding business opportunities in less developed countries. The Private Infrastructure Development Fund is investing in infrastructure by pooling resources from Switzerland, other donors, banks and private investors. Switzerland could achieve much more by leveraging other countries better, and lead international private sector partnerships to finance development.

  • Domestic taxes are very important sources of funding for schools and hospitals in developing countries. It is therefore damaging when as much as 1 trillion dollars flow out of Africa every year due to tax evasion and money laundering. Stopping this would make a huge difference. Switzerland is an active supporter of the World Bank’s Stolen Asset Recovery initiative and is working on strengthening national laws to combat capital flows of criminal money.

  • Some of the largest insurance companies are based in Switzerland, where they calculate and value risk. Minimizing global risk is also an important part of the Swiss development cooperation strategy. What is the risk that the income gap between rich and poor citizens will cause conflict? What are the risks of climate change to coastal communities and what are the safest adaptation strategies? Switzerland’s expertise and risk mitigation programs on migration, food security, climate, finance, trade and water provides leadership in international forums.

‘Dare’ to lead

I have never had the pleasure of owning a Swiss watch, but have experienced the clockwork that is Swiss society. Everything is punctual, proper and reliable! The same can be said about Swiss development assistance.

The predictable and long-term funding commitments serve as an example to other donors. Swiss ODA has been increasing steadily. When the government announced the target 0.5 percent of Gross National Income by 2015, we all knew it would happen on time. When the country decides to go for the international 0.7 percent target, we all know it will happen.

Switzerland has also improved domestic cooperation to make sure all the cogwheels of government are synchronized and working smoothly. Combing development and environment is particularly important. Countries will not prioritize the environment while their people live in poverty. On the other side, long-term growth and development will require environmental sustainability. Switzerland has taken important steps with efforts to join risk mitigation and climate change adaptation programs with humanitarian assistance and development. For example, humanitarian assistance is followed by long-term development programs and climate change adaptation measures in places such as Myanmar, which faced disaster after Cyclone Nargis in 2008.

The world is fascinated with the fact that the Swiss vote on absolutely everything. All power is in the hands of the people. They seem to understand that people make the best decisions about their own lives! This philosophy is equally valid when it comes to development assistance. Nations must set their own strategies. Recipient countries have commended Switzerland’s effective consultation with them. However, it is recommended to use the local governments more. Around half of Swiss bilateral assistance is delivered as ready-made projects with little local involvement. All donors have to improve in this regard. The best way to build a state is putting it to work. Mahmud Suleiman, the finance minister of Somalia, once told me that his state will not grow unless it is being used — please use our country system!

Switzerland is doing great work, but could achieve much more by leading and leveraging other countries. Important issues such as poverty reduction, humanitarian work, fragile states and private development finance require leadership. No country fear being led by countries such as Switzerland, and countries must dare to lead.

Join the Devex community and access more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.

You have 2 free articles left
Log in or sign-up to unlock all of the free news on Devex.

About the author

  • Erik solheim profile

    Erik Solheim

    Erik Solheim is chair of Organization for Economic Cooperation and Development’s Development Assistance Committee since January 2013, and incoming executive director of the U.N. Environment Program. With a solid background in climate, the environment and peace building, Solheim was also Norway’s minister for international development from 2005 to 2012.