Many critics of the international development arena argue that some of its practitioners and approaches are stagnant and haven't changed much since its formative period in the late 1940s and 1950s. Yet today, we are witnessing an unprecedented change in the international development arena: the rise of two types of new donors. First, there are the developing — and mostly very big — countries such as India, Brazil and China. Second is a very different type of previously developing, mostly small, and technologically advanced donors such as South Korea, Singapore and Israel.
The first type draws much of the attention. China's leading role in the newly established Asia Infrastructure Investment Bank, perceived by many as a counter-reaction to Washington-based institutions, is probably the most significant example of this new type of donor. India and Brazil are increasing their official development assistance allocations and also creating development finance mechanisms to meet domestic needs.
The second type, however, is less often discussed, either because the financial contributions of countries such as South Korea or Singapore are limited, or because we are witnessing a new phenomenon that doesn't fit into the traditional frameworks of the current development system.
In order to better understand this new type of donor, I will focus on Israel, a very small country of 8 million people that was a World Bank beneficiary until the late 1970s. More recently, Israel has become an Organisation of Economic Co-operation and Development member, while facing tremendous transformation.
Those enormous challenges have made Israel into a real-life lab of development strategies and a hotbed for technological breakthroughs, many of which are very relevant to developing countries. Israel's lack of water forced Israeli farmers and researchers to breed sustainable seeds and invent drip irrigation. The focus on public and individual health in a new nation resulted in the second largest medical records database in the world and the most advanced digital health solutions that feed it with more data every second. Ongoing security threats triggered a booming cybersecurity industry that is becoming a crucial component of any country's resilience, let alone developing countries.
Israel is seeking to become a donor in Africa. The country's strategy will be to focus on specific countries and particular sectors where they can make an impact with limited finances to invest.
However, Israel's proven and relevant track record is not reflected in a significant and meaningful presence in the development arena. In the existing global development structure, "contribution" seems to be measured only by dollars or euros, thus making it almost impossible for a small donor to make any real impact on policies, decisions or priorities.
I would argue that it is up to us, the small and new donors together with the leading development finance institutions and major donors, to find ways of leveraging the advantages of small donors to achieve better development outcomes.
First, the term "innovation for development" should be filled with clear meaning that goes far beyond competitions, challenges and hackathons. The existing planning, appraisal and bidding procedures of the core development institutions make it almost impossible for small and medium-sized companies to win a tender, thus creating a clear obstacle to the introduction of new models, technologies or solutions to development challenges. This is a pity. Given the complexity and severity of those challenges, a novel idea that is tested and scaled can make as much difference as a billion-dollar investment into traditional solutions.
Second, we must find ways to appreciate and, if possible, assess non-financial contributions and adjust decision-making mechanisms, as well as international rankings, accordingly. For example, a flexible donor that excels in managing partnerships and making all stakeholders comfortable is as important for the success of a project as the largest donor in dollar terms. Any development professional is familiar with the frustrating scenario of slow disbursement or abandoning a budgeted project because the pieces just do not stick together. An entrepreneur who had failed several times in the past can bring a fresh perspective to a project that is running off course because it was designed in the same way as 10 previous projects, and therefore suffers from the same shortcomings.
Third, small donors need "technical assistance" as they face real challenges at home and abroad. At home, allocation of resources for development finance is weighed against many competing needs such as welfare, education, defense and health care. Abroad, the relatively small donations and shortage of development professionals increase overhead costs for the donor, making implementation complicated and meaningful impact extremely difficult to achieve.
While billions of dollars are spent on technical assistance in developing countries, far smaller amounts — as well as awareness and attention — can be allocated to support small donors in their growth process. Internships and "secondi" type of placements within a development bank is a well-known concept. But I think that the reverse kind of placements — those of development professionals within donor national governments — could help us better understand "the system" and its needs, and then we can grow to be meaningful and helpful.
As we aim to design Israel's development finance strategy, we review our clear core strengths, which include innovative ecosystems in various sectors such as water, agriculture, food security, information technology, cyber, health care, and more; our own experience transforming from an emerging economy into an OECD member; flexibility and a "can do" approach; high tolerance for risk-taking; and even the ancient Jewish tradition of Tikkun Olam — repairing the world — which is embedded in our culture.
We understand the responsibility that comes with the "developed economy" status and we are searching for the best possible and sustainable ways to becoming an innovative donor, while humbly taking our weaknesses and constraints into consideration. Allowing for more innovation in the development project planning, financing and implementation, together with extra focus on the importance of non-financial contributions and ongoing guidance from large and established stakeholders, could cultivate the next generation of donors.
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