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G7 and Development

by Aniket Bhushan, Rachael Calleja and Norhan Awadallah

Published: May 25, 2017

Italy will host the G7 this week in Taormina (May 26-27, 2017). Canada will be the next to host the G7 in 2018.

This analysis addresses two questions:

  • What issues have recent G7 leader level summits focused on?
  • How have development issues fared in G7 agendas?

We look at summits since Canada last hosted the G8/7 back in June 2010 at Muskoka, and also discuss considerations for Canada’s 2018 G7.

Why the G7 and Development?

G7 countries are the largest development assistance providers globally. The G7 accounted for approx. 73% of OECD-DAC official development assistance (ODA) in 2016.

Two of the G7 – Germany and the UK – met the UN’s 0.7% of ODA/GNI target in 2016.

G8/7 leader level summits have traditionally been key venues for announcements of signature development priorities. Africa in particular has been the focus of several G8/7 leader level summits.

The seminal accomplishment of the 31st G8 summit at Gleneagles in 2005, hosted by the UK – widely seen as one of the most productive and successful – was a massive debt cancellation package – $40 billion for the highly indebted poor countries (HIPC), most of them in Africa. In addition, a substantial pledge to increase aid to developing countries was made – by $50 billion, over 5 years from 2005 to 2010, with an emphasis on ‘doubling aid to Africa’ (half of that or an incremental $25 billion by 2010 for Africa).

Gleneagles was also the summit where, following its 2005 International Policy Statement, Canada announced a commitment to “double aid to Africa” in 5 years from 2003-04 levels (C$1.04 billion). The target was officially achieved in 2008-09 (C$2.16 billion). This doubling was faster than the commitment to double the entire aid program (2002 – 2010).

Gleneagles however is also recalled for its lack of consensus on the 0.7 ODA/GNI target. With 4 of the G8 committing to achieve 0.7 by 2015 or earlier – France, Germany, Italy and the UK – Gleneagles was the best chance for the target. However the detractors, Canada included, won the day and there was no G8 level commitment as advocacy groups and NGOs had been calling for.

In the lead up to 28th G8 summit in Kananaskis, Alberta, in June 2002, the last time Canada hosted (prior to Muskoka in 2010), the government announced the “Canada Fund for Africa”, a C$500 million commitment in support of the G8 Africa Action Plan and NEPAD. The fund also included C$100 million for the “Canada Investment Fund for Africa” – an early foray into using public funds to leverage private capital for development, managed by private sector fund managers (in this case Cordiant Capital based in Montreal and Actis based in London).

Setting the agenda is a privilege of hosting, but – Events of the day almost always take over

The main role of the G7 host is to set the agenda. In reality this is set well in advance, so ministerial level engagements (which happen through the year prior to the leader level summit) can work towards it. Canada’s priorities for 2018 will almost certainly already be in advanced planning and become clearer at, and immediately following, the upcoming Italian G7.

The table below summarizes key issue areas covered at each G8/7 since Muskoka (2010). Three points stand out from our analysis:

There are a set of general issues almost every host puts on the agenda: these include economic issues in the form of growth, open markets, trade, balance between fiscal austerity and spending, job creation and the like. These feature in each of the 8 summits since and including Muskoka (and upcoming Taormina). There are other issues that also typically feature prominently. For instance climate change, action against global warming and or environmental protection in some form (in 7 out of 8).

But, crises of the day almost always take over: European debt crisis, North Korea, nuclear proliferation, Israel in Gaza (Canada, 2010); Fukushima, European sovereign debt crisis, conflict in Yemen, Libya, Syria (France, 2011); economic crisis in Greece, conflict in Syria (US, 2012); Syria (UK, 2013); Russia’s annexation of Crimea, Ukrainian sovereignty, Iran and North Korea’s nuclear program (EU, 2014); Russia in Crimea, Ebola, Iran nuclear deal (Germany, 2015); refugee crisis, North Korea, Russia and Ukraine (Japan, 2016). This is sure to be the case in upcoming summit, with terrorism clearly in focus (given Manchester) in the lead up to Taormina.

Contentious issues and controversies are par for the course, till they dominate the agenda: in most cases these are relatively small and dont get much attention beyond the policy wonk community (disagreement on the so called “robin hood tax” in 2010; balance between stimulus and austerity – common to many summits; lack of progress on climate targets – also common to many summits). However in exceptional cases they loom so large as to dominate the agenda – the expulsion of Russia and reversion of the G8 back to the G7 in 2014 (a summit which Russia was supposed to host) is a prime example.

Development issues are almost always discussed, but – Don’t always come with financial commitments

How have development issues fared at recent G8/7 leader level summits? Broadly speaking, using Gleneagles (2005) as a point of reference, development issues while still covered have become less central.

Our analysis points to three trends (see table below for a full summary):

Hard commitments on development have tended to wane at recent summits: in 3 of the 7 summit outcomes and declarations we cover in the table below, we find no evidence of hard financial commitments (including restatement of existing commitments). But there are exceptions. Muskoka, Canada (2010) mustered a pledge of approx $5 billion (primarily for Africa), led by Canada’s C$1.1 billion (over 5 years) new and additional funding commitment to maternal newborn child health (in addition to C$1.75 billion in existing spending, taking it to a total of C$2.85 billion from 2010-15, a figure as we have shown Canada surpassed). France (2011) galvanized over 2 billion Euro in support for Arab Spring countries, and additional multilateral support for Tunisia and Egypt. The UK (2013) galvanized $1.5 billion for humanitarian needs in Syria. Japan (2016) took on the health SDGs and pledged $1.1 billion for health systems strengthening and public health emergency preparedness, and in addition pledged $6 billion to Middle East stabilization, in the lead up to the summit.

Compared to the level of financial commitment at Gleneagles – again, widely seen as the most successful and productive, at least on development – recent summits pale in comparison.

In part due to aid target fatigue: aid fatigue in general is an issue given fiscal constraints post financial crisis, as well as an increasing sense at least since the adoption of the SDGs that even developing countries want to move on from an aid focused relationship, and focus more holistically on issues like trade, market access, private investment and the like. Aid target fatigue is a bigger dampener for new spending commitments.

There are several reasons. First, targets invariably require precision and have a technical component which neither politicians nor the general public is interested in. Take for instance notions like “doubling” which have general appeal. In reality they depend on the baseline (pick a particularly poor starting point and it is much easier to double) and basis (for instance current vs. constant currency, accounting or not accounting for inflation). Second, there is widespread evidence donors routinely miss targets. The G8’s own 2010 accountability report reflecting on Gleneagles’ commitments clearly shows this – overall donors fell anywhere between $10 billion to $18 billion short (depending if you prefer current or constant currency, something Gleneagles never specified). Even where donors claim to have met targets, for instance Canada’s doubling aid to Africa, they are frustrated by criticism from civil society that questions the merits of the same and only call for more spending.

Most donors routinely fail to achieve their own alternative aid spending targets. France set a ‘timetable to reach 0.5 ODA/GNI by 2007’ but fell far short of this (though increased aid substantially from 2007 to 2010). Italy aimed to reach ‘0.51 ODA/GNI by 2010’ and failed to get even half way.

Re-announcements to take advantage of the occasion and attention are especially common when it comes to development spending: This is plain to see for example in Canada’s last two federal budgets (much of the $5 billion to “reengage the world” announced in Budget 2016, which included $2.65 billion for climate finance, had already been announced well ahead of the budget. Similarly Budget 2017 restated Budget 2015’s $300 million allocation towards a new DFI). In the context of recent G7s, an example is Japan’s (2016) $1.1 billion commitment to public health. The announcement was not only made in advance of the G7, but $800 million of the pledge was for the Global Fund’s fifth replenishment, and therefore already expected.

Considerations for Canada’s 2018 G7

The agenda for Canada’s 2018 G7 in many ways writes itself. We should expect little by way of surprises. However each generic area takes on new significance. How and how far the host chooses to go will say a lot about ambition and global standing.

Strong re-commitment to open markets and especially trade: clearly this ought to be of key significance for an open mid-sized economy like Canada that is highly reliant on global trade. However it takes on new significance in light of TPP rejection (and possible revival), and near certain trade conflict with the US – if not over softwood or dairy, then in the context of the Bombardier-Boeing commercial-defense aerospace spat, or some other aspect of protectionism and anti-competitiveness (there are too many to choose from). Not to mention the eight hundred pound gorilla – renegotiation of NAFTA – which should be well underway by the time.

Action on climate change and transition to low-carbon growth: given the current government’s agenda this would hardly be a surprise, especially as there are domestic achievements that can be touted (provincial accord, green infrastructure, carbon pricing and trade).

Promoting inclusiveness, openness, multiculturalism and pluralism as a response to extremism and terrorism: again, follows from domestic themes, but also links with global contributions (for instance the relatively successful resettlement of Syrian refugees).

On development 

How Canada navigates development is much more uncertain and likely less of a priority. A matter of concern is Canada’s spending level compared to G7 peers. In overall volume terms, presently Canada is the smallest aid provider in the G7 (thanks in part to Italy’s efforts to ensure it was ahead of Canada in time for the Italian G7). On ODA/GNI Canada ranks in the middle of the pack (with Italy).

Historically, Canada’s ODA/GNI ratio when it hosts the G8/7, has been almost identical to the OECD-DAC average (this was the case in both 2002 and 2010). However unless the numbers are made to show differently – which is entirely conceivable as donors have a lot of discretion regarding how spending is profiled, when and how expenditures take place, and how they are accounted for – the 2017 figures which will be in use in time for Canada’s 2018 G7 will show the host to be far short of OECD-DAC averages (both weighted and unweighted). Presently the OECD-DAC average ODA/GNI is at 0.32 while Canada’s ratio is at 0.26, the widest shortfall since 2000.

What would be good to see

Signature initiative on mobilizing private capital for development: this is clearly where the puck is going. Major changes are afoot. Public resources, used to leverage private capital for development, will almost certainly count more and more generously towards aid. With the new DFI, which should be in place by 2018, and forays into blended finance like Convergence (based in Toronto), Canada is re-positioning itself. Other developments, like the World Bank IDA’s new Private Sector Window (PSW) in collaboration with IFC, are further evidence that even when it comes to the poorest countries, leveraging private sector input and capital is going to be the name of the game.

Canada could lead with a signature initiative, that pushes the envelope even further. Couple of out-of-the-box ideas: 1. a large global development impact bond (or a signature capital market issuance of some sort). 2. an initiative to securitize part of future aid flows. The goal of each would be to demonstrate how small amounts of public resources can be best used to leverage much larger private investment but with a sustainable development end in mind including in the poorest countries. The DFI and other platforms are not exclusive to this but rather can help to make it happen.

Reinvigorating the multilateral development finance system, and multilateral institutions more generally: several issues are at play, from graduation criteria to expanded use of multilateral bank balance-sheets, to capital increases. The G7 are the main shareholders across multilateral institutions. Their inability to act fast enough to reform and update their governance and institutional set-up to keep up with the times comes with a real fiscal cost. Case in point, China’s decision to launch a new multilateral in the Asian Infrastructure Investment Bank (AIIB). Canada eventually agreed to join the AIIB, and its $256 million subscription is effectively the only real new money for development (i.e. increase to the IAE) the Liberal government has delivered to date. As a highly respected player on the board of each of the major multilateral banks Canada is well placed to push for innovation and faster reforms.

What is more likely

  • Rights-based, feminist international assistance, focus on women and girls, women’s economic empowerment 
  • Narrower sector-level initiatives and announcements (health; education; climate change-food security-agriculture-innovation)

A focus on ‘feminist assistance’, women and girls would be in line with past G7s on development. It would be no surprise given Canada’s recent international assistance review. Neither would more narrow and smaller initiatives (or re-announcements) related to health and education, or, some hybrid of climate change, food security, agriculture and innovation – each of them pet G7 development themes.

The above are the most likely candidates.

If anything, what may differentiate Canada’s G7 is how it approaches these areas – for instance through new mechanisms and funds or new institutions and partnerships, or by challenging G7 peers to spend more on development, especially on global health, gender and reproductive rights.

After all by the 2018 G7 the real impact of proposed sharp cuts (over 30%) in the largest donor’s aid budget (the US) will not only be evident in the numbers but also in programming and effects on the ground in developing countries.


G7s since Muskoka: Key areas covered and announcements on development


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