Post‐2015 Global Governance of Official Development Finance: Harnessing the Renaissance of Public Entrepreneurship

Abstract

The spirit of 'public entrepreneurship', reignited by large-scale and long-term official finance from emerging economies, is now driving a process of 'creative destruction' in the established systems for governing official development finance primarily forged among advanced economies. In response to this burgeoning official finance from emerging economies once on the margins or outside of these established systems, potentially seismic shifts are occurring in three central governance systems-the reporting systems for official development assistance in the OECD Development Assistance Committee, OECD export credit disciplines and debt sustainability in the Bretton Woods Institutions. Emerging economies create competitive pressures that work to redress the undue rigidities in these established frameworks, opening the way to meeting vast development financing needs. If not well managed or coordinated, however, growing official finance runs the risk of further rounds of financial arms races and debt crises. To harness the processes of 'public entrepreneurship' as a force for good in realizing a transformative post-2015 development agenda requires international cooperation to reshape global governance of official development finance.

China’s international development finance: Past, present, and future

“…The idea of transformative investment has been advanced in the global policy discussion by China and absorbed into the G20 and World Bank vocabulary. China's public entrepreneurship model of development, with policy banks and innovative enterprises playing a key role, is gaining recognition as well as generating global economic governance issues (Xu and Carey 2015b). At the same time, China is moving forward with the lessons of its experience in terms of the social and human capital dimensions and environmental impacts.…”

“…It is in this sense that we see the Chinese policy banks as a central part of the 'public entrepreneurship' that has enabled China to overcome the first mover problem long identified by development economists, whereby the development process must be co-created by the public sector and the private sector in close interaction (Klein et al 2010;Xu and Carey 2015b). The state capitalism mode so often used to describe China's development model misses how the public and private sectors have interacted in China's development process at a decentralized level.…”

Beyond Donation: China’s Policy Banks and the Reshaping of Development Finance

“…The majority of Chinese ODF, as the "Estimating China's ODF Using OECD Definitions" section will show, is not aid and is not perceived as "aid" in China. Xu and Carey (2015) conceptualize Chinese credits using an idea of "public entrepreneurship," i.e., "scaled-up, market-based official finance especially from developing economies." Lin and Wang (2017) argue that China is going beyond aid through development cooperation for structural transformation and call for a broadening of the OECD's definition of Official Development Assistancenon-concessional export credits should also be calculated since they too contribute to development.…”

Development co-operation

“…While transformational aspirations are at the heart of the SDGs, no reporting system so far is up to the task of reporting on transformational actions in a multi-actor development community. Current reporting systems for Official Development Assistance (ODA), for export credits and for debt sustainability constrain rather than encourage the vision, action and innovation needed to generate transformative development (Xu and Carey, 2015). The SDG outcome text, 'Transforming our World: The 2030 Agenda for Global Action', spells out an elaborate set of arrangements in the UN system for monitoring and reporting.…”

“…Public entrepreneurship and private entrepreneurship together 'co-create' economic development in a dynamic, interactive process, generating new economic landscapes with new technological paradigms (Boix 2015;Brewer 2008;Klein et al, 2010;Mazzucato, 2013;Xu and Carey, 2013). Public entrepreneurship has three essential features: (a) vision, (b) action in the presence of uncertainty, and (c) readiness to innovate and foster learning by doing and innovation in their societies at large (Xu and Carey, 2015). This role for the state goes beyond establishing an enabling environment for sustainable development.…”