Rapid economic growth in the developing world has turned many once-poor nations such as China, India, Brazil, and Indonesia into middle-income countries (MICs), defined by the World Bank as countries whose annual per capita gross national income ranges from $1,026 to $12,475. With relatively stable governments and growing financial resources, these countries receive less international aid now that they’ve ascended the economic ladder. That is not to say that their social problems have disappeared. Far from it. In fact, despite their relative economic progress, MICs are now home to 72 percent of the world’s poorest people. (See the exhibit below.) Income inequality and growing urban poverty are enormous challenges.
Having largely outgrown the need for traditional aid, however, governments in these countries are striving to reposition themselves as global players in development rather than as aid recipients. To this end, many are investing in innovative programs for fighting poverty, hunger, and disease. For instance, Brazil’s cash-transfer program has greatly improved nutrition among the country’s poorest populations and increased their incomes by about 25 percent since 2000. Mexico’s Oportunidades social-safety-net program has improved the health of low-income people and helps keep students in school longer. The system serves as a model for New York City and Nicaragua.
In this evolving landscape, the balance of power has shifted. Rather than being passive recipients of international aid, governments are now starting to actively choose the services they want from aid agencies, and they are ready to pay for those that support their development agendas.
How can international aid agencies address the most pressing social issues when the governments of MICs are investing in their own programs and no longer need direct delivery of services and commodities such as food, cash, and health care? And how can agencies complement the changing role of national governments that are now taking full ownership of implementing their national development agendas?