Rob Katz

Commitment to (Private Sector) Development

CDI Investment MapHow do you determine a country’s commitment to international development?? I wouldn?t know where to start, but thankfully, researchers at the Washington, DC-based Center for Global Development have published an index to help us sort it out.? The Commitment to Development Index, published since 2003, ranks 21 OECD countries? commitment level based on seven metrics: aid, trade, investment, migration, environment, security, and technology.

When you aggregate these into an overall index, the results aren?t terribly surprising–the Netherlands, Denmark, Sweden, Norway, and New Zealand lead the way, while Spain, France, Italy, Greece, and Japan bring up the rear.? The United States sits thirteenth out of twenty-one countries–slightly below-average.

What’s most interesting about the CDI, however, are the disaggregated results.? First, I asked myself, “Which countries are most committed to private sector-led development?”? Using the trade and investment metrics seemed like the best way to arrive at an answer.? For trade, the CDI penalizes countries with high import tariffs and domestic subsidies–a methodology based on production-weighted estimates of aggregate protection in rich countries toward developing countries.? Commitment to investment measures both foreign direct investment and portfolio investment–basically, measuring how much rich countries? policies encourage investment in developing countries based on a 22-question checklist.? (For more on each methodology, check out Inside the Index.)

It turns out that Canada, the Netherlands, and Australia, three nations whose overall rankings are tenth, first, and sixth, respectively, are the most committed to private sector-led development–each is in the top five of both categories.? Even lowly Italy, ranked in the bottom of the overall index, scores relatively well in terms of its commitment to trade and investment.? While New Zealand is tops in terms of its free-trade policies, it scores third to last from an investment point of view.? And the US?? Second-best in trade policy; seventh in investment.?

My brief look at the CDI leaves me with the following thought–you can?t judge a country’s development policy based on a single factor.? At the same time, I?m inclined to look at the specific policies of the trade and investment leaders for examples of what works from a private sector point of view.? Investors should also take note.? If you?re looking to invest in a company with designs on the BOP market, make sure they?re headquartered in a country with favorable CDI trade and investment rankings.?