‘Financing Development’ as a Field of Practice, Study and Innovation
Jurisdiction | South Africa |
Published date | 15 August 2019 |
Citation | 2009 Acta Juridica 168 |
Pages | 168-184 |
Author | Kevin E Davis |
Date | 15 August 2019 |
‘Financing Development’ as a Field of
Practice, Study and Innovation
KEVIN E DAVIS*
New YorkUniversity
I INTRODUCTION
There is ongoing debate about the role foreign capital plays in developing
countries efforts to reduce poverty and promote development. In theory
poor countries should almost always be able to put foreign capital to good
use. In practice though, much depends on the terms on which the capital
is provided. This holds true whether the transaction in question involves a
loan from the International Monetary Fund (IMF) or bilateral aid or
project financing. In each case the great challenge is to find terms that are
sufficiently appealing to induce financiers to part with their funds yet still
compatible with the social and economic needs of inhabitants of develop-
ing countries. In 2002 fifty world leaders acknowledged these inter-
related challenges and, as part of the Monterrey Consensus, endorsed the
statement that ‘[A] holistic approach to the interconnected national,
international and systemic challenges of financing for development . . . in
all parts of the globe is essential.’
1
Although it may not be immediately obvious, law plays a significant
role in defining the terms upon which financial capital flows to develop-
ing countries. In short, when it comes to financing development, law
matters. Moreover, the conceptual tools that have been developed to
study other areas of law can be useful in shedding light on how financing
development is or ought to be practiced. Thus, both practical and
conceptual considerations weigh in favour of treating the legal aspects of
financing development as an important field of study.
The purpose of this essay is to justify and then examine the scholarly
implications of treating the legal aspects of financing development as an
integrated field of practice, study and innovation.
2
The first part describes
the field of practice, including some of the transactional forms used in
* Beller Family Professor of Business Law, New York University School of Law. I thank
Nikhil Dutta, Matthew Haar and Benedict Kingsbury for helpful comments on an earlier
version of this paper and Heather Sims for excellent research assistance. I am also grateful for the
support of the Filomen D’Agostino and Max E Greenberg Research Fund at NYU School of
Law and the Carnegie Corporation of New York.
1
United Nations Report of the International Conference on Financing for Development (18–22
March 2002), Monterrey MexicoA/Conf. 198/11.
2
There are also curricular implications. For an example of a course devoted to financing
development see: http://www.iilj.org/courses/FinancingDevelopmentCourse.asp(accessed 7August
2008).
168
2009 Acta Juridica 168
© Juta and Company (Pty) Ltd
financing development, the importance of the terms that govern those
transactions, and the role that law plays in defining those terms. The
second part defines the field of study and discusses the role legal concepts
can play in studying it. The third part elaborates by setting out four ways
of studying and stimulating innovation in the legal aspects of financing
development.
II THE PRACTICE OF FINANCING DEVELOPMENT
(1) Financing is important
Transnational financial transfers to developing countries take a number of
forms and pass through a number of channels. Perhaps the most high-
profile category of flows is foreign aid, that is to say, financing provided
on a non-commercial basis in the form of gifts, grants or debt relief. For
example, the United Nations Millennium Project claims that the inhabit-
ants of the rich world can end extreme poverty by providing Official
Development Assistance (ODA) that amounts to less than 0.7 percent of
their GNP.Even sceptics about the effectiveness of financial aid agree that
it has an important role to play in development. For example, William
Easterly does not believe that foreign aid or any other type of foreign
intervention can end poverty in the developing world, but he still believes
that if properly channelled foreign aid can ‘alleviate the suffering of many
desperate people’.
3
Foreign aid flows through both the public and private sectors. In 2007
disbursements of ODA amounted to $103.7 billion and US ODA
amounted to $21.8 billion.
4
By contrast, the recorded portion of remit-
tances flowing from migrants to friends and families in developing
countries amounted to $251 billion and remittances from US residents to
the rest of the world were estimated at $44 billion.
5
Private donations
from rich country NGOs to inhabitants of poor countries probably
exceed $10 billion annually.
6
3
W Easterly The White Man’s Burden: Why The West’s Efforts to Aid the Rest Have Done So
Much Ill and So Little Good (2006) 383.
4
Both these figures include substantial amounts of aid directed to Iraq and Afghanistan. For
instance, in 2007 the US devoted almost $5.3 billion worth of aid to those two countries.
Organisation for Economic Cooperation and Development ‘Debt relief is down, other ODA
rises slightly’(4 April 2008), available at http://www.oecd.org/document/8/0,3343,en_2649_
33721_40381960_1_1_1_1,00.html (accessed 1August 2008).
5
World Bank ‘Remittances Data’ (July 2008), available at http://econ.worldbank.org/
WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:21122856~
pagePK:64165401~piPK:64165026~theSitePK:476883,00.html (accessed 1August 2008).
6
D Roodman & S Standley ‘Tax policies to promote private charitable giving in DAC
countries’ (2006) Center for Global Development Working Paper No. 82, available at
http://www.cgdev.org/content/publications/detail/6303 (accessed 1August 2008).
169‘FINANCING DEVELOPMENT’AS A FIELD OF PRACTICE,STUDY AND INNOVATION
© Juta and Company (Pty) Ltd
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