Chapter 1. Fragility in the post-2015 framework

This report is published at an important time for international development co-operation. The post-2015 development framework is likely to be much more ambitious than the Millennium Development Goals (MDGs). This introductory chapter outlines the progress of fragile states and economies in meeting the MDGs and the challenges that fragility poses to meeting global development ambitions in the post-2015 era. It summarises the development finances available for addressing fragility, and the steps that can be taken to better allocate and monitor finances for reducing fragility and achieving global development aspirations in the future.

International fragility policy is evolving

In 2015, the world’s governments will agree on a successor framework to the Millennium Development Goals (MDGs). This framework will be more ambitious than ever. It will be universal and will encompass a great many aspects of economic, social and environmental sustainable development.

The States of Fragility 2015 report looks ahead to the challenges that fragility will pose to delivering these goals by 2030. It is structured around eight questions that are introduced in this first chapter and then examined in more detail in subsequent chapters. Chapter 2 sets out the big picture: the challenges fragile countries face in achieving development goals and the obstacles to development posed by fragility across all countries in the post-2015 era. Chapter 3 takes stock of international financing for fragile situations. Chapter 4 outlines the opportunities and priorities for moving from fragility to resilience post-2015. Annex A describes the methodology underlying the three approaches to capturing the complexity of fragility that are presented in this report. Annex B provides additional statistical data related to some of the issues explored in the main body of this report.

The major findings of this report are relevant no matter how the post-2015 goals and targets are finally framed. Fragility can impede development in all countries. Building more resilient states that have the capacity and legitimacy to govern effectively and investing in global public goods will be essential for meeting global aspirations in the post-2015 era.

Question 1: How have fragile states fared in meeting the Millennium Development Goals?

Fifty countries and economies are on the 2015 fragile states and economies list, the sample group for analysis in this report. Almost half of them (23) have featured on all lists since 2007. Today, these countries are home to 43% of people living on less than USD 1.25 a day; by 2030, poverty is likely to be even more concentrated in fragile countries.

The MDGs were ambitious targets for all developing countries, but have been most challenging for fragile states. While many of these countries have made important strides in improving human development, as a group they have lagged behind other developing countries’ MDG performance.

According to World Bank data, nearly two-thirds of countries and economies in this group are expected to fail to halve poverty by 2015. By 2015, one-fifth of them will reduce child mortality by two-thirds and just over a quarter of them will halve the number of people who do not have access to clean water. While some fragile states have made major improvements in child survival and access to basic services, trends in global progress towards the MDGs still point to a growing concentration of poverty and weak human development in countries affected by fragility. Chapter 2 provides a more detailed evaluation of the progress towards the MDGs.

Question 2: How should fragility be assessed post-2015?

The MDGs did not include measures to reduce fragility or build state capacity and social and economic resilience. The lack of focus on peacebuilding and statebuilding in the MDG era appears to have compounded the slower rates of relative progress in development outcomes in fragile states.

Progress has been slower in fragile states due, in part, to the lack of focus on fragility in the MDGs.

While it is now widely recognised that the quality of institutions plays a central role in shaping development progress, there have been no formalised goals to support governance systems, and no targets to guide and monitor progress. The United Nations Open Working Group (OWG) on Sustainable Development Goals (SDG) responded to this omission. It acknowledged the interdependence of peace, institution building and development by proposing as a goal the promotion of “peaceful and inclusive societies for sustainable development”, as well as goals and targets for more inclusive and sustainable social, economic and environmental development.

A more universal approach for assessing fragility will be needed in the post-2015 period, one that moves beyond a single categorisation of fragile states toward measures that capture diverse aspects of risk and vulnerability. This report proposes a working model for analysing all countries’ risks across five clusters of fragility indicators: 1) violence; access to justice for all; 3) effective, accountable and inclusive institutions; 4) economic inclusion and stability; 5) capacities to prevent and adapt to social, economic and environmental shocks and disasters. This model is put forward to stimulate fresh thinking and new ideas about these dynamic states of fragility and how to better track needs, aid flows and progress in achieving the SDGs in fragile situations. The approach to assessing fragility proposed here provides a basis for further development once the post-2015 goals, targets and indicators have been finalised.

The five proposed dimensions of fragility reveal distinct patterns of vulnerability. Countries vulnerable across multiple dimensions are most likely to have been identified on the fragile states list, but many lower middle-income countries are vulnerable to the risks of violence, economic shocks and natural disasters. Many of these countries are in Latin America and the Caribbean. Twelve countries identified as vulnerable in the economic inclusion and stability cluster have never been on a fragile states list.

A universal approach to assessing fragility has multiple benefits. It can help to identify priorities by highlighting countries that are vulnerable to specific risks and reversals of development gains; it can inform international priorities for jointly reducing fragility; and it can continue to focus efforts on making progress in the poorest and most fragile situations. A clustering approach also addresses some of the drawbacks of a single fragile states list. For example, countries themselves do not always find it helpful to be on the list. A single index can also miss important risks that interact with weak institutions and fragility such as climate change, pandemic threats and transnational organised crime.

Figure 1.1 is a Venn diagram illustrating the five-cluster working model presented in this report. Each of these five clusters – violence, justice, institutions, economic foundations, and capacity to adjust to shocks and disasters (resilience) – is represented as an oval. In the original analysis, this oval included the 50 countries and economies that showed the highest vulnerability and risk associated to the cluster in question. Here, we focus on those countries that rank among those 50 in more than one aspect. The 9 countries at the centre of the diagram rank among the 50 most vulnerable countries in all 5 clusters simultaneously. Moving out from the centre, those listed in the overlapping areas are among the most affected in four, three and two clusters. The methodology for the clustering is presented in Question 2 and Annex A.

Question 3: What obstacles does fragility pose to delivering the post-2015 agenda?

The vast majority of the targets proposed by the UN Open Working Group are more demanding than their MDG equivalent, and especially challenging for fragile states and economies where poverty is likely to remain concentrated.

Fragility in all its forms will pose a formidable obstacle to eradicating extreme poverty for all people everywhere by 2030. Global success in poverty reduction over the next 15 years will heavily depend on success in building resilient institutions and societies and on reducing conflict. Question 3 of this report presents a set of scenarios that examine the scale and distribution of global poverty based on varying assumptions about the pace of progress in addressing fragility. These scenarios are not predictions. Rather, they are estimates of different global trajectories that serve to illustrate the change that is necessary to strengthen peaceful and inclusive societies by 2030 (Figure 1.2). The scenarios suggest that:

Fragility will have a significant impact on the scale of global poverty. Under the “current trend” scenario, 25% of people in fragile states (nearly 500 million) will remain at or below the USD 1.25/day poverty line in 2030. Under the more optimistic “improved institutions” scenario, that share falls to 22% (420 million), while the “best-case” scenario sees a fall to 19% (350 million).
Reducing poverty will require addressing fragility. The countries and economies on the 2015 fragile states list are home to 43% of the world’s population living in absolute poverty. By 2030, poverty could become increasingly concentrated in fragile states: even under the best-case scenario, 62% of the global poor will be located in fragile states.
Unprecedented rates of progress will be needed to end poverty. Even in the best-case scenario of improved institutions and development, which assumes major improvements to institutional capacity and reductions in violent conflict, fragile states will have large pockets of endemic poverty.

Efforts must begin now if the Sustainable Development Goals are to be met by 2030. Progress in building institutions and reducing conflict must accelerate in the early stages of the post-2015 period to preserve any realistic hope of meeting new goals and targets on income and poverty as outlined in the sustainable development agenda.

Question 4: What sources of development finance are available to fragile countries?

There are significant data deficits on flows of non-official development assistance and domestic sources of finance. These data gaps make it difficult to accurately track the financial resources available to meet post-2015 ambitions. Foreign direct investment (FDI) data, for instance, are based on global statistics from the World Bank and cannot be disaggregated by sector. Data on official development assistance (ODA) and other official flows (OOF) are based on data from the OECD-DAC membership and do not reflect all amounts extended by non-DAC providers of development co-operation. Data on domestic revenues are currently available or reported for only 15 of the 50 countries and economies on the fragile states list. Better quality data are also needed for other flows, such as philanthropy and other private flows.

ODA plays a crucial role in filling finance gaps for poverty eradication and other development priorities in countries and economies with low domestic revenues and will continue to do so. Sixteen of the top 20 most aid-dependent countries have been on the fragile states list since 2007, when it was first compiled. Since 2000, per capita ODA to fragile countries and economies has almost doubled, and the majority of all ODA has been allocated to countries that are on the 2015 fragile states list. Since 2007, 53% of total ODA has been allocated to countries that are currently on the list. This trend is set to continue. Country programmable aid (CPA) to fragile states peaked in 2013, and is projected to stabilise at higher levels than CPA to non-fragile developing countries into 2017. This broadly reflects the international community’s intent to allocate aid to the poorest and most fragile countries. Non-traditional providers of development co-operation are also increasing development co-operation and investment in fragile situations. The United Arab Emirates, Turkey and the People’s Republic of China are estimated to be among the largest non-DAC providers in absolute terms, although China does not report its data to the OECD. Moreover, Turkey and the United Arab Emirates are among the most generous non-DAC providers to fragile situations in terms of percentage of their gross national income (GNI).

However, the positive aggregate trends in supporting fragile states mask imbalances in the distribution of ODA across countries that can have major implications for human well-being. No donor agency adjusts ODA allocations to take into account other agencies’ allocation decisions, and some aid allocation decisions are geopolitically driven. This causes under-investment in some countries and the persistence of aid orphans. Ten of the world’s 11 aid orphans have been at one time or another on the fragile states list; these include Guinea and Sierra Leone, which have been badly affected by the 2014 Ebola outbreak. Meanwhile, 22% of all ODA allocated to countries on the fragile states list between 2003 and 2012 went to Afghanistan and Iraq, largely driven by geopolitical considerations.

Other sources of development finance are negligible in many fragile states. Domestic revenues are growing, but from a low base. Remittances benefit a small number of countries with large diaspora populations, and many fragile states that do not have natural resources find it hard to attract FDI. Only 6% of FDI to developing countries goes to fragile states. OOF, which comprise non-concessional loans and other flows that are not primarily directed at development aims, are also heavily concentrated in a smaller number of countries.

Question 5: How is aid allocated in fragile states and to reducing fragility?

The majority of ODA to fragile states has been dedicated to sectors linked to the MDGs, and is therefore reflected in the Creditor Reporting System (CRS) as related to social services, economic infrastructure and services, health, population and education.

Aid budgets are still adapting to the five Peacebuilding and Statebuilding Goals (PSGs) endorsed in 2011 by the g7+ group of conflict-affected countries and OECD member countries. While there is no agreed framework for tracking aid to the PSGs, a working model for tracking assistance found that by 2012, ODA support for the PSGs remained low. Just 4% of ODA to countries on the fragile states list was allocated to the PSGs for legitimate politics, 2% for security and 3% for justice. Country-level experience also suggests donors have not fully aligned aid with national peacebuilding and statebuilding frameworks.

Similarly, viewing ODA allocations through the lens of the five fragility clusters shows that aid is not always aligned to risks and vulnerabilities that will continue to contribute to fragility in the post-2015 era. There is some evidence that aid is aligned to needs for institution building: countries with lower levels of institutional capacity receive higher per capita ODA financing. However, a significant burden of violence is concentrated in lower middle-income countries and these contexts receive relatively limited per capita aid flows. In addition, vulnerability to shocks and disasters is greatest among a cluster of least developed countries (LDCs) and lower middle-income countries, but these states do not receive ODA commensurate with managing their risk exposure. Figure 1.4 highlights the financing gaps for the 50 countries and economies in this group.

Addressing fragility will also require investment in global public goods such as peacekeeping and conflict prevention, measures to advance low-carbon economic growth and reduce carbon emissions, and systems to detect and respond to disease outbreaks with pandemic potential. However, there are no agreed estimates of financing needed for these public goods and no agreed norms for monitoring spending.

In the post-2015 era, monitoring and targeting of finance aimed at reducing fragility can be improved by:

Implementing a global system of statistics for all available sources of development finance – not just from traditional donors, but also non-traditional providers of development co-operation and private actors.
Drawing on tools such as the five dimensions of fragility to identify vulnerabilities, needs and resource trends.
Introducing updated aid sector codes in the OECD-DAC’s Creditor Reporting System for accurately tracking support for the post-2015 goals and targets and the PSGs.
Agreeing on financing needs and norms for tracking expenditures on global public goods.

Question 6: Is security spending aligned and commensurate with the security challenges, risks and vulnerabilities that contribute to fragility?

Peace and security investments can help address fragility. With the important exception of peacekeeping, however, there is no agreed international system for measuring security spending that benefits global stability. Question 6 of this report highlights the significant and systematic gaps in data that make it difficult to assess how much is spent on security assistance, and to what ends. Based on available data, ODA allocated to building security sectors in fragile states totalled 1.4% of all aid in fragile situations in 2012. When security spending in Afghanistan and Iraq is removed, the investment in security in other fragile situations is even lower – less than 1%. Even if data gaps are dramatically biasing these figures downward, there is likely to be serious under-investment in countries that are aiming to develop their security and rule of law institutions as a matter of priority.

These types of spending all have the potential to reduce global fragility, and a more coherent system of measuring security spending as a global public good could support more effective international conflict prevention and resolution efforts. Any development of new norms for reporting is technically challenging given the need for precision and rigour, with countries potentially wary of the risks of repackaging international “militarised” and national security spending as ODA. Countries could consider whether to:

Agree on norms and responsible global institutions for reporting and collating relevant peace and security spending.
Develop indicators of impact of spending on peace and security.
Agree on a methodology for monitoring spending on conflict prevention and for capturing how much is spent on conflict prevention versus intervention in existing conflicts and crises.

The OECD-DAC work on broadening its measurement framework to be fit for purpose for post-2015 presents an opportunity to assess the real level of investment in this area.

Question 7: What opportunities exist to address fragility?

The post-2015 process has catalysed an unprecedented debate about how to overcome obstacles to sustainable development. This political will can be harnessed. At the national level, fragile countries are increasingly directing their own processes of recovery. Many of these efforts will galvanise around implementing a post-2015 peaceful and inclusive societies goal.

Fragile countries and economies also will have to navigate factors that can unlock development – or impede it – in the post-2015 era. They will have increasingly young and urbanised populations; many will continue to manage the challenges of large natural resource endowments and deepening connections to global markets. With sound institutions in place, these factors can drive economic transformation and reduce poverty. Innovations in multi-sectoral responses to reducing violence, building trust in government and improving the quality of public services will all be paramount.

Question 8: What should international support look like in the future in order to be “fit for purpose”?

Fragile and conflict-affected countries are hard environments in which to spend aid well. On the recipient side, fragile states often have weaker institutions and absorptive capacity for aid. Many fragile situations have been poorly served by supply-driven aid approaches. Although donors place a heavy emphasis on co-ordination in fragile states, the reality is that in many contexts they still pursue distinct agendas. These challenges are often political: they reflect divergent interests of national and international actors that are difficult to shift. As a result of these pressures, aid is often less than the sum of its parts – it is not always delivered in ways that either align with national priorities or build sustainable institutional capacity. To rise to the challenge of the post-2015 era, aid needs to be made smarter.

To rise to the challenge of the post-2015 era, aid needs to be made smarter.

The New Deal endorsed in Busan in 2011 calls for aid to be aligned to national political priorities to build national institutions through national budgets. It is an assertion of national ownership. So far, however, New Deal implementation has only been partial. Political commitment is needed on all sides to build momentum and real change. It will be important for g7+ countries to strengthen uptake and understanding of the New Deal within governments and to engage all levels of society in the process.

This report calls for smarter demand-driven aid modalities and instruments in the post-2015 era. In particular, it will be essential to:

Adapt existing on-budget aid modalities to more fragile situations to improve harmonisation and flexibility, and to accelerate the pace of development of national institutions and systems.
Test innovative smart aid modalities. Southern actors are already experimenting with new forms of demand-driven support. “Matching funds” models, if properly calibrated, could reward demand-driven national innovations and performance in generating revenues. Greater efforts can also be driven into funding regional capacities for reducing fragility.
Scale up aid instruments that can stimulate private resources but are currently under-utilised. Aid instruments such as risk guarantees, new debt instruments and equity investments can all assist countries to mobilise private finance.

Meeting universal development ambitions will be harder than ever in the post-2015 era. Question 8 highlights the potential contents of a new package of measures to better support fragile situations and reduce fragility. They include priority commitments to:
Introduce a new tool for monitoring universal fragility risks and vulnerabilities and finances in the post-2015 era. This report proposes a working model that can form the basis for an international tool once post-2015 goals, targets and indicators have been agreed.
Allocate more of total ODA to the poorest and most fragile countries, and reverse the declining trend of ODA to LDCs. It is important to keep in mind the existing UN target to allocate 0.15-0.20% of national income to least developed countries.
Address imbalances in the distribution of ODA across fragile situations, starting with the countries that are underfunded.
Agree on strengthening finance beyond aid – scaling up resources to middle-income countries; boosting countries’ own domestic revenues; working to achieve firm international commitments to scale up support for public financial management; reducing the transaction costs of remittances; and a new global partnership for stemming illicit financial flows.
Agree on targets and norms for tracking spending on global public goods such as peace and security, climate, food security and health.
Develop a diversified package of smart aid instruments – to mobilise private development finance; reward domestic revenue generation; make more use of technology for reaching the poorest and most vulnerable people; and scale up South-South, regional and triangular co-operation.
Ensure that peer review and aid oversight mechanisms capture performance and accountability for aid in fragile situations.
Implement a global system for collating credible, accurate, timely and relevant global statistics for all sources of development finance – not just from traditional donors, but non-traditional providers of development co-operation and private actors too.

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