THE NON-PROFITS/PHILANTHROPY/AID NEXUS: CHANGING NORMS
Every year the developed world transfers billions of dollarsto the developing world as international development aid. Starting in the 1990s, with the growth of multilateral initiatives to address concerns about the global environment, a vast amount of these dollars are being transferred from the developed world to the developing world via trust funds rather than pursuant to bilateral sovereign-to- sovereign arrangements. The number of these trust funds for international development aid has grown exponentially overthe last decade. In 1990, for example,the World Bank (which currently tends to be the trustee of choice of these trust funds),administered a portfolio of trust funds worth about $2 billion. Today, it holds over $15 billion in trust fundsmoney and serves as trustee of some 766 different trust funds.
These trust funds involve development aid with a difference. The range of contributors to such funds has expanded beyond sovereigns, intergovernmental organizations and interantional financial institutions to include foundations, philanthropists and the private sector. Between July 1, 2006 and June 30, 2007, forexample, the World Bank administered trust fund resources from 290 sovereignand non-sovereign contributors. The ultimateintended beneficiaries of these funds are developing countries. The universe of actual recipients, however, has expanded to include a variety of non-sovereign entities, such as local governments and non-governmental organizations, along with sovereigns.
What do these trust funds fund? Responding to a “call to arms” from a varietyof sources (philosophers (e.g. Amartya Sen), non-government organizations and community groups (e.g. ActionWithout Borders), economists (e.g. Jeffrey Sachs), celebrities(e.g. BONO) and others, they address a vast range of needs. These include (i)global problems (the environment, HIVAIDs and Avian Flu), (ii) human and social development (such as education, hunger and maternal health); (iv) economicdevelopment (microfinance and financial regulatory reform), (v) post-conflictneeds (e.g. in Gaza, Bosnia, Afghanistan and Iraq); and humanitarian relief (post-tsunami,earthquakes, floods). They may also be used to pilot innovative financing mechanisms for development (such as the purchase of greenhouse gas emission reductions from developing countries).
What kind of assistance do these trust funds provide? Currently, they provide mostly grants. These can range from a grant of severalmillion dollars to develop renewable energy technologies in the Marshall Islands,or to Uzbekistan
Who calls the shots in administering these funds? The changes that began in 1990 towards the increased useof these trust funds do not stop simply at the use of that mechanism,or at the expanded range of contributors and recipients included. No, those changes go further and have effecteda dramatic change in the nature of that mechanism, the trust fund, itself. Prior to the 1990s, the trust fund forinternational development aid was a simple arrangement. Contributors agreed on a broad set ofpurposes for the trust fund and then transferred their contributions to thetrust fund to the trustee with instructions to distribute the trust funds tothe intended beneficiaries in accordance with those purposes. Thereafter, the role of the contributor was apassive one, limited to receiving and reviewing annual reports from the trusteeon how the trust fund resources had been used. That passive donor paradigm is a paradigm of the past. Today, the contributors to a trust fund forinternational development aid maintain an active, ongoing role in theallocation of the trust fund resources throughout the life of the fund. This has necessitated creating trust fundgovernance structures of varying complexity. At a minimum. the structure of thetrust fund will include a governing council of donors (who will meet once ortwice annually to review proposals for the use of trust fund resources andselect those to be funded), a secretariat to serve as the permanent staff tofacilitate the operations of the trust fund, frequently a technical advisorygroup, and the trustee.
What are the legal and policy implications of this explosive growth in the use of trust funds for international development aid? This growth in the use of trust funds for internationaldevelopment aid and the altered paradigm of what such trust funds entail, posesome interesting legal and policy challenges for the international order. These include; (i) thelaw governing the role and responsibilities of the international trustee and the scope of that role; (ii) the legalprinciples governing the trustee/contributor relationship; and (iii) the legalprinciples governing the relationship of the contributors inter se.
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