Financing knowledge hubs – Current modalities and opportunities

[Blog post originally published at the Community of Practice on Knowledge Hubs, become a member here]

Due to its potential to inform capacity development and support reform priorities, knowledge exchange is high on the agenda of government institutions around the world. While there is a clear desire to learn from each other, the practical possibilities to learn from peers and partners very much depend on the availability of financial resources, for example to pay for field trips or conduct joint studies. Today, most knowledge activities are still done in an ad hoc way, which implies that partners need to mobilize financial support for each project.

In this context, knowledge hubs can play an essential role in not only leveraging financial resources from external partners, but also drawing on national and institutional budgets dedicated to development cooperation programs and, especially in line ministries, international affairs. Vis-à-vis project approaches, this can help create certain predictability and a mayor scale of financing. In many countries, including Indonesia and Mexico, the increasing awareness of policy-makers and parliamentarians is also opening the possibilities to include knowledge exchange specifically in national and sector budgets. Here again, the creation and consolidation of knowledge hubs might trigger and accelerate budget allocations, as these institutions will by definition require a sound and predictable financial framework.

And indeed, today’s institutions involved in knowledge exchange are already accumulating experiences and solutions to finance their activities. Some of the emerging financing models can be summarized as follows:

  • Budget allocation: Even if to date developing countries have yet to allocate resources specifically to knowledge exchange, it is true that governments in the South are increasing national development cooperation budgets. The cases of the Mexican and Thai International Development Cooperation Agencies (AMEXCID and TICA, respectively) illustrate that a majority of annual cooperation budgets are dedicated to technical cooperation. Then, within technical cooperation, knowledge exchange is one of the key channels used. For the next years, greater visibility could be ensured through an adequate marking or tagging of knowledge exchange expenditures within public financial management, allowing also for improved capacities to plan, account for results as well as ensuring oversight through national parliaments.
  • National Funds: Governments and their knowledge hubs are advancing with innovative instruments to finance development cooperation. In South Africa, the African Renaissance Fund (ARF, 63 million USD in 2012) includes, apart from economic cooperation and humanitarian assistance, a substantial share of knowledge exchange, which will be further upgraded through the Fund of the African Development Partnership Agency (SADPA), to be launched this year. Mexico is also planning to launch a National Fund for Development Cooperation, probably in 2014, while in Indonesia similar plans are underway in the context of the 2011-2025 Grand Design on South-South Cooperation.
  • Joint Funds: Reflecting the commitment to long-term partnerships, several knowledge hubs are piloting different schemes of Joint Funds for their cooperation. Mexican AMEXCID is a leader in using bilateral Funds which are in practice primarily dedicated to knowledge exchange, for example with Chilean AGCI (launched in 2008, with an annual budget of 2 million USD) and Uruguay's AUCI (since 2012, 500,000 USD annually). Importantly, knowledge exchange can also be financed by shared Triangular Cooperation Funds, which the German International Cooperation Agency (GIZ) maintains with South Africa (since 2007, total budget of estimated 10 million USD) and Chile (since 2005, total of 1 million USD). Chile also co-manages a Triangular Cooperation Fund with Spanish agency AECID (since 2011, total of 1.3 million USD). While not necessarily a shared Fund, JICA’s Third Country Training Program (TCTP) funds South-South training and mutual learning since 1975, and is heavily used by countries such as Indonesia, Malaysia and Thailand for their national knowledge exchange programs.
  • Multilateral Funds: Apart from the wide array of multilateral programs which rely on knowledge exchange as modality, especially global institutions are offering direct financial support to these modalities. Since 2010, the World Bank-hosted South-South Experience Exchange Facility finances knowledge exchange projects that draw directly upon the expertise of developing countries, having, as of today, funded over 100 projects with over 10 million USD. Even if direct access is not possible, WB teams are supporting knowledge hubs very closely through this modality. Hosted at the UNDP and overseen by the G77, the Perez-Guerrero Trust Fund for South-South Cooperation (PGTF) is already a long-standing reference for multilateral support to technical cooperation among developing countries. Launched in 1983, the PGTF has a core capital of 6 million USD, using only the interests for financing. Up to 2012, 243 projects have been funded with 12 million USD (with an annual budget of 213,000 USD in the last decade).
  • Public-Private Partnerships (PPP): Leveraging private resources is a core priority for governments in Indonesia and South Africa with specific focus on PPP programs which might be directed to development cooperation activities, including knowledge exchange. There is a clear ambition to ensure that (emerging) National Funds are capable, both legally and administratively, to capture, manage and account for third-party financing. Advances in this very new field will very much depend on the overall capacity of the public sector to interact with private financing, and in particular guide and structure PPP.

This short review of financing modalities shows that concrete options are emerging and could be scaled up in the short and medium run, especially in the context of knowledge hubs. While especially the inclusion of knowledge exchange in national public finances remains challenging, the new National Funds underway in a number of countries might become a clear opportunity to allocate specific resources and track expenditures more adequately. This can be triggered by the launch or strengthening of knowledge hubs, which would ultimately benefit from a better quality and quantity of financial resources dedicated to knowledge exchange.

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