Country_12_Luxembourg_EN

Luxembourg

Commitment to Development Index 2012

Luxembourg David Roodman and Julia Clark

The Commitment to Development Index (CDI) ranks 27 of the world’s richest countries based on their dedication to policies that benefit poor nations.

Looking beyond standard comparisons of foreign aid flows, the CDI measures national policies in seven areas that are important to developing countries: aid, trade, investment, migration, environment, security, and technology. This report reviews Luxembourg’s performance on the 2012 CDI. For more details, visit cgdev.org/cdi.

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Overall Score

Luxembourg’s 2012 CDI Performance n Overall rank 2012: 4 n Overall score 2012: 6.3 Luxembourg ranks 4th overall in 2012.

Luxembourg’s largest contribution to developing countries is its high quality foreign assistance program and large share of aid as a proportion of GDP. It also scores well in migration due to a large increase of unskilled migrants from developing countries as a proportion of its population during the 1990s. However, Luxembourg performs poorly on trade, investment, environment and technology. It has large agricultural subsidies that hamper developing country exports, weak support for extractive industry transparency initiatives, low gas taxes and high greenhouse gas emissions, and little support for research and development.

Luxembourg’s CDI Performance, 2012 Aid Trade Investment Migration

Environment Security Technology Overall

0

www.cgdev.org/cdi

4

8

12

16

Luxembourg Country Report

Aid

Aid quality is just as important as aid quantity, so the CDI measures gross aid as a share of GDP adjusted for various quality factors: it subtracts debt service, penalizes “tied” aid that makes recipients spend aid only on donor goods and services, rewards aid to poor but relatively well-governed recipients, and penalizes overloading poor governments with many small projects.

n Score: 13.0 n Rank: 1

Investment

Rich-country investment in poorer countries can transfer technologies, upgrade management and create jobs. The CDI includes a checklist of policies that support healthy investment in developing countries.

n Score: 4.2 n Rank: 21 Strengths

Strengths - High net aid volume as a share of the economy (1.04%; rank: 2) - Small share of tied or partially tied aid (0.1%; rank: 4) - Large share of aid to poor and relatively well-governed recipients (selectivity rank: 3)

- Employs foreign tax credits to prevent double taxation of corporate profits earned abroad - No restrictions on pension fund investment in emerging markets

Weaknesses

- Allows project proliferation; small average project size (rank: 17)

- Denies foreign investors tax benefits in developing countries - Loopholes in domestic legislation permit bribe payers to circumvent the OECD Convention - Weak leadership in extractive industry transparency initiatives

Trade

Migration

Weaknesses

International trade has been a force for economic development for centuries. The CDI measures trade barriers in rich countries against exports from developing countries.

n Score: 5.3 n Rank: 20

The movement of people from poor to rich countries provides unskilled immigrants with jobs, income and knowledge. This increases the flow of money sent home by migrants abroad and the transfer of skills when the migrants return.

n Score: 6.8 n Rank: 7

Strengths - Low tariffs on textiles (6.4% of the value of imports; rank: 3) - Low tariffs on apparel (6.4% of the value of imports; rank: 3) - High level of manufactures imports from poorer countries (10.1% of GDP per capita; rank: 4)

Strengths

Weaknesses

Weaknesses

- High agricultural subsidies (equivalent to a tariff worth 15.1% of the value of imports; rank: 24)

- Small share of foreign students from developing countries (16.3%; rank: 27)

Center for Global Development

- Bears share of the burden of refugees during humanitarian crises (rank: 12) - Tuition for foreign students the same as for nationals

Luxembourg Country Report

www.cgdev.org/cdi

Environment

Rich countries use a disproportionate amount of scarce resources, and poor countries are most vulnerable to global warming and ecological deterioration, so the CDI measures the impact of policies on the global climate, fisheries, and biodiversity.

n Score: 5.5 n Rank: 21

Technology

Rich countries contribute to development through the creation and dissemination of new technologies. The CDI captures this by measuring government support for R&D and penalizing strong intellectual property rights regimes that limit the dissemination of new technologies to poor countries.

n Score: 4.2 n Rank: 21

Strengths - No fishing subsidies (rank: 1) - Low fossil fuel production rate per capita (0.0 tons of carbon dioxide equivalent; rank: 1)

Strengths - No government R&D expenditure on defense (rank by share of GDP: 1)

Weaknesses

Weaknesses - High greenhouse gas emissions rate per capita (23.7 tons of carbon dioxide equivalent; rank: 26) - Low gas taxes ($0.67 per liter; rank: 26) - Poor compliance with mandatory reporting requirements under multilateral environmental agreements relating to biodiversity (rank: 25)

- Low tax subsidy rate to businesses for R&D (rank: 24) - Offers patent-like proprietary rights to developers of data compilations, including those assembled from data in the public domain - Does not revoke unused patents

For More

Security

Since security is a prerequisite for development, the CDI rewards contributions to internationally sanctioned peacekeeping operations and forcible humanitarian interventions, military protection of global sea lanes, and participation in international security treaties. It also penalizes arms exports to poor and undemocratic governments.

Visit cgdev.org/cdi for the complete 2012 edition of the Commitment to Development Index. There, you can explore the numbers with our interactive graphing tool, view additional publications and background papers, and dive deeper into the CDI methodology by downloading our data and code.

n Score: 5.0 n Rank: 15 Strengths - Few arms exports to poor and undemocratic governments (rank by share of GDP: 4) - Participates in major international security treaties and regimes

Weaknesses - Low personnel contributions to internationally-sanctioned peacekeeping and humanitarian interventions over last decade (rank by share of GDP: 25)

Center for Global Development

Luxembourg Country Report

www.cgdev.org/cdi

Commitment to Development Index 2012 Country Denmark Norway Sweden Luxembourg Austria Netherlands Finland New Zealand United Kingdom Portugal Canada Germany Belgium France Spain Australia Ireland Switzerland United States Italy Greece Hungary Slovakia Czech Republic Poland Japan South Korea

Rank 1 2 3 4 5 6 7 8 9 10 11 11 13 13 15 15 17 18 19 20 21 22 23 24 25 26 27

Aid 11.5 13.0 12.6 13.0 3.1 9.5 6.6 3.3 6.8 3.1 5.0 3.9 6.4 4.2 4.0 4.3 7.5 5.2 3.2 1.3 1.6 0.8 0.8 1.1 0.7 1.6 1.0

Trade 5.3 1.1 5.8 5.3 5.6 5.9 5.8 8.1 5.5 5.6 6.2 5.5 5.5 5.6 5.5 7.4 5.2 1.5 6.7 5.7 5.3 5.4 5.8 5.5 5.6 0.1 -1.3

Investment 4.7 6.1 5.3 4.2 4.8 6.3 5.1 4.3 6.3 5.2 6.1 6.3 5.3 6.1 5.9 6.1 2.9 4.4 5.0 5.4 4.0 3.6 2.9 3.9 4.1 5.2 5.6

Migration 6.2 9.9 7.8 6.8 11.7 5.5 4.4 6.4 4.7 4.0 7.0 6.9 5.0 4.0 5.4 4.2 2.8 8.6 5.2 4.7 6.4 1.7 0.6 1.3 0.6 1.9 1.3

Environment 6.8 3.2 7.3 5.5 6.2 6.7 7.4 6.2 7.2 7.2 2.5 6.9 7.0 6.9 6.4 3.8 6.5 5.8 4.3 6.7 5.9 7.9 8.3 7.2 7.4 4.5 4.2

Security 7.7 7.6 1.2 5.0 6.1 3.2 6.6 7.3 5.4 6.0 5.7 3.7 3.6 3.7 3.4 5.1 6.9 4.4 4.6 5.0 5.7 5.4 5.5 1.6 3.8 4.5 1.4

Technology 6.6 5.7 4.7 4.2 5.7 5.4 5.9 4.8 4.3 7.4 5.5 5.0 4.6 6.6 5.8 5.2 3.9 4.8 4.9 4.2 2.8 3.4 2.6 5.3 2.7 6.1 7.0

Overall Score 7.0 6.6 6.4 6.3 6.2 6.1 6.0 5.8 5.7 5.5 5.4 5.4 5.3 5.3 5.2 5.2 5.1 5.0 4.8 4.7 4.5 4.0 3.8 3.7 3.6 3.4 2.7

Change since 2003 -0.2

+0.7 -0.3

n/a +0.7 -0.1

+0.1 0.0 +0.7 +1.1 +0.3 +0.5 +0.5 +1.0 +0.7 +0.2 0.0 +0.2 +0.8 +0.7 +0.7 n/a n/a n/a n/a +1.3 n/a

The above table lists scores for each of the 27 CDI-ranked countries across seven policy areas. A country’s overall performance is the average of its seven component scores, each of which are scaled so that an average score in 2012 equals 5.0. The final column shows the change in each country’s overall score since the CDI began in 2003 (using 2012 methodology).

About The CDI The Commitment to Development Index has been compiled each year since 2003 by the Center for Global Development (CGD), an independent think tank that works to reduce global poverty and inequality through rigorous research and active engagement with the policy community. CGD senior fellow David Roodman is the chief architect of the CDI, and collaborators have included William R. Cline on trade; Theodore H. Moran on investment; Jeanne Batalova, Kimberly A. Hamilton, and Elizabeth Grieco on migration; Amy Cassara and Daniel Prager on environment; Michael E. O’Hanlon, Adriana Lins de Albuquerque, Mark Stoker and Jason Alderwick on security, and Keith Maskus and Walter Park on technology. The Index is supported by the CDI Consortium.

Center for Global Development

Independent Research and Practical Ideas for Global Prosperity www.cgdev.org 1800 Massachusetts Ave., NW • Washington DC 20036 Tel: 202.416.4000 • Fax: 202.416.4050