Observations of an ex pat: development bonds

Every now and then you have to blow your own horn. This is one of those occasions when I am going to do just that.

Last week I won a commendation from the award committee of Britain’s Ashdown Prize for Radical Thought. It would have been nice to win first prize and the cash that went with it, but the commendation provides me with a modicum of credibility and the hook to promote it.

The commendation was for my proposal for “Development Bonds.”  What, you may ask are Development Bonds? Well, I think they are a multi-level win/win solution for a transfer of capital from the developed to the developing world.

It works like this: Developing World governments  propose projects for consideration. Developed World governments approve or disapprove the projects using an agreed criteria. Financial institutions raise the capital through bond issues. Developed countries encourage investment in the bonds  by offering taxpayers relief on the repayments.

The template for the development bonds are America’s municipal bonds.  Contrary, to public opinion, municipal bonds did not originate in the US. They were common during the Renaissance when the Italian city states regularly used them to raise money for public building projects. But they came of age in the US in 1812 with a New York City bond issue to build the 327-mile Erie Canal which linked the nascent potential of the American West to the port of New York and through it the markets of the world.

Thousands of cities and local authorities around the globe raise money through bond issues. But America’s municipal bonds stand out by offering income tax relief on the repayments. This means that they attract not only institutional investors but also high-wealth private individuals. American municipal bonds are one of the chief financial instruments that have transformed the United States from a resource-rich, backward, often corrupt, virgin territory—not unlike Sub-Saharan Africa today—into the world’s only super power.

Development Bonds would achieve the following:

  • A substantial increase of capital funding available to developing countries for development projects, complementing existing sources of finance.
  • It would place the initiating and implementation process in the hands of the Developing World while still allowing a substantial input by Developed World countries.
  • Give the Developed World’s general public a direct stake in the success of the Developing World.
  • Shift a significant share of the burden of development from taxpayers to private investors and thus help to remove the issue of aid from the domestic political agendas of the Developed countries.


However, some development economists who have considered the idea have thrown up some reservations. That is their job. They have pointed out that investors will seek guarantees. That there is a problem  with increasing the indebtedness of  already overburdened developing economies and that the mechanisms required may fall foul of existing regulations such as  the mixed credit rules of the OECD’s Development Assistance Committee.

Those are details. They are important details. But if the principle is accepted than the will is created to deal with the details.

Acceptance must come from the political establishment which is why I was particularly pleased that the commendation was awarded by Liberal Britain at the recent Liberal Democratic Party’s annual conference. Political acceptance is vital because the Development Bond proposal requires a national treasury to agree a drop in tax revenues. I stress, this reduction would be more than offset by a cut in direct aid. One official at the British Department for International Development said that private investment of this kind is worth ten times direct government aid.

Ideally, this is a group wide initiative for the G8 countries.  But given the difficulty of achieving committee consensus, it might be best if the plan is tested by one or two major donor countries. If it works then they can sponsor a roll out to any other G8 countries that want to participate.

Finally, thanks very much to Lord Ashdown, the Ashdown Prize Committee, Liberal Britain and the Liberal Democratic Party for providing me with the platform from which I could blow the development bond horn.


* Tom Arms is a Wandsworth Lib Dem and produces and presents the podcast www.lookaheadnews.com

Read more by or more about .
This entry was posted in Op-eds.


  • David Evershed 21st Sep '18 - 3:37pm

    Offloading high risk development bonds onto retail customers – Sounds like a mis-selling scandal in the making to me.

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

If you are a member of the party, you can have the Lib Dem Logo appear next to your comments to show this. You must be registered for our forum and can then login on this public site with the same username and password.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

Please complete the name of this site, Liberal Democrat ...?


Recent Comments

  • User AvatarLorenzo Cherin 22nd Oct - 1:54am
    Would very much agree with friends here who say this is all in good fun, and really worry when some who are known for their...
  • User AvatarDavid Raw 21st Oct - 10:03pm
    I understand Facebook made 1.3 billion pounds profit in the UK last year and paid just over 15 million pounds in tax. I remember Mr...
  • User AvatarTeejay 21st Oct - 9:42pm
    "Your generation is being betrayed by mine. By those who look to the past, who see Britain as a museum." If there were to be...
  • User AvatarAlex Macfie 21st Oct - 9:36pm
    Jayne Mansfield: Satire is a legitimate part of campaigning politics. Your apparent failure to get this suggests you are the kind of person who tends...
  • User AvatarJayne Mansfield 21st Oct - 8:57pm
    @ Alex Macfie, Sorry Alex, I think that as a party you need to decide whether Brexit is a serious matter and in order to...
  • User AvatarAdam Bernard 21st Oct - 8:50pm
    Harrow local party last week issued a statement on this - relevant part: "We believe that a special conference is an egregious waste of money,...