A Crystal Ball for Global Development: What Will Happen in 2016?

True to hopes, 2015 was a landmark year for global development. Two decades of talks yielded an ambitious, universal agreement to fight climate change and the UN General Assembly defined the next 15 years of development targets with the Global Goals for Sustainable Development (SDGs) and agreed to a framework for financing them. However, as with any year, 2015 brought in unexpected crises: millions of Syrian refugees, an earthquake in Nepal, and violent extremism around the world in Kenya, Mali, France, Iraq, Lebanon, and many other countries.

What is 2016 going to bring? Predictions are a tricky business, but we think these are going to be defining themes for the coming year in global development:

Blended finance will become the de facto way to finance development priorities.
The new Sustainable Development Goals (SDGs) are in effect, but there's currently a 2.6 trillion funding gap for the SDGs per year - roughly equivalent to the GDP of Brazil. Traditional development aid cannot fill this void alone; more private sector involvement is critical to the success of the SDGs. However, investments in emerging markets are lagging and major funds have lost between 12 and 30 percent of their value in the past five years. Moreover, for the first time in nearly three decades, investors have pulled more money out of emerging markets than they have put in.

Is this a death knell for the development goals? Not at all. We predict increased investment in blended finance, a new way to use public funds to entice private capital towards investments that have financial, social, and environmental gains. The recent launch of the Convergence platform at Davos is a good first step. We also believe that there will be a growth in financing from developing countries themselves: think tax revenues, private domestic savings, pension funds, private equity markets, and remittances. Combined these can surpass current aid flows.

The implication? The public sector needs to design structures and initiatives that incentivize the private sector to collaborate with them - they will not be able to achieve the ambitious SDGs alone.

The race for a new UN Secretary General (SG) will result in a clarified mandate for the United Nations.
The UN had a few successes in 2015 (read: SDGs and climate agreement) but it has fallen far short in maintaining peace and security - it was hampered in its ability to broker solutions in Syria and Yemen and in protecting human rights in Daesh territory.

The UN has a watershed moment in 2016 when a new SG will be sworn in. She (most of the leading current contenders are women) will have the gargantuan task of making the UN relevant again. She will have to articulate a vision to make the large bureaucratic organization nimble enough to respond to a new form of conflict and humanitarian crisis that is quick to flare and driven by non-state actors. As is, the institution is at risk of being relegated to a 70-year experiment no longer fit for its purpose.

The implication? The UN needs to follow through on its promise to ensure a robust election process where candidates are forced to articulate, debate and defend their vision for a UN that is fit for today's purpose.

El Niño will show that all the investments we have made in building resilience are not enough.

El Niño has already hit and will compound the effects of climate change in 2016. This is the planet's first real test since passing the COP21 agreement in December 2015.
There have been a number of resilience initiatives over the past five years - like Rockefeller's 100 Resilient Cities and the World Bank's Small Island States Resilience Initiative. We predict that El Niño will test these investments - and sadly they will come up short. 2016 will see increased weather pressure on coastal cities, more natural disasters and a higher frequency of extended droughts or flooding on agricultural plains - all of which will have significant knock-on effects.

To mitigate this, we need to double down on resilience investments and data is key. Crowd-sourced maps, advanced weather radars, and real-time monitoring during crises will need to become ubiquitous to keep people safe. Financial innovation through weather-indexed insurance for crops will be an important component.

The implication? Development finance institutions need to re-prioritize resilience programs and investments as a critical part of their portfolio in order to avoid significant human casualties in 2016.

Syrian refugees will come to be viewed as an opportunity for European growth.
Europe is aging - 27 of the 30 countries with the largest population over 65 are in Europe. Countries such as Bulgaria, Romania and Hungary have seen their populations shrink by 5 to 15% since 1990. Maintaining economic prosperity with a shrinking working-age population is a major challenge.

We predict that as Syrian refugees become more integrated, they will be recognized as the sustainable solution to ensuring economic prosperity in Europe. Is this overly optimistic? Perhaps. There is a rise of right wing politics driven in part by this crisis, and attitudes towards immigrants are firmly negative.

But there are two things that give us hope. First, Europe has overblown fears of immigration before (e.g., the immigration of Poles, Turks, Romanians) which have subsided with time. Second, this group of refugees from Syria is disproportionately well educated, which will help - over 40% have a secondary school education or higher. Research shows that these refugees are likely not only have a positive fiscal impact, but are also likely to create jobs by starting their own businesses.

Ideally, we should prevent a refugee flow by tackling the root cause of the problem in the country of origin. But in the interim, we should also focus on integrating the refugees that are already here. This will require reducing processing times; providing job support; and dispelling rumors and misinformation about refugees' impact on society.

The implication? National governments need to avoid the reaction to "contain" refugees - and implement long-term policies positioning refugees as the solution to Europe's unsustainable economy.

Democracy will be redefined in sub-Saharan Africa.

Over the past twenty years, democracy on the African continent has become more widespread. However, its fundamentals still have tenuous roots in many countries.

A movement, endorsed by the AU and African Development Bank, supports a more centralized and integrated form of governance known as the democratic development state. Championed by Ethiopia and Rwanda, this model seeks to cultivate a robust free market and pair it with strong and centralized political institutions in a common effort to eradicate poverty. The major shift with this model is a move away from relying on external actors (i.e., NGOs) to achieve growth.

Our prediction is that this model will become a more popular transitional form of democracy. This doesn't mean that all countries will follow suit. There are counter examples, such as Kenya, which is undergoing a devolution process. However, we think this model will gain favor as governments see how it balances growth with inclusiveness. There is a key danger here though: critics rightly point out that this model can lead to abrogation of civil liberties (as is alleged in Ethiopia and Rwanda). This cannot continue to be the norm if indeed this model is going to flourish.

The implication? If this model does become dominant, donors will need to fundamentally rethink the ways in which they engage with governments because their presence may no longer be welcome.

By Yana Watson Kakar, Madji Sock and Shyam Sundaram
Yana Watson Kakar is the Global Managing Partner of Dalberg. Madji Sock is the Regional Director for Africa, and Shyam Sundaram is Dalberg's Chief of Staff.

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