Lecture 5: (re-) Emerging Donors Flashcards
Emerging Donors
developing countries with growing economies, growing international involvement and relatively higher levels of socio-economic development
• recipients and donors at the same time
How much aid from emerging donors?
- difficult to estimate
- only some report aid flows to OECD (mostly European non-DAC members and main Arab donors)
- reporting differs, often inconsistent
- lack of transparent data from growing donors like China, India, Brazil
- not following DAC definition of ODA, other financial flows are being reported as development cooperation
or (re-) emerging donors
o most of them gave aid before
o cooperation among the countries of the “South” since 1955 Bandung Conference of Asian and African countries: adopted “Declaration on promotion of world peace and cooperation” (incl. abstention from interference in the internal affairs of another country, promotion of mutual interests)
→ foundation for South-South cooperation
o some of them (esp. Arab countries) launched their aid programs in 50s and 60s
o aid in 60s and 70s, decline in 80s, re-emerged at the end of 90s
Classification of emerging donors
significant differences among “emerging donors”
3 distinct models:
- the Southern model
- the Arab model
- the DAC model
similar in aid modalities, approaches to development cooperation, characteristics of their aid programs etc.
Southern model
Donors from the “South” (excl. Arab and some of the post-communist countries)
biggest and most visible are BRICS
2014: New Development Bank by BRICS states:
o multilateral development bank
o alternative to existing Western-dominated multilateral financial institutions
o aim to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies & developing countries
o equal voting rights, equal number of shares, no veto power
- they distinguish their assistance programs from those of traditional donors and the traditional donor-recipient model
- motivated by promotion of bilateral and regional trade and investments, to gain access to natural resources, gain votes in UN etc.
main distinguishing features:
o cooperation horizontal = players on the same level
providing assistance to each other (x traditional vertical aid)
o equality and mutual benefit => development partners, business partners (not donor and recipient)
o principle of non-interference
o no conditionality (except for China’s “One China” policy)
o focusing on productive sectors, infrastructure projects, agriculture sector
o trade, FDIs and development assistance often provided together
o strong focus on technical cooperation and training
mix between traditional development, economic cooperation and internal business promotion
criticized by traditional donors: supporting “rouge states”, ignoring environmental and social standards, human rights etc.
Southern model: China
- foreign aid program dates back to early 50s – Korean war, China providing aid to North Korea
1954: Five principles of peaceful coexistence:
o respect to territorial integrity and sovereignty, non-interference, mutual benefit..
- 60s - 70s aid ideologically motivated: to other socialist countries, supporting leftist guerilla movements, huge infrastructure projects
- 80s - 90s → access to natural resources, esp. in Africa (due to rapid econ. growth in China)
- regional cooperation with most of the African countries: Forum on China-Africa Cooperation
o Eswatini (Swaziland) excluded – no diplomatic ties ← cooperation with Taiwan
- grants and loans (mostly loans)
- mostly projects in infrastructure and agriculture
tied aid = recipient country is obliged to purchase Chinese goods, technologies and services, or aid is provided directly in form of direct supply of Chinese goods; Chinese often employed on these projects
institutional arrangements:
o Ministry of trade coordinates
o Ministry of finance prepares annual budgets
o MFA only providing consultations for the MoT
o China Development Bank, Export-Import Bank of China
- economic impact of Chinese presence in Africa:
o ambivalent
o mining: higher income from the export of raw materials x not contributing to diversification of economic structure
o import of Chinese goods: cheap and affordable goods x damaging local industries
agriculture: problem of land grabbing:
o Chinese companies producing mostly for local markets, not for export → risk for local farmers
- African countries again increasing their debts
- Cooperating with governments accused of violating human rights
Arab model
some of the oldest and most generous aid programs:
60s Kuwait Fund for Arab Economic Development
70s Abu Dhabi Fund for Development &
Saudi Fund for Development
o SA, Kuwait, UAE aid average: 1.5% of GNI
(UAE in 70s and early 80s up to 12% of GNI)
o volumes of aid fluctuated, following oil prices and national petroleum export revenues
o Saudi Arabia, Kuwait and the UAE > 90% of total ODA by Arab donors, Qatar a more recent donor
- priority sectors: transport and storage, energy, agriculture, forestry and fishing, water supply and sanitation
- influenced by Arab social solidarity and religious ties → regional concentration, primarily to other Arab countries:
o MENA region receives ≈ 70% of Arab aid
o recently increase in commitment to low-income countries, esp. in sub-Saharan Africa
o aid more likely to countries not maintaining diplomatic relations with Israel, voting with Saudi Arabia in the UN GA
Islamic Development Bank: one of the largest Arab donor agencies, lending only to members of the Organization of Islamic Conference
relative cohesiveness and high level of coordination between Arab donors
projects often co-financed amongst members
low commitment to multilaterals
sector priorities: infrastructure projects in transport, energy, water supply
aid generally untied
• volumes of aid: DAC reporting mechanism do not capture all the flows unique for Arab aid:
o public-private aid: according to OECD DAC reporting rules, only public aid counted as ODA, in Arab countries more fluid understanding
o religious aid: excluded from DAC reporting systems, in Arab countries aid serves mixture of religious and humanitarian/development purposes
• zakat: example of public-private religious aid:
o for poor and those in need
o in 80s governments establishing official agencies for collection and distribution of zakat
o distributing zakat abroad as well, focusing primarily on poverty reduction (e.g. regular cash or in-kind transfers to poor households, orphans etc.)
• growing number of official zakat agencies
DAC model
new donors forming their aid programs after DAC members, following DAC guidelines, definition of ODA
candidates to or recent members of OECD DAC
post-communist countries, Israel, Iceland, Turkey…
characteristics and modalities of giving aid largely similar to traditional DAC members
classic donor-recipient relationships
focus often on social sectors, contribute to multilateral institutions
aid programs relatively small, target of 0.33%
history:
o V4 countries had development cooperation with Third World during the Cold War
o foreign relations and development cooperation driven by interests of the Soviet Union
o recipients mostly socialist & leftist governments and formal allies of the Soviet bloc
o mainly in-kind goods delivery, technical cooperation, scholarships
o aid programs suspended with the end of Cold War →V4 countries as recipients
o re-established at the beginning of the New Millennium
features distinguishing them from traditional DAC donors:
o limited economic and political ties with developing countries due to their small size and lack of colonial history
o see themselves as less affected by the security threats caused by global poverty and weakness of some states, but stability of regions in their neighborhoods has high priority – slowly changing now
o international development usually not part of public discourse,
lower public awareness →lower public support
o development challenges of their own, difficult to justify higher spending on development assistance
o relatively short experience with development assistance (not considering pre-1989 aid)
→ impact on quality, quantity and territorial allocations of aid
• quality of aid problematic:
o foreign aid policies highly donor-driven, recipients having limited influence on planning and programming => low ownership
o relatively big number of recipients, projects being relatively small => fragmentation of aid
o evaluation not emphasized, feedback and organizational learning are neglected
o providing de facto tied aid is common: e.g. calls for proposal being issued only in the language of the donor, only companies and organizations from the donor countries can apply for the funding etc.
o aid mostly to middle-income countries
• recipient countries 3 groups:
countries in the V4 neighborhood: Western Balkans and the CIS region
o stability, economic interests (potential trading partners) and cultural/historical ties
Iraq and Afghanistan
o international obligations as NATO members
partner countries “inherited” from the communist period
o countries with which development partnerships already existed before the transition
o formerly they all had socialist-oriented political systems
