New Donor and Old Donor:Are they really different?

 Introduction

The world focus on development assistance is no longer at the central point, as a results of power shift manifested by emerging new global political-economic powers. The emergence of China, the United Arab Emirates, the Kingdom of Saudi Arabia, the Czech Republic, India and Brazil among others, in recent years has changed the landscape of the world’s development aid that was once dominated by traditional donor members in the Organization for Economic Cooperation and Development – Development Assistance Committee (OECD-DAC). The emerging donors amongst the European Union (EU) new members, has increasingly challenged the orthodoxy of foreign aid. Countries such as the Czech Republic, Hungary, Poland and the Slovak Republic have turned into aids’ recipient after their insertion into liberal market economies and are now playing active roles in the revived aid programs. The formation of economic cooperation between Brazil, Russia, India, China and South Africa in what is called the BRICS provides an alternative source in development assistance and the emphasis on the South-South Co-Operation (SSC). The contribution of the Arab donors in recent development assistance is not to be neglected. The Kingdom of Saudi Arabia, the United Arab Emirates and Qatar who benefited from the natural petroleum fortunes are financially strong and have been gaining lucrative political as well as economic position in developing countries, particularly in the Middle East, South Asia, East Africa and in the Muslim world.

Who are the major aid donors? What kind of aid do they give and why?

Development assistance began not long after the end of the Second World War when the Organization for the European Economic Cooperation (OEEC) was established to back the US-financed Marshall Plan to assist in the reconstruction of Europe in 1948. Having encouraged by the global prospect of future development opportunities, Canada and the US joined as the OEEC member and signed the OEEC Convention. As a result, the OECD was established to acknowledge donor’s aid policy and cooperation in 1961.

The recent big surge in development assistance suggests the growing prospect of international development business. Huge amount of aid flows, one third of which goes to the African countries, attracting international interest and participation in the aids project including from the private sectors (De Haan, 2009). The United Kingdom (UK) is among the five countries from the EU and the OECD-DAC that met the United Nation (UN) defined goal of a 0.7 percent of its Gross National Income (GNI). The establishment of the Department of Foreign and International Development (DFID) in 1997, with the idea of expanding the partnership in tackling world’s poverty, indicates a success story of the new Labor government. The whole inspiration behind poverty eradication shows the new donor’s value – moral obligation and guilt towards their former colonies. Although China has been providing aid soon after the founding of the People’s Republic of China in 1950, it remains outside of the OECD-DAC. Through a separate definition and approach of development assistance, China has been promoting development aid and economic cooperation with other developing countries and promoted the South-South cooperation (OECD, 2016). The Chinese foreign aid comes in multiple forms, namely the complete project, goods and materials, technical cooperation, human resource development cooperation and debt relief. The Tanzania-Zambia railway (TAZARA Railway) project was the single largest complete project by China and is perceived as  a symbol of Chinese solidarity for the African newly independent countries (China Foreign Aid, 2011).

Woods (2008) states that it was estimated that nearly USD 100 Billions of aids were spent by these emerging new donors, although the real figure may vary according to different source of information, nevertheless Naim (2007) opined that the huge amount of money spent was “generous but toxic”. This generalization has brought in a deep scepticism that the emerging donors are similar to those established donors. Nevertheless, what most important to the receivers is the amount of local interests that can be realized by the foreign aid. Whether they are to be utilized in the interest of the government or the regime of the country and to an extent serve the hidden agenda of the donors remain in heated debate.

 

What are the main differences between the old donors and the new donors?

In order to situate the position of the old and the new donors in the context of global development assistance, it is important to define the donors’ characteristic and values diligently. Firstly, the international declaration on international aid regulations underscore the importance of each foreign aid’s donor to provide a set of standard mechanisms for disbursing aid.  The old donors in general submit to the OECD Paris Declaration on Aid Effectiveness (Paris Declaration) 2005 and subsequently the Accra Agenda of Action (AAA) in 2008. Formulated around five pillars, the Paris Declaration aims to provide members with implementation measures, establishes monitoring systems and creates mechanism to ensure accountability (OECD, 2016).  The AAA on the other hand was designed to improve four main areas, which were not included in the Paris Declaration; “ownership, inclusive partnership, delivering result and capacity development” (OECDa,2016). These have significantly been the milestone in translating global development strategies, ethics and regulations for the old donors. As for the new donors, there are still insufficient constructive adherent to any collective declaration. However the Busan Partnership for the Effective Development Cooperation in 2011 suggest new donor’s commitment to common development goals, shared principles and commitments for international development (OECDd,2016). Country like China, India and Brazil have all agreed to be part of this declaration.

For the past few decades, the new donor and the old donors’ foreign aid policies are structured based on their internal and external political and economic shift, and often are translated into foreign policies. This can be seen from China’s adoption of policy reform and opening up in 1978 followed by the 1990s shift that resulted in the adaptation of socialist market economy (China Foreign Aid, 2011). New members of the EU such as the Czech Republic, Poland and Slovenia among others have quickly been involved in international development affair, transforming into liberal market economies after the Cold War. The involvement of Arab donors is predominantly perceived as a reflection of the new security imperative measures, particularly after the terrorist attacks on the United States in September 2001 that resulted in the interventions in Afghanistan and Iraq (Villanger,2007). For the old donors such as the United States and the United Kingdom, their foreign policy on international aid were always seen as part of the rethinking on geostrategic security concerns. This, in particular, is to contain communisms expansion in 1960s, as seen in the military aids that were provided to the Eastern Europe, Latin America, Indo China as well as Africa and the shift to global security imperative involving war on terror in the 21st century (Woods, 2004).

Donor’s conditionality is another long entrenched paradox in development assistance. This characteristic is claimed to be another obvious difference between the old and the new donor. The new donor’s continuous actions of delivering aids to the fragile states, or, as Naim (2009) puts, as the ‘rogue’ state, are often criticized as blind support towards the degradation to democracy and state building values. Based on evidence, new donors such as China and Venezuela have shown that their aids’ conditionality are emphasized on respect of sovereignty and mutual respect, and not an enforcement of certain standards or requirements. Whereas the old donors have always prioritized their conditionality based on political condition and the Western values. Another of the old donor concern is that the requirement for aid modality delivering system which placed the recipients’ countries to abide to appropriate financial and governance system before the aids are able to be delivered (Woods, 2008).

The growing popularity of the emerging donors is a response to the dissatisfaction occurring amongst the recipients, particularly the poor countries towards the aid’s priority (Woods, 2008). This is translated into the understanding that the new donors’ focus is more attractive, with less bureaucracy and least management.  The new donors emphasize on economic infrastructure and growth, providing expertise from countries who have experienced rapid economic growth such as the UAE and China. Flexible loans and grants are provided, in order to stimulate the economy of for both the donor and the recipient through the bilateral government-to-government or multilateral means using international philanthropies such as the China Exim Bank and the Qatar Foundation.  On the other hand, the old donor’s shift to poverty alleviation and empowerment through their programs are seen as less attractive to the poor countries. For instance, since 1997, the UK Aid have refocused on the elimination of poverty and an emphasis on a sustainable development targets and livelihood (DFID, 1997). This focus requires a good governance system in place, which for some poor countries, this is considered relatively too expensive to be implemented.

The final key difference is the problem of incoherence has been recognized by the old donors, as a result of the increasingly dysfunctional coordination and alignment in the multilateral aid delivery systems (Woods, 2005). The old donors have created so many institutions, which are often regarded as the mechanism to resolve previous development assistance channel efficiency, leading to them becoming fragmented and duplicative. The United States’ aid flow in the wake of September 11 has been strategically designated to serve the security imperatives, creating new initiative and supplementary appropriations – the Millennium Challenge Account (MCA). This initiative has been recognized as being a less auspicious contribution to overcrowded aid’s area in the Middle East and Afghanistan (Woods, 2005).

 

Are they really different? To which extents?

The rigorous differences between the old donors and the new donors are now widely recognized as the great disillusionment of the recipient countries. The OECD-DAC is overseeing the problem and establishing through continuous process of negotiation and consultation a better coordination between the donors and the recipients. Despite the fact that these efforts are instrumental, finding the commonality rather than the difference may be seen as a way to overcome obstacles in the old and new donors’ relationship.

The international declaration on development assistance ranging from Paris, Accra and Busan do not have any difference, if every participating country does not really submit to them. This can be seen in the instance of the World Bank, in which the major donors who created it do not rely on the institution’s functionality completely (Woods, 2008). The United States and the United Kingdom through multilateral organizations and agencies, often deal directly with the recipient countries. Whereas China alone deals directly with developing countries to determine customizable aid structure, debt relief and aid programs.

Critics around the unconditionally of the new donors aid program at some point were exaggerated as Woods suggests that the emerging donor particularly China do not provides unconditional support for fragile states such as Sudan and Zimbabwe. In one case however, established donors such as the United States has been involved in providing aid to Afghanistan and Vietnam during the intense Western-Communist Cold War in the late 1970s. The United States was aware that Communist progression to world dominance would reach one-step ahead should Afghanistan fall into their control, therefore at all cost, providing financial aid to insurgent groups was the US best indirect intervention to hold Soviet progression and was perceived as the simplest and fastest way to pursue political agenda.

There is some opinion that perceives foreign aid as an indirect new imperialism, which to a certain extent is able to put the sovereignty of receiving state into question.  While some of the new and the old donor countries  seem to be “sincere” through their unconditional aids, it seems unfair to judge motives of the donors.  However no one could reject the notion that in a world full of competition, a return is expected for every investment.  The United Kingdom has ended its bilateral aid to India in 2015, after few years of growing debate over whether India should receive the aid. At the same time, India is also an emerging donor and its GDP has leaped to 7% as compared to the UK itself (BBC, 2015). This paradox of unconditionally relationship deteriorates especially after a French company won a $15 billion military mega deal, snubbing UK’s offer. If UK expects that its aid to India as an investment for future inter government economic deal, then definitely India no longer needs it. Critics therefore suggest that aid should be channelled directly to the poor people, via established civil groups and Non-Governmental Organisation (NGO)s.

Conclusion

The world’s development assistance is in the process of going through changes in terms of its approach and the paradigm shift, which is seen to be dynamic and non-uniform, despite the fact that there are efforts by both the new and the old donors to celebrate their differences. The old donors have shifted to social development whereas the new donors focus on the infrastructure. The old donors consistently required political, economic and society conditionality in aid, while on the other hand, the new donors provide unconditional requirement. Both donors use similar approach in the aid modality and delivery system. However, the way they are being used is distinctively different. Although not an important matter in the global development assistance’s values, evidences have suggested that in terms of the support on selective states, both the new and the old donors are likely to pursue their own motives and agendas. The new donors’ support on fragile states was being critiqued as part of the debate of the definition of economic co-operation beyond aid; while on the other hand, the old donors’ reluctance paradigm on the fragile states is seen as a great hindrance. Amid all the challenges and the rapid changes in the world’s political and economic landscape, the new and the old donors must collaborate and accept their differences, mobilize their unique strength collectively and have faith for one thing in common; humanity.

“You must not lose faith in humanity. Humanity is an ocean; if a few drops of the ocean are dirty, the ocean does not become dirty.” (Gandhi)

 

 

References

Bräutigam, D. (2011) ‘Aid ‘With Chinese Characteristics’: Chinese Foreign Aid and Development Finance Meet the OECD-DAC Aid Regime’, Journal of International Development 23(5), pp. 752-764

De Haan, A (2009) How the Aid Industry Works, Kumarian: West Hartford, CT.

Department for International Development (DFID) 1997. Eliminating World Poverty: A Challenge for the 21st Century, London: DFID, (Available online: http://www.bristol.ac.uk/poverty/downloads/keyofficialdocuments/Eliminating%20worl d%20poverty%20challenge.pdf)

Milner, H.V. and Tingley, D. (2013) ‘Public opinion and foreign aid: A review essay’, International Interactions 39(3), pp. 389-401

Information Office of the State Council (2011), ‘China Foreign Aid’, (Available online: http://english1.english.gov.cn/official/2011-04/21/content_1849913.htm)

Smith, K, Yamashiro Fordelone, T., Zimmermann, F.(2010) ‘Beyond the DAC : The Welcome Role of Other Providers of Development Co-Operation’, Development Assistant Committee (DAC), (Available online : https://www.oecd.org/dac/45361474.pdf )

Villanger, E. (2007) ‘Arab Foreign Aid: Disbursement Patterns, Aid Policies and Motives’, Forum for Development Studies 34(2) : pp 223-256

Woods, N. (2008) ‘Whose aid? Whose influence? China, emerging donors and the silent revolution in development assistance’, International Affairs 84(6): 1205-21

Woods, N. (2005) ‘The shifting politics of foreign aid’, International Affairs 81(2): 393-409

 

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