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Emerging Donors: Ushering in a New Aid Era?

Emerging donors' 'no strings attached' aid with an emphasis on infrastructure is opening up policy space around development assistance.
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Out of step with established donors? Heads of states from the BRICS nations. Photograph by The Office of Dilma Rousseff, President of Brazil.

The policy space in which aid is allocated may be more open at the moment than ever. The paradigm in which official development assistance is allocated has already shifted significantly from its original roots. But now, with the increasing influence of the so-called ‘emerging donors’, there is potential for the aid paradigm to be revolutionised once again in the coming years.

A history of aid

In the post-war era, former colonies exporting primary products found that importing manufacturing products made their balance of payments uneven, meaning revenue for growth was insufficient. Many economists advocated an injection of aid – a “big push” – that would stimulate investment and encourage growth. Others later built on this by claiming that aid could also help fill a gap in financing, savings, or foreign exchange. (Some economists argue that contemporary debates about aid tend to neglect these types of structural impediments.)

The failure of economic experiments in the 1970s, however, made it clear that industrialisation and a “big push” were not reducing poverty as anticipated. As a result, greater focus was placed on addressing basic needs like food, housing, and education. Some argue that this new emphasis – which came alongside a decreased focus on agricultural and physical infrastructure – occurred with donors’ interests in mind, as de-emphasising infrastructure would ensure less competition with the West’s manufacturing and farming, particularly that of the United States.

In the 1980s, the World Bank and International Monetary Fund turned to the implementation of structural adjustment programmes in developing countries, effectively making aid conditional upon government’s making economic reforms such as trade liberalisation, privatisation and de-regulation. With the failure of these programmes, however, the focus shifted even further towards social sectors and humanitarian needs.

The Millennium Development Goals and Africa

In the new aid agenda developed in the 1990s, the conditions upon which aid was allocated shifted from economic reforms to ‘good governance’, which emphasises democratisation, decentralisation, and liberalisation.

The new aid agenda of the 1990s also added a commitment to harmonisation between human and economic dimensions of development, realised through the implementation of the Millennium Development Goals (MDGs). Agreed to by governments and leading development institutions, the MDGs are a set of eight goals ranging from halving extreme poverty to halting the spread of HIV/AIDS and providing universal primary education by 2015.

Their adoption, a coordinated effort between donors and countries, represented an increasing shift toward the provision of social rather than economic aid. While this suggests a lesson was learned through the structural adjustment programmes – that generating economic growth and development are not the same – it has also disconnected official development assistance from its roots.

Many are pleased at MDGs’ inter-disciplinary approach to development, but not everyone agrees with how they were designed or even what they aim to achieve. Development economist William Easterly, for example, argues that the MDGs were arbitrarily designed in a manner that ultimately downplays recent African achievements in growth, gender equality, primary education, clean water, and child mortality. And ignorance of this convergence only feeds into Western stereotypes of Africa as a corrupt, impoverished, continent.

Emerging donors and their new trends

But things are starting to change again. Countries such as Saudi Arabia, the United Arab Emirates, Kuwait, China, India, Korea, Venezuela, Brazil, and South Africa, among others, have increasingly allocated official development assistance to poorer countries on their own terms. These ‘emerging donors’ – so named because most are not part of the OECD’s Development Assistance Committee (DAC) for ‘established donors’ – have begun to establish a new status quo, one without policy strings attached, and one which returns to an emphasis on infrastructure, innovation, exports and health, rather than governance.

If upper estimates are to be believed, China, Brazil, and Saudi Arabia may now give more official development assistance than half of the DAC’s donors.

This break from the status quo has not come without criticism. Some lament perceived tendencies for these donors, particularly China, to support so-called rogue states without involving themselves in politics, to “free ride” on debt relief given by Western donors, and to ignore good governance and environmental standards set by international organisations. Others, however, counter that these claims have been exaggerated and argue that aid from non-DAC donors better fulfils the promises for more aid continuously made by the West.

In Africa specifically, some optimistically note a tendency for recipient states to adopt a multi-faceted strategy by utilising the grants and capacity-building support of donors based upon donors’ strengths – for China, this means investment, Brazil agriculture, and India technology and telecommunications.

Solidifying trends toward change: OECD aid down

The increasing influence of donors coming from outside this traditional paradigm is also altering the grounds on, and justification for which, aid is given. While economic interests and strategic planning are certainly present, there is not, for example, a Beijing Consensus that makes aid conditional upon specified economic or political policies.

Much official development assistance has typically had self-interested economic or geopolitical motivations which sometimes supersede development. The heyday of this was during the Cold War although these trends perhaps gained new momentum with the rise of the War on Terror. Emerging donors, on the other hand, appear to be going back to basics of re-emphasising infrastructure over governance. They are not writing rules (and cheques) in ways that as explicitly advance their own geopolitical objectives.

New aid trends may also be being facilitated by the fact that, for the first time since 1997, the level and value of OECD official development assistance allocations has dropped. Explanations vary, with some pointing to the global economic recession, the euro crisis, the end of the era that created Make Poverty History, and disillusionment with aid’s efficacy as a result of corruption. Others, such as Oxfam, allege that cuts are political in nature.

Either way, it seems that the influence of emerging donors is rising. Emerging donors bring increased external financial flows for Africa, a return to investments in productive rather than social sectors, and greater competition between donors. While it is unclear what the outcome will be, what seems certain is that now more than ever, it may be possible to revolutionise the policy space in which aid is allocated.

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