The third world, as it used to be known, is disappearing gradually, as the parts of it that have developed are now concentrating their energies on building up those that have not.
– Robert D. Kaplan, Monsoon: The Indian Ocean and the Future of American Power
The tides of foreign aid are shifting. Traditionally, foreign aid has been in the form of grants from developed nations that are channeled primarily through multilateral institutions such as the World Bank. Known as Official Development Assistance, such aid comes with strict preconditions and targets multiple sectors of the economy based on guidelines laid out in country assistance strategies. However, the last few years have seen major changes in the sources and models of development assistance from foreign countries. Such aid, which I term Non-Official Development Assistance (NODA), comes from large developing countries such as China and India, has fewer preconditions than ODA and targets specific sectors. By focusing on the relative impact of development assistance from the West and China in Africa, I demonstrate that NODA is more effective than ODA overall in achieving economic development in recipient nations. At the same time, China’s assistance to Africa also highlights two limitations of NODA: its tendency to place the commercial interests of donors over the needs of its recipients and lack of accountability arising from absence of centralized political institutions delivering NODA. Despite its limitations, NODA is an important addition to the development assistance regime. The competition between ODA and NODA may allow each to constantly innovate and reform its models and methods, improving the efficacy of development assistance and giving African nations a greater say in their development.
The Problems with ODA
To understand NODA’s rising popularity among recipient nations and its benefits over ODA, it is necessary to first understand how ODA works and where it has failed. The types and directions of ODA are determined on the basis of broad developmental goals such as poverty reduction, education and environmental sustainability, now incorporated into the Millennium Development Goals (MDGs). MDGs are now a part of the ODA framework through preconditions imposed on recipient countries in order to receive assistance, and through country assistance strategies that lay out plans targeting multiple sectors. Most scholars acknowledge that the goals stated by ODA address valid issues such as poverty and would contribute to economic development of the recipient nation if they were realized. However, many scholars criticize ODA on the methods it uses to achieve its stated goals.
Recipient nations perceive ODA’s preconditions as an attempt by donors to intervene in their economies and promote the donors’ political and economic interests. According to the scholar Ngaire Woods, ODA’s preconditions aim to impose a “Washington consensus” or the free-market economic structure of the West on the rest of the world. Such preconditions take time to implement and thus ODA cannot reach nations immediately to meet their short-term development needs. Even when ODA reaches nations in the long run, it enjoys limited success. A survey of 305 IMF aid programmes from 1979-1983 found implementation failure in 53 percent of the cases.According to Woods, strict conditionality in the face of implementation failure has made recipient nations wary of donors’ claims that the Washington free-market consensus will lead to economic development. ODA is thus both unpopular and ineffective among recipient nations, who feel that ODA ought to give higher priority to their development needs.
Another problem with ODA is that it tends to follow its country assistance strategies to the letter rather than customize them to local needs and feedback. In his essay “Planners and Searchers,” the scholar William Easterly states that ODA’s country assistance strategies and poverty reduction papers have predetermined goals based on “big action” to solve “big problems”. Since donors predetermine the goals, the goals do not change based on recipient feedback. Additionally, the predetermined goals are vague. Nigerian journalist Dayo Olopade says that African countries simply “cut and paste” the MDGs and country assistance strategies into their national poverty reduction policies.This cut and paste approach is problematic. While MDGs outline certain overarching goals, they do not specify the framework for achieving these goals. Citing the first MDG that aims to eradicate poverty and hunger, Olopade highlights the importance of agriculture to achieve both of these goals and points out how agricultural investments are completely missing from the MDGs. Agricultural investments are critical to Africa, parts of which suffer from low agricultural productivity. The myopic focus of donors and recipient governments on the MDGs, and their inability to identify Africa’s agricultural issues have led to insufficient investment by ODA in Africa’s agricultural sector. While MDGs act as great broad guiding principles, we cannot use them in isolation. MDGs must be accompanied by specific targeted policies that respond to local needs and channel assistance in the right direction – in this case, towards the agricultural sector in Africa – in order to meet the larger goal of poverty reduction.
Poor co-ordination between the multiple organizations providing ODA also contributes to the sub-par outcomes of ODA. First, it makes ODA inefficient. In his essay “The Cartel of Good Intentions,” Easterly points out the “duplication of efforts” among organizations pursuing identical programs in the same nations. In such a scenario, two organizations are working where a single organization would have been just as effective, if not more. Multiple organizations in a region also means governments have to report to multiple donors. This shifts focus away from the priorities of recipients towards the requirements of the donors and makes aid ineffective. Second, it leads to inertia among donors of aid to change their strategies when faced with implementation failure. As Easterly points out, if the aid program fails, the blame gets diffused among the multiple organizations. Donors of ODA respond to implementation failure by increasing aid commitments under the existing strategies rather than attempting to change the strategy. He attributes this to the lack of a feedback mechanism between different organizations offering ODA. Thus poor co-ordination between donors of ODA exacerbates the problems caused by preconditions and country assistance strategies.
Due to its preconditions and country assistance strategies, ODA has not only become unpopular among recipient nations but also ineffective in meeting its intended Millennium Development Goals. The absence of conditionality and the specific targeted goals laid out by NODA allow it to be more effective than ODA in achieving economic development.
What is new about NODA and does it work?
Eliminating Conditionality and Introducing Commerce
Unlike ODA, NODA does not come tied with strict preconditions and structural adjustment programs. A report by the Congressional Research Service summarizes that Chinese assistance is accessible to supposedly “infeasible” nations that have not met the preconditions required by ODA, and are therefore not eligible to receive ODA. Its speed and accessibility make NODA popular among poor and corrupt nations that often need development aid the most but cannot receive it because of their inability to meet the preconditions.
While NODA may be fast and popular, that does not necessarily make it beneficial to the recipient nations. While scholars acknowledge the popularity of NODA, they are ambivalent about the benefits of NODA in the absence of strict conditions. Moisés Naím highlights the disadvantages of NODA by saying that it gives aid to corrupt governments that do not meet standards of development and human rights, thus supporting what he calls rogue states (95-96). Naím believes aid without preconditions is morally wrong (because it supports governments violating their citizens’ rights) and economically ineffective because corruption and poor governance prevent aid from being implemented properly. Thomas Lum highlights similar problems in a more moderate light. While he recognizes that China’s assistance meets short-term development needs, he also notes that China does not enforce standards such as democracy or environmental sustainability. Lum feels that Chinese assistance carries benefits in the short-run but such benefits cannot be sustained in the long run without meeting the above-mentioned standards. For instance, aid from China may be used by the government to construct a school expeditiously. But without a strong democratic government to uphold law and order, it is quite likely that school attendance will be minimal. The benefits of the school then remain unrealized. Both Naím and Lum see democracy, eradicating corruption and free market reform as prerequisites for effectively delivering assistance. By ignoring these standards, China’s assistance could possibly have a negligible impact on long-term economic development.
A closer look at China’s assistance strategies in Africa shows that it has achieved tangible results and aided the short as well as long-term development of African nations, even in the absence of preconditions. I attribute China’s success to two reasons: its soft-power strategies that emphasize mutual respect, and its attention to the common commercial interests of donors and recipients. NODA, and particularly China’s emphasis on “respect for sovereignty with no conditions attached” (Zhou Enalai’s eight principles of China’s foreign aid) has increased its soft power i.e. its ability as a donor to influence the policies of recipients. The scholars Li Baoping and Lu Jiabao explain China’s strategy of soft-power: “Instead of lecturing African countries on good governance in ‘hard-power language’…a central element of the China-Africa relationship is the principle of equal rights and mutual respect through which Africa can negotiate with China as an equal, seeking mutually beneficial outcomes.” The strategy adopted by NODA makes recipient nations view donors as allies and equals rather than adversaries looking to intervene in their economies and societies. This makes recipient nations more open to advice and guidance from the donor nations and increases donors’ influence in the region.
While increasing soft power clearly works in favor of the donors, it can also prove effective in achieving the economic development of recipient nations. For instance, China extended development assistance to Sudan through investments by China’s oil company despite the Sudanese government’s failure to end the Darfur crisis. China was ultimately able to urge the Sudanese President to work with the United Nations and other envoys to end fighting and bring in peacekeeping forces, a move that was widely appreciated by the UN. Why did this happen? In Sudan, China’s quick investment first achieved immediate results by boosting economic growth, which made the Sudanese authorities believe that China was a valuable ally, and hence increased China’s ability to work with Sudan towards longer term goals of peace and economic development. China’s policy of mutual respect worked much better for Sudan than the Western preconditions in the short as well as the long-term.
While NODA removes strict preconditions to uphold respect for sovereignty, it substitutes them with a series of commercial conditions. Some commercial conditions allow donors to gain access to natural resources in recipient countries. According to Robert D. Kaplan, China has provided assistance towards infrastructure development in Africa in exchange for the rich natural resources of African countries and now imports a third of its oil resources from African countries. Many of China’s infrastructure development projects also require the recipients to provide service contracts to Chinese companies. About 70 percent of the infrastructure development programs in Africa have been implemented by Chinese companies. The commercial benefits to China encourage it to continue increasing its assistance to Africa.
Many of the “conditions” attached to NODA have succeeded in incorporating donors’ commercial interests and recipients’ commercial and developmental needs. China’s investments in Angola are a case in point. In 2002, the Export Import Bank of China (EXIMBANK) provided a $2 billion concessional loan towards infrastructure development, using the oil resources of Angola as collateral. The scholars Campos and Vines, who have extensively studied Sino-Angolan relations, point out that the funds have “kick-started 100 projects in the areas of energy, water, health, education” and expanded access to electricity and water, especially in the capital region. In exchange for the natural resources of Africa, China’s loans have achieved tangible economic results, especially in infrastructure, something that Africa desperately needs.
However, NODA risks placing its donors’ commercial interests before the recipients’ interests when the two come into conflict with each other. In their book on the development of the Forum on China-Africa Co-operation, Li Anshan and Funeka April point out: “although FOCAC is a joint collaboration between China and Africa, FOCAC activities are actively driven and led by the Chinese government”. China’s soft power ultimately works for the benefit of African nations only to the extent that it matches China’s own interests in the region of Africa. In Sudan, China gained concrete returns on its investments in the form of the oil resources in Sudan and its assistance thus benefited Sudan’s development. However, in some other cases, China’s assistance has not been so beneficial. Brookings Institution scholar Yun Sun points out that Chinese aid is directed more towards resource-rich African countries, which denies access to resource-poor nations and may also overlook poor economic and political standards in the resource-rich nations. For instance, China’s assistance to copper mines in Zambia enables China to import 63 percent of its base metals from Zambia, but it has not benefited miners, who face poor and inhuman working conditions and often lose their lives in mining explosions. The expansion of the mining industry has led to increased exploitation of workers in Zambia to meet Chinese commercial demands.
While NODA’s commercial nature has disadvantages, ODA has not necessarily fared better at establishing development standards and placing recipient interests over donor interests. In his report on the World Bank’s assistance to Africa, Scott Pegg notes that the World Bank’s attempts at privatization in Zambia have not furthered its stated goals of poverty alleviation in the region. While the assistance benefits Western donors by opening up markets for their transnational companies, it promotes the expansion of resource-extractive and labor-exploiting sectors such as mining in Africa. Both ODA and NODA have thus been heavily influenced by the interests of their donors and neither are fully altruistic. Nevertheless, in most cases, NODA has proved to be more beneficial than ODA to the African nations.
Specificity of Policies and Institutions
NODA’s specific goals make it more effective than ODA, which has failed to supplement its broad Millennium Development Goals with specific policies. NODA’s success in establishing and achieving highly specific benchmarks is best exemplified through China’s healthcare aid in Africa. In the 2006 Forum on China Africa Co-operation (FOCAC) meeting, China offered to facilitate training of 15000 healthcare workers in Africa, build malaria prevention centers and double Chinese scholarships to African students. China’s recent $12 billion commitment to building 30 new hospitals in Africa offering “comprehensive medical services”, and the start of construction of a hospital in Nigeria, shows that it has taken positive steps in this direction. China has been successful in its assistance largely because it identifies the sectors it wishes to target and the results it hopes to achieve. Also, as Anshan and April note, FOCAC produces impact assessment reports every four years. While other development organizations also conduct impact assessments, FOCAC’s specific assistance makes it easy for recipient nations to measure its effectiveness through specific benchmarks. Thus the specific nature of FOCAC contributes to the effectiveness as well as accountability of aid.
Not only do NODA’s specific programs improve effectiveness and accountability, they also enable it to recognize and respond to local problems and involve local people in the solution process. As discussed in the previous section, the MDGs fail to acknowledge the link between poverty, hunger and agriculture, and donors of ODA blindly include the MDGs in their implementation strategies without paying adequate attention to local needs. In contrast, as pointed out in a report by the South African Institute for International Affairs, China has identified agricultural investment as the key to achieving the first MDG and increased its agricultural investment in Africa, particularly through private Chinese companies and banks. The report points out that the lack of infrastructure, particularly irrigation facilities, severely compromises Africa’s agricultural productivity. In 2012, at the Fifth Ministerial Conference of the FOCAC in Beijing, Chinese president Hu Jintao announced measures to improve irrigation through well drilling and water supply projects and the expansion of agricultural technology demonstration centers, platforms for Chinese experts to share their technological know-how and experience with local people. China’s programs have helped boost agricultural productivity, with yields per hectare rising to 8-9 tonnes. Not only was China able to identify the link between agriculture and poverty reduction, it accurately identified lack of infrastructure at the local level as the root cause behind low agricultural productivity in Africa. China also involved local stakeholders in the solution through its technology demonstration centers.
While NODA makes more specific investments and does not suffer from ODA’s problems of over-institutionalization, most donors of NODA lack a centralized national institution at the political level that could be accountable to recipient governments. A recent study by the NYU Wagner School points out that China lacks a centralized aid agency affiliated with its foreign affairs ministry and directs all of its investments through institutions such as the Export-Import Bank (EXIMBank) under the Ministry of Commerce. Since the foreign affairs ministry is responsible for political diplomacy, an aid agency tied to the foreign affairs ministry would better take into account recipient interests in order to maintain friendly diplomatic relations. NODA’s aid agencies, linked to their commerce ministries, tend to place the donors’ commercial interests over the recipients’ development needs.
However, China has taken some steps towards institutional reform. Campos and Vines point out that all Chinese projects in Angola are inspected by third party organizations in Angola not funded by EXIMBank’s credit line. The presence of third party inspectors makes aid from China accountable to the government and local organizations in Angola, in turn ensuring China’s aid is effective and beneficial to Angola. The FOCAC, established in 2000 under the Ministry of Foreign Affairs, is another positive step towards institutionalization and accountability. While the actual funds to Africa are still primarily channeled through the EXIMBank, FOCAC has been successful in negotiating clear and concrete commitments by China on providing aid to a large number of African countries. China’s attempt to reform its assistance strategies carries hope for the people in Africa.
A Competitive Foreign Aid Market
NODA is rapidly emerging as a popular form of development assistance due to its benefits over ODA. While ODA’s standards of development could serve as blueprints to benefiting recipient nations in both the economic and social spheres, these standards remain somewhat theoretical and ODA has largely failed in implementing them in the recipient countries. At the same time, while NODA has certainly succeeded in establishing huge infrastructure projects and creating jobs, economic growth does not necessarily translate into commensurate social benefits for the people in the recipient nations, as seen by deteriorating working standards in Zambian mines. NODA’s limitations, particularly its focus on the commercial interests of its donors, compromise the extent to which its soft power strategies can be beneficial to recipient nations.
While NODA cannot and should not be a perfect substitute to ODA, its presence could prompt a reform process in the methodologies of delivering ODA. Deborah Brautigam points out that while donors like China tend to focus on huge economic investments and infrastructure development, the older donors of development assistance tend to focus more on the social sector and benefits to people in recipient nations (Brautigam 761). ODA’s high standards and the MDGs can be successful if combined with NODA’s methodologies such as linking aid to commerce and having specific goals. For instance, a World Bank (ODA) project in Mali focused on reducing transit costs of exporting mangoes from Mali, a land-locked country, to Europe through multi-modal transport (combining rail, air and sea transport). The strategy dramatically increased export revenues for Mali and enhanced returns to local mango producers. The World Bank’s well designed program allowed it to achieve quick economic results and its guiding principles improved the lives of mango producers. By posing a challenge to ODA in the development assistance regime, NODA could prompt it to redefine its methodologies and develop innovative assistance strategies like the multi-modal transport scheme in Mali.
The increased competitiveness in the development assistance regime has begun pushing both ODA and NODA to take their recipients’ interests more into account than ever before. Kaplan speaks of how China and India have been trying to “woo” Africa through their development assistance programs and have increased their development assistance in the process. While he does not explicitly mention the US in this competition, the fact that he chooses to highlight this phenomenon in his book on US policy in the Pacific shows that the US should and is taking the emergence of NODA seriously. Competition between sources of assistance, and the resulting increase in development assistance, has served to benefit Africa: it has improved economic growth considerably in Africa since 2003 and the number of African countries with multi-party governance, civil rights and a free media has risen from three in 1977 to eleven in 2011. Competition has also allowed recipient nations to have a greater say in their development strategies. In 2002, Angola refused assistance from the IMF to solve its problems of hyperinflation because of the latter’s strict preconditions. It subsequently secured a $2 billion credit line from China without any preconditions and used it successfully for several infrastructure projects. From a passive recipient of foreign assistance, Angola transformed to an active consumer expressing a choice, choosing quick assistance without preconditions over delayed assistance due to preconditions. If NODA was not present as a competitive alternative to ODA, Angola could not have taken such a strong stance against the IMF without compromising its economic development. In order to sustain their donors’ interests, all forms of development assistance are being forced to better respond to the interests and voices of their recipients.
As NODA gains popularity among recipient nations, the development assistance regime will inevitably modify itself and expand to include NODA. Both ODA and NODA are guided by the economic and political interests of their donors and in many cases, this limits their ability to be effective in benefiting their recipients. Even so, NODA’s emphasis on soft-power, local involvement and specific targeted agendas has made it more effective than ODA in establishing benefits to recipients. In the long term, the competition between ODA and NODA could lead to reforms in the models of development assistance to better suit the interests and demands of recipient nations, thereby increasing the efficacy of development assistance.
Rhea Kumar (’18) is an Undeclared major in Branford College.
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- Lum et al, China’s Assistance, 1.
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