International Development Cooperation
By Zhang Yunfei
Amid rising global development funds in recent years, developed countries remain the main players despite their declining share, while developing ones have emerged as impressive forces with profound influence in international development cooperation (IDC).
I. Official development assistance remains dominant, but its effectiveness is challenged.
Developed countries dominated international development cooperation (IDC) in the past 70-plus years, providing grants or preferential loans through Official Development Aid (ODA) to developing peers or multilateral development agencies, as a major way for them to promote global governance.
The OECD proposed that developed countries spend 0.7% of their gross national income (GNI) on development assistance, which has become an international yardstick of developed countries’ fulfillment of their duties in IDC. The 30 members of OECD Development Assistance Committee (DAC) contribute more than 80% of global assistance to developing countries every year. Among them, nearly all international assistance of the US, Canada, the UK, Italy and Australia is aid given gratis, and 84% of the international assistance of Germany is free assistance. ODA has become a major source of development funds for many developing countries and some least developed countries (LDCs), in particular, rely on international assistance as their main source of fiscal revenue.
Major western donors enjoy geographical, cultural and linguistic advantages in Africa. Africa has close historical, linguistic and cultural links with countries such as the UK, France, Portugal and Germany whose values, institutions and models are highly recognized in their former colonies. Developed countries focus on aid for social issues and well-being, such as medical care, disaster mitigation, education and the environment, which are highly visible and to the direct benefit of ordinary people. In addition, developed donors have paid close attention to the role of NGOs and built solid partnership with them who trickle down foreign assistance to the grassroots in the recipient countries.
Developed countries have accumulated rich experience in IDC from their operation in the past 70-plus years. On the one hand, they have put in place complete and mature aid administrative and operational mechanisms backed by sophisticated supervisory and evaluation systems. The series of criteria and guidelines developed by the DAC aim to coordinate and regulate assistance of its members and supervise their assistance by peers review. Developed countries tend to follow or take as reference DAC rules and criteria despite their non-binding nature. Most developed countries have well-developed aid legislations and designated aid agencies to coordinate relations with other government departments. Independent and transparent supervision and evaluation are established to ensure effective use of aid funds and smooth operation of projects. On the other hand, rules making is dominated by the OECD and its members thanks to their well-developed IDC theoretical system and huge influence in this landscape. They are home to a number of think tanks on IDC and their universities run IDC majors. The OECD annual development cooperation report and research papers give timely review on IDC experience and lessons and put forward solutions. In addition, developed countries value exchanges and cooperation among themselves by regularly holding international assistance seminars to discuss cooperation fields and aid directions and jointly supporting some large projects in the recipient countries.
Despite its impressive progress in education and health care, ODA of developed countries did not make a fundamental difference to economic development in the recipient countries. Many recipient countries remain trapped in abject poverty due to some deep-seated problems in the current IDC system.
First, developed countries are less willing to provide aid, which is the primary reason behind the ineffectiveness of ODA. For years, ODA of most developed countries have never reached the 0.7% threshold. To make it even worse, developed countries, in recent years, suffered economic slowdown due to the international financial crisis and, as a result, less political will and capacity in IDC. According to the OECD Development Cooperation Report 2018, official development aid from OECD/DAC members totaled USD 146.6 billion in 2017, 0.31% of their combined gross national income, a decrease of 0.6% from 2016 in real terms and well below the 0.7% target. Among the DAC members, only Denmark, Luxembourg, Norway, Sweden and the UK hit the 0.7% mark. Except for the UK (USD 17.9 billion), the other four major donors—US (0.18%, USD 35.3 billion), Germany (0.66%, USD 24.7 billion), Japan (0.23%, USD 11.5 billion) and France (0.43%, USD 11.4 billion)—all missed the mark. In recent years, to ease pressure on humanitarian aid, developed countries pushed for the inclusion of humanitarian emergency fund and ODA. In 2017, humanitarian emergency fund reached USD 15.5 billion, accounting for 10.6% of all ODA, which means less funds for other fields and purposes.
Second, developed countries promote their values and development models through ODA and usually attach political conditions to their aid. Due to their poor governance capacity and heavy dependence on international assistance, some recipient countries were forced to accept tough political conditions centered on western democratization as required by their donors. However, owing to different national conditions, the introduction of western democracy tended to trigger internal conflicts and social upheavals. Since late 1980s, a number of African countries suffered large-scale political crisis and even bloody conflicts in their rush to political democracy and economic privatization. Far from politically and socially stable, some of them are still prone to humanitarian crisis, in no small part due to the aid policy of western countries.
Third, developed countries’ international strategies figure prominently when they providing assistance. The UK and France are more interested in their former colonies; Japan seeks more influence in its neighborhood and the UN, with focus on Southeast Asia and Africa; and the US was blunt when it said “it will no longer provide indiscriminate assistance”, with most of its aid flowing to Afghanistan, Egypt, Jordan and Kenya etc. As a result, some countries who badly need assistance have no access to foreign aid, as ODA to LDCs represented 0.09 per cent of DAC countries’ gross national income, well below the established target of 0.15-0.20 per cent ODA/GNI to LDCs.
Fourth, ODA suffers burdensome, inefficient and wasteful implementation procedures with high administrative cost, as a large part of aid budget is used for conferences and evaluations. According to a World Bank report, such cost was so high that 85% of foreign aids from western countries were not spent on the issues when the funds were earmarked and only 15% of ODA were used for their original purposes. In addition, a myriad of actors—development consulting firms, NGOs and individuals work on diverse and disperse issues, leading to the fragmentation of foreign aids. A large part of the funds flow to soft infrastructure such as democracy building, human rights, culture and education, which prevents the recipient countries from focusing on economic development and poverty alleviation.
In recent years, ODA is widely criticized in developing countries for its ineffectiveness. In her work Dead Aid, the renowned Zambian-born economist Dambisa Moyo was vocal against the ODA policy of developed countries, arguing such patronizing and condescending aid is “the silent killer of growth” that has not boosted economic development in Africa, but rather put it in the trap of dependence.
II. Increasingly important South-South cooperation faces a host of challenges.
South-South cooperation was born in mid-1950s. The Bandung Conference in April 1955 established the principles of South-South cooperation, proposing cooperation on funds and technologies among developing countries and displaying prospects of a new type of cooperation featuring equality and mutual assistance among Asian, African and Latin American countries. The Non-aligned Movement and the Group of 77 identified the fields, contents, ways and guiding principles of South-South cooperation, thus laid its organizational foundation. The Buenos Aires Plan of Action adopted by the United Nations in 1978 added more substance to South-South cooperation. In the 21st century, particularly after the international financial crisis in 2008, developing countries have been conducting closer cooperation on development, with growing international influence. Emerging economies led by BRICS countries have become active players and advocates for South-South cooperation. In the Second UN High-level Conference on South-South Cooperation held in Buenos Aires in March 2019, UN Secretary General António Guterres gave high credit to South-South cooperation, saying it had lifted millions out of extreme poverty, helped developing countries achieved some of the fastest economic growth rates ever seen and set global standards for sustainable development. Given rising unilateralism and protectionism, greater South-South cooperation will add to global development momentum, tap potentials in cooperation and growth, and give developing countries a greater say in IDC.
The unique strengths and development philosophy of South-South cooperation are increasingly well received in the developing world. The first strength is equality and mutual benefit. South-South cooperation partners are committed to equality, mutual benefit and non-interference in domestic affairs. Due to their same or similar national conditions, difficulties and challenges, many partners are recipients and donors at the same time, which gives them unique perspectives on development. Economic outcomes are the primary objective in South-South cooperation which puts less restrictions on the use of aid funds, fully respects the autonomy and development needs of the recipient, and places more emphasis on mutual benefit and win-win. The second strength is economic complementarity. At different development stages and with diverse economic structures, some developing countries are emerging industrialized countries and others agricultural countries; some have a complete set of economic sectors and others are specialized in one sector; and some are only left with backward technologies and others equipped with advanced ones. Such complementarity in industrial mix and needs makes cooperation among them possible and easier. The third strength is mutual learning in economic development. Facing the common challenge of growing economy and improving people’s well-being, South-South cooperation partners focus on agriculture, industry, economic infrastructure and public facilities etc. Having suffered the same difficulties confronted by the recipient countries, emerging economies offer development pathways and concepts more suitable for peer developing countries. With more insights into the need of their fellows, emerging economies provide more practical technologies, more viable cooperation projects, and thus more targeted assistance.
In early South-South cooperation, there were few donor countries other than China, India, Saudi Arabia and Brazil. As their economies develop and foreign policies evolve, a growing number of developing countries, such as Indonesia, Kazakhstan and Mongolia, began to provide and expand aid. According to the DAC, Saudi Arabia, the UAE, Turkey, China, India, Qatar, Russia, Mexico and Brazil are among the top 30 donor countries in the world. In addition, the BRICS New Development Bank launched in July 2015 and the Asian Infrastructure Investment Bank founded in the following December have narrowed the gap and added more substance in international development financing.
South-South cooperation is also confronted with many challenges. First, funds are the primary barrier to greater South-South cooperation. Except for a few high-income countries (mainly Arabic states), many donor developing countries are, at the same time, recipient countries facing onerous development tasks and protracted capital shortage. Second, due to the absence of an effective coordination mechanism and divergence in regulations, criteria and statistics, fragmentation in aids has led to institutional overlapping, competition and even tensions. Developing countries differ greatly in resource endowments, political and economic institutions, culture, religious faith, development model, economic stage, foreign policy and geopolitics, indicating there is still a long way for South-South cooperation to go. Moreover, the current foreign aid administrative systems of development countries leave much to be improved. Policies and laws remain underdeveloped in many of these countries whose foreign aid systems are composed of scattered departmental rules. Most of them do not have standalone foreign aid administrative agencies, complete development assistance plans, and comprehensive and effective supervisory and evaluation systems.
III. The future of international development cooperation remains uncertain, with both competition and cooperation.
As developing countries become more prominent in the global economic landscape, South-South cooperation has become increasingly influential in the development landscape which in turn becomes more complex with more players. The coming years will witness intensified competition on the IDC order and rules. Cooperation and competition will be intertwined among developed and developing countries, with the following trends:
First, developing countries will strive for a greater say on IDC. The evolving international political and economic landscapes require further adjustment to the IDC rules. Developing countries place more emphasis on autonomy and uniqueness in their development cooperation, calling for inclusion of more aspirations from developing countries into the IDC rules. For example, the Global Partnership for Effective Development Cooperation (GPEDC) proposed by the OECD/DAC in 2016 was resisted due to its failure to take into consideration the views of developing countries. Some think tanks in developing countries contribute to institutional building in South-South cooperation by exploring a tailor-made statistical and evaluation system.
Second, the IDC rules will change even faster. To maintain their dominant position in the IDC, developed countries, on the one hand, attempt to include South-South cooperation into their foreign assistance system, make evaluation on such cooperation with existing OECD criteria, invite emerging economies to join the DAC or ask them to provide aid data; on the other, they keep fine-tuning their aid policies and rethink traditional aid criteria—relevance, effectiveness, efficiency, impact and sustainability in the belief that these criteria be reviewed and adjusted as appropriate. At the same time, western donors come to recognize such financing practices as preferential loans and preferential export buyer’s credit adopted by countries like China and India to help other developing countries. Western donors have also stepped up coordination between ODA funds and diverse financing channels and pushed for Public-Private-Partnership (PPP) in development assistance.
Third, the Sustainable Development Agenda has become a shared priority for South-North and South-South cooperation. The 2030 Sustainable Development Agenda adopted by the United Nations in 2015 covers a wide range of issues—elimination of poverty and hunger, health, education, gender equality, energy, economic growth and the environment. With “sustainable development” as the overall goal, the Agenda has connected political, economic, social and environmental issues with development and transcended the boundary between developed and developing countries. The Agenda is composed of 17 Sustainable Development Goals and 169 targets. Despite different preferences among developed and developing countries, the former on freedom, justice, the rule of law and human rights and the latter on poverty reduction and economic growth, countries around the world recognize a wide range of challenges—natural disaster, environmental degradation, communicable diseases, transnational crimes and terrorism—can only be effectively addressed through concerted efforts. To help developing countries realize the SDGs have become a priority when countries formulate their IDC programs. The G20 Hangzhou Summit in 2016, for the first time, developed an action plan on the 2030 Agenda for Sustainable Development, which put the issue of development at a central position, which is unprecedented. In spite of divergent views on specific topics, the action plan made a breakthrough in the dialogue on the development issue among developed and developing countries.
Fourth, the Belt and Road Initiative (BRI) provides a new pathway and platform for IDC. The BRI has come a long way in the past six years, from blueprint to reality and from a Chinese proposal to its inclusion in the UN document. The BRI has injected new impetus to the world economy and provided a major platform for IDC. By May 9, 2019, 131 countries and 30 international organizations have signed cooperation documents with China on the BRI. More than 6,000 delegates from 150 countries and 92 international organizations, including leaders from 38 countries and the UN and the IMF, attended the Second Belt and Road Forum for International Cooperation in Beijing in April, 2019. In the spirit of partnership featuring pursuing cooperation through consultation, the BRI has contributed to common development in participating countries and regions through bilateral, trilateral and multilateral cooperation. It can enhance the capacity of developing countries for independent development and fit perfectly well with the UN 2030 Agenda and the Agenda 2063 of the African Union, which will deliver a strong boost to South-South cooperation. At the same time, the BRI has shown a strong pulling effect globally, which has helped more developing countries get the attention and assistance from developed countries and international organizations. In late March 2019, China signed MOUs on BRI cooperation with Italy and then Luxembourg and Switzerland. Some other western countries also expressed their interest in getting on board. With a growing number of developed countries involved, it is believed that the BRI will become a best example of open and inclusive cooperation on international development.
Zhang Yunfei is Board Member of the United Nations Association of China (UNA-China).