There’s a new class of members in the foreign-aid club, with China at the head. At this summer’s fifth Conference of the Forum on Africa-China Cooperation, the red dragon pledged $20 billion of new aid to the developing continent. That is more than spare change.
The Chinese commitment is symbolic of the dramatic paradigm shift taking place in foreign aid in the past decade. The BRICS economies — Brazil, Russia, India, China, and South Africa — are lending to countries that for decades relied on the Organization for Economic Cooperation and Development-Development Assistance Committee (OECD-DAC), a group of Western and like-minded states commonly referred to as traditional donors. Increasingly, aid is emanating not only from the BRICS. A second tier of emerging donors — South Korea, Venezuela, Indonesia, Saudi Arabia and Turkey, to name a few — also are playing a more prominent role in foreign aid.
While the figures are hazy, a working paper by the Center for Global Development indicates that emerging powers contribute between $11 billion and $42 billion in aid each year. China, the largest emerging donor, gives out more money today than the World Bank, according to the Council on Foreign Relations’ Elizabeth C. Economy. While the sheer volume is astounding, the reach of assistance also is expanding.
Many emerging donors have provided aid for decades, much in the form of technical cooperation and knowledge-sharing, often to countries in their own backyard. India, for instance, trained thousands of civilian and defense professionals through a technical and economic program since the early ‘60s. South Africa, Brazil and oil-rich Arab states have been channeling aid to projects and programs in Africa, South America and across the Middle East, respectively, for decades.
A new and fundamental transformation is taking shape. Emerging donors are becoming more tactical and organized. India, for decades the largest recipient of development aid, announced in 2011 that it would establish its own development agency and shell out about $11 billion over the next seven years. According to Indian officials, the new agency will be modeled around the U.S. Agency for International Development and will ensure that delivery is transparent and effective. Similarly, South Africa has proposed a development agency that promises to be “efficient” and “flexible.”
Among the new club of donors, China is the most watched and most criticized. Its disregard for good governance and environmental standards and continued relations with rogue and pariah states are widely condemned. It has been criticized for disorganization and irregular aid disbursements by both traditional donors and recipient nations. This is changing slowly as well. In April 2011, China released its first white paper on foreign aid, an unambiguous effort to outline its mission and showcase how its activities have been part of a concerted and thought-out national policy on aid.
Emerging powers are not shy about disclosing that their interest in foreign aid is both humanitarian and strategic. Aspirations to play a more prominent role on the global stage are at the forefront; the use of soft power to gain political leverage is fast becoming an essential policy tool. Regarding the launch of South Africa’s new development agency, an official openly noted that the agency was “not only a reflection of altruistic motives, but of how to advance South Africa’s own interests.” Similarly, India and Brazil have been candid about loosening their purse strings to win political favors at the United Nations, especially to gain a coveted seat on the U.N. Security Council.
At their end, recipient countries no doubt have welcomed the new money enthusiastically. The 2008 global financial crisis in particular provided a unique opportunity for emerging powers to step in as Europe and the United States crumbled into a prolonged recession. Their foreign aid budgets have contracted since.
Beyond the money itself, aid from the emerging powers is delivered faster and comes with no strings attached. In addition, a study by the Economic Strategy Institute says China’s “sheer competence and speed with which [it] is able to negotiate and execute its development programs is an important element of its appeal.” Moreover, emerging donors have effectively marketed their dual-role status as donors and recipients, further adding to the appeal of south-south cooperation.
That said, there are plenty of reasons for traditional donors to stay in business. First, data on emerging-donor assistance is hugely unreliable. While there are reports and estimations of disbursement figures, these are not monitored adequately and many figures simply are not disclosed. As a result, uncertainty remains about whether countries and even specific sectors are receiving the aid they need. Along the same lines, loans and investments from emerging donors do not undergo the same scrutiny — and may lack monitoring to enforce environmental and human rights standards. In contrast, OECD-DAC evaluates projects based on impact, sustainability, effectiveness, efficiency and relevance.
Second, aid from emerging countries is still largely regional or based on a shared identity. This may change, but as of yet, the largest disbursements for Brazil are to Portuguese-speaking countries and within the Caribbean; India’s largest disbursement is to Bangladesh; Saudi Arabia’s primary focus is within the Middle East; and so forth. There are large swaths of regions, not precluding emerging donors themselves, that are still in need of crucial foreign aid from traditional donors.
Finally, competition is not bad. So far the West — with the exceptionof five of the 22 countries of the OECD-DAC — have failed to muster the political will to meet aid commitments of 0.7% of gross national income pledged at the 2005 Group of Eight Gleneagles Summit. Fresh actors may result in more accountability in meeting commitments and attaining meaningful results from needy recipients.
Farah Thaler is associatedirector at the International Institutions and Global Governance program at the Council on Foreign Relations.