Sunday, June 25, 2017

Aid and development

International aid and development assistance are important contributors to the economies of the Lower Mekong region. All Lower Mekong countries receive official development assistance (ODA), with Thailand also contributing ODA as a donor. Nevertheless, the region accounts for just 3.6 percent of the world’s total ODA received, a low figure considering the significant military conflicts that the region has faced in the last five decades and the resulting developmental and humanitarian challenges.

 Total ODA figures

ODA is the flow of resources from official agencies (including governments and government agencies) where economic development and welfare is the main objective. The assistance must be concessional – there must be a grant element.
The total amount of ODA received in the Lower Mekong was US$5.5 billion in 2015, US$1.7 billion less than the previous year.1 While ODA to Laos was basically unchanged, there were falls for Vietnam (US$1 billion less), Thailand (US$296 million less), Myanmar (US$216 million less) and Cambodia (US$125 million less). Over the last decade, Vietnam has received the highest annual amount of ODA among the Lower Mekong countries by far; in 2015, its US$3.2 billion ODA income made up over half the total amount of the five countries together.2

In 2013, the amount of ODA Myanmar received increased almost seven times to US$3.9 billion.3 Myanmar’s increase came as it continued to remove barriers to trade and restrictions on foreign entities operating within its borders. Western donors, such as Australia, the European Union and the United States, had committed only limited humanitarian aid in Myanmar following the 1962 military coup, complaints of the repression or rights, and intermittent political instability over several decades. They began expanding assistance and re-establishing local offices following moves towards greater transparency and democracy, especially after 2011.4 The massive increase was not sustained, however, and Myanmar’s 2015 ODA figure of US$1.2 billion was less than a third of the figure of 2 years earlier.
In 2015, ODA comprised 4.0 percent of Cambodia’s gross national income (GNI), 4.0 percent of Laos’ GNI, 2.0 percent of Myanmar’s, 1.7 percent of Vietnam’s and close to 0 percent for Thailand. This places Cambodia and Laos in the “medium aid dependency” category and the others in the “low aid dependency” category.5 Although Vietnam received the highest level of ODA in 2015, Laos and Cambodia both received a higher rate of ODA per capita at US$69 and US$43 respectively, followed by Vietnam (US$34), Myanmar (US$22) and Thailand (US$0.9).6 The average for the Lower Mekong was US$33, compared to the world average of US$21.7

Top donors
The majority of ODA to developing countries comes from the 29 members of the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD). Fifteen of these are among the region’s top donors.

A donor country’s aid commitments can change significantly after a change in national administration. In March 2017, for example, plans for enormous changes for funding by USAID to developing countries were unveiled in the United States.8 Although the details are not yet settled, proposals include cutting aid to developing nations by over a third, merging USAID with the State Department and realigning funding to tie it more closely to US national security objectives. The proposed changes would take place in fiscal year 2018.

Chinese contributions
Although not listed in the chart of the 15 top donors to the Lower Mekong, China is a large contributor to the region. The exact amount is difficult to determine, as China does not classify its assistance according to ODA standards set by the Development Assistance Committee (DAC). Some of its contributions are not transparent, and observer estimates vary enormously, partly depending on where the line is drawn with concessional loans. For example, JICA Research Institute has estimated China’s total “net foreign aid” at US$5.4 billion in 20139, while the RAND Corporation estimated China’s foreign aid programmes for 2013 at US$317 billion10 – a massive difference. While many western aid programmes are based on grants, China’s aid is largely made up of pledges to lend. Another key difference is the focus: 75% of Chinese aid reportedly goes to natural resource and infrastructure projects, with less than a quarter to humanitarian work.11
See below for a map of Chinese financial aid projects in the Lower Mekong, and explore the full profiles dataset here.

The establishment of the China-led Asian Infrastructure Investment Bank in October 2014 will add a further US$40 billion for infrastructure, while also giving China greater influence in regional development and policy.
Aid for infrastructure development
Donors and development assistance agencies such as the Asian Development Bank (ADB), have prioritized infrastructure projects to meet the demands of these transitions. These projects include hydropower generation and grid extension, road and bridge construction.12 The ADB alone has funded infrastructure projects worth about US$11 billion since 1992.
A man operates a bulldozer during the leveling of and upgrading of a road base in Cambodia. Photo by Asian Development Bank, taken on 15 February 2011. Licensed under CC BY-NC-ND 2.0.

A man operates a bulldozer during the leveling of and upgrading of a road base in Cambodia. Photo by Asian Development Bank, taken on 15 February 2011. Licensed under CC BY-NC-ND 2.0.

Finding a balance
Large projects, such as infrastructure development, have far-reaching and sometimes unintended effects. The environmental and social impact of such projects, such as the mass relocation of people living on affected lands,  sometimes results in criticism of the donors involved. In providing aid to promote economic development, responsible donors aim to balance the needs of governments, the private sector and the rights of local communities.
Both country donors and large institutions are sometimes criticised for the projects they support. In March 2017, the advocacy group Inclusive Development International (IDI) and partners released a report looking at the activities of the International Finance Corporation (IFC), the World Bank’s private-sector arm.13 It found that the IFC provides funding that supports development with profound environmental and social impacts, including displacing local populations and damaging their livelihoods. This is despite IFC’s purpose of reducing poverty through sustainable development and requirements that it protect people and the environment.

Sustainable Development Goals
An important global guide to aid and development is the 2030 Agenda for Sustainable Development adopted at the United Nations Sustainable Development Summit in September 2015.14 The Agenda includes 17 Sustainable Development Goals (SDGs) – successors to the UN’s Millenium Development Goals that ended in December 2015. The 17 SDGs are: (1) No poverty (2) Zero hunger (3) Good health and well-being (4) Quality education (5) Gender equality (6) Clean water and sanitation (7) Affordable and clean energy (8) Decent work and economic growth (9) Industry, innovation and infrastructure (10) Reduced inequalities (11) Sustainable cities and communities (12) Responsible consumption and production (13) Climate action (14) Life below water (15) Life on land (16) Peace, justice and strong institutions and (17) Partnerships for the goals. There are 169 associated targets.
Each country localizes the programme, setting indicators against which local progress can be measured. The SDGs are then integrated into national planning.

Aid and development terms
Official Development Assistance (ODA):
Financial aid given by governments and related agencies of developed countries to promote the economic development and welfare of developing countries. Aid may take the form of grants or concessional loans. Loans and credits for military purposes are generally excluded.
Bilateral aid:
Bilateral ODA flows direct from one donor government to one recipient government. Some key bilateral donors include Japan (JICA), China, Australia, France (AFD), Switzerland (SDC), and the United States (USAID).
Multilateral aid:
Multilateral ODA is channelled through development agencies such as the World Bank, the European Union, the Asian Development Bank (ADB), and various United Nations (UN) organizations that draw from more than one government’s assistance to provide support to a country.
Development Assistance Committee (DAC) donors:
The majority of ODA to developing countries comes from the 29 members of the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD). The DAC donors have to abide by the DAC guidelines in formulating and reporting on the national development cooperation programs. DAC members are mostly European states, but also include Australia, Canada, and the USA.
Non-DAC donors:
Donors are outside the OECD-DAC member group. They are often referred to as ‘new’, ‘emerging’, ‘non-traditional’, or ‘non-western’ donors. Non-DAC donors as a whole are increasingly using ‘aid’ as one part of a larger set of foreign policy instruments—which may encompass traditional grant aid, lines of credit, concessional loans, trade, investment, and technical cooperation—in their engagement with partner countries. With non-DAC donors such as the BRICS (Brazil, Russia, India, China and South Africa) growing in economic clout, the role and influence of non-DAC donors in changing the aid landscape is set to increase, particularly in the Lower Mekong region.

Related to aid and development

1. World Bank. “Net Official Development Assistance and Official Aid Received (Current US$). Accessed 5 May 2017.
2. Ibid.
3. Ibid.
4. “Burma, History.” Accessed 5 May 2017.
5. OECD defines “low aid dependency” as an ODA/GNI ratio below 3 percent and “high aid dependency” as greater than 9 percent. OECD. 2003. Harmonising Donor Practices for Effective Aid Delivery. Paris: OECD, 111; World Bank. “Net Official Development Assistance and Official Aid Received (Current US$).” Accessed 5 May 2017.; World Bank. “GNI, Atlas Method (Current US$).” Accessed 5 May 2017.
6. World Bank. “Net ODA Received Per Capita, (Current US$).” Accessed 5 May 2017.
7. Figures based on 2013 ODA levels reported by OECD, and 2013 population figures provided by the Asian Development Bank.
8. Bryant Harris, Robbie Gramer, Emily Tarkin, 2017. “The End of Foreign Aid As We Know It”, Foreign Policy, April 24 2017. Accessed 5 May 2017
9. JICA Research Institute 2016. “JICA Research Institute Releases an Update on the Estimation of Chinese Foreign Aid”, June 30 2016. Accessed 5 May 2017.
10. Charles Wolf Jr 2015. “China’s Foreign Aid Offensive”, June 29 2015, Accessed 5 May 2017.
11. Ibid
12. For example, JICA funded the Can Tho Bridge in Vietnam. JICA. 2010. JICA and Mekong Delta. Hanoi, Vietnam: JICA. Accessed 22 July 2015.
13. Inclusive Development International, 2017. Reckless Development: The IFC’s Dodgy Deals in Southeast Asia Outsourcing Development: Lifting the Veil on the World Bank Group’s Lending Through Financial Intermediaries, Part 3, March 2017. IDI March 2017. Accessed 5 May 2017.
14. United Nations 2015. “Transforming our world: the 2030 Agenda for Sustainable Development.” Accessed 5 May 2017.



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