Monday, August 15, 2011

New Donors of Foreign Aid

According to The Economist we are soon to see the creation of a new foreign assistance agency, the India Agency for Partnership in Development. This agency reportedly will have $11.3 billion to spend over the next five to seven years. The article describes the rise of new donors of foreign assistance, including China and Saudi Arabia. Brazil is also considering "setting up its own aid agency, gives up to $4 billion a year of assistance".
Wen Jiabao, the prime minister, has promised that in 2010-13 China will provide $10 billion in low-interest loans to African countries, bolster the China-Africa Development Fund by $1 billion (bringing it to $5 billion) and cancel debt owed by highly indebted countries with which China has diplomatic relations. In April this year the Chinese government issued its first white paper on its foreign-aid programme. The amount budgeted for aid had “increased rapidly” since 2000, it said, with growth of nearly 30% a year between 2004 and 2009.......

According to a new report by a non-governmental organisation called Global Humanitarian Assistance, aid (conservatively defined) from non-DAC countries rose by 143% in 2005-08, to $11.2 billion, before falling during the financial crisis. Aid from the BRICs (Brazil, Russia, India and China) more than doubled. The establishment donors’ aid monopoly is finished.
I suppose the most encouraging aspect of this story is that former recipients of foreign aid have progressed so much economically that their governments feel that they can now provide help for other still poorer nations. I find it encouraging too that these countries with their different experiences in social and economic development will provide new and different perspectives on foreign aid. The emphasis of China on support for infrastructure development seems especially useful, and indeed the approach by which China ties improving infrastructure to trade relations which encourage exports from the aided country over that road and port infrastructure seems interesting and potentially valuable.

On the other hand, it occurs to me that there are large geographic areas in Brazil, China, India and Russia in which poverty is a big problem and in which support for social and economic development seems to be very much needed. It has been hard to justify U.S. aid to countries with relatively large economies and relatively high average per capita income, since any such U.S. aid would be so small a part of their total development budgets. I can only hope that the countries with emerging foreign aid programs will continue to emphasize also domestic efforts to help their poor regions to develop and to fight poverty!

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