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Opinion

July 6, 2017

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Aid beyond self-interest

In recent years, there has been significant focus on Chinese aid policies and practices. This is largely because China has become a global development actor and has been investing heavily in numerous countries.

According to the 2014 White Paper – released by the Information Office of the State Council of China – between “2010 to 2012, China appropriated in total Yuan 89.34 billion ($14.41 billion) for foreign assistance in three types: grant (aid gratis), interest-free loan and concessional loan”. The same document further adds that 36 percent was in grants, nine percent was interest-free loans and 56 percent was concessional loans. Overall, 121 countries received aid from China, including 30 in Asia, 51 in Africa, nine in Oceania, 19 in Latin America and the Caribbean and 12 in Europe. Similarly, agriculture, education, health, industry and infrastructure are the primary sectors where most Chinese development assistance is targeted.

Based on its overall aid budget, China’s bilateral foreign aid has been ranked at the sixth position since 2012, next to Japan and France. As a result, China is moving “from its traditional largely passive role in international development governance to a new role as a proactive institutional and conceptual innovator based [on] a large view of geography and development”. On account of its expanding aid programme, China has gradually emerged a key development actor in the global development landscape and has become “much more assertive in international development, trade, environment and foreign aid policies”.

However, with its emerging global role, Chinese aid policies and practices have also come under strict scrutiny and criticism in numerous countries – particularly in Africa. Firstly, critics have argued that unlike traditional or Western aid-providers in the case of China’s development financing, “aid, trade, and investment are seen as interconnected”. It is asserted that the boundaries between aid per se and trade and investment are blurred. Instead of looking at aid exclusively and separately from other modes of development financing – as is the case with traditional donors – China’s development cooperation involves ‘the aid-business-trade model’ as it combines all three elements into a single strand.

When China’s aid is examined under the same set of definitions, standards and parameters as those established by the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD), it becomes evident that there is no clear differentiation between aid and other developmental financing in the form of trade, investment or even soft loans.

With regard to the aid-allocation policies to various countries under these initiatives, critics have maintained that China’s foreign assistance programme is primarily driven by Beijing’s trade and commercial interests and the desire to get access to natural resources and new markets. In his article in Foreign Policy magazine in 2007, Naím pointed out that development cooperation from China is largely aimed to ensure access to raw materials in developing countries – particularly energy. The writer called it “rogue aid” driven primarily by self-interest. There are various other studies – citing specific cases and examples but lacking rigorous empirical analysis – where it is stated that China allocates most of its aid to countries that serve as markets for finished Chinese products as well as suppliers of various raw materials.

However, prioritising economic, political, security and diplomatic interests has influenced the foreign aid policies of a majority of DAC and non-DAC donors during as well as after the cold war period. There are well-documented studies backed by strong empirical analysis that bilateral aid allocation from most Western donors has been motivated and influenced by foreign policy pursuits and diplomatic goals. As a result, China as a donor is perhaps not alone in using aid as a foreign policy tool in the pursuit of economic, political and diplomatic interests along with poverty reduction and developmental objectives. It has remained the modus operandi of most donors to use aid as a veritable arm of foreign policy.

The US-Pakistan aid relationship is a typical example of a ‘marriage of convenience’ where the US was the largest aid provider to Pakistan when the former needed the latter to pursue its geo-strategic goals in the cold war era as well as in the so-called war on terror period. Hence, there has rarely been altruistic aid without ulterior motives of one kind or the other.

In addition, contrary to the criticisms of China’s aid being driven primarily by selfish interest, a research study by Dreher and Fuchs in 2015 illustrates that this is actually not the case. Analysing Chinese project aid, food aid, medical staff and total aid allocations to 132 developing countries in various regions between 1956 and 2006, they empirically tested the extent to which China’s commercial and political interests have shaped its foreign aid allocations.

Based on their empirical assessment, the researchers have asserted that as compared to traditional donors, China does not appear to be paying significantly more attention to politics in aid allocation. In addition, they stated that in contrast to widespread perceptions, there is no substantial evidence that China’s aid allocation is dominated by natural resource endowments. They have argued that “denoting Chinese aid as ‘rogue aid’ seems unjustified”.

Another key characteristic of China’s aid is the willingness of the Chinese government to finance infrastructure projects in energy, transport and communication. It is believed that with time, China’s impact and role is going to be more pronounced and integral in the arena of international development as it has been investing substantially in countries where traditional donors have been less active (ie fragile states) and in sectors that have remained neglected and underfunded – such as infrastructure.

Large investment in “the productive sectors, including agriculture, along with investment in core infrastructure” is welcomed by numerous developing countries as many Western donors have prioritised social sectors and broader policy interventions around ‘human rights’ and ‘good governance’. There is no doubt that China has put substantial aid resources into the field of infrastructure – an area where Western countries are unwilling to invest.

In order to allay the perceptions that Chinese aid is far more self-centred, it is also important to bring more transparency about its aid policies and programmes. The two white papers – published in 2011 and 2014, respectively – are the right initiatives at the right time. It is appropriately pointed out that: “with the expansion of China’s assistance scale, however, the lack of systematic and standardised aid quality monitoring and evaluation will become an increasing and prominent disadvantage”.

Although the government of China has come up with reasonable policy and institutional measures to streamline and strengthen its aid portfolio, these steps are not sufficient to fully address the challenge and effectively deal with its expanding aid programme.

 

The writer is a postdoctoral research
fellow at the German Development
Institute at Bonn, Germany.

Email: [email protected]

 

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