Thursday 07 Oct 2021 | 12:17 | SYDNEY
Thursday 07 Oct 2021 | 12:17 | SYDNEY

Asia emerging donors transform aid


Danielle Cave


9 February 2012 13:30

Asian countries have been providing foreign aid, in various forms, for decades. However, over the past few years these newer (or 'non-traditional' or 'emerging') donors have begun to have a noticeable impact on the global development picture

Graph compares annual aid budgets of OECD donors with estimates (in yellow) of those of emerging donors. Courtesy of the Center for Global Development.

Asian economies have growing financial resources, expanding strategic interests, and rapidly increasing dependence on imported energy, food and minerals. It comes as no surprise they are building up development assistance programs to use in their expanding foreign policy objectives.

Asian donors are using these growing aid programs to form new and influential relationships in developing countries in the Asia Pacific, across government, civil society and the private sector. As these relationships evolve and strengthen, they alter the social, economic and political development of the Asia Pacific, a region which, by 2016, will be responsible for 42% of the world's GDP (based on PPP; in comparison, Europe and North, South, Central America and the Caribbean combined will have 49% of the world's GDP in 2016). 2016 is also the year the Chinese economy is set to surpass of the US. We are well and truly living in an Asian Century.

Since the Cold War, newer Asian donors including China, India, South Korea, Thailand, Malaysia, Indonesia and Singapore have been growing, dispersing and refining their aid programs. Strategy, tighter commodities markets and a glut of donors means foreign aid is increasingly acquiring a geostrategic edge. For aid recipients, emerging-country donors will be attractive for reasons other than strategy and self-interest; the emerging economies' own stunning economic successes offer an alternative model for developing countries.

In delivering aid, Asian donors often have different motivations and expectations to those of traditional donors. A combination of local and regional stabilisation, humanitarian concerns, commercial interests and geo-strategic factors tend to be the primary forces motivating emerging donors in Asia. Of course, each donor is developing and polishing their own unique characteristics.

The Fourth High Level Forum on Aid Effectiveness in Busan recognised the opportunities for 'South-South' cooperation (aid and development co-operation between developing and emerging economies). Yet there is no indication that the discussion in Busan will convert into formal cooperation between traditional and emerging donors. Such cooperation is resource- and labour-intensive. China, for example, is still grappling with a burgeoning and increasingly complex foreign policy framework, not to mention a series of precarious security concerns. Aid cooperation with OECD (traditional) donors is surely very low on China's foreign policy agenda, despite the donor-led development policy scramble to Beijing.

China, the most dominant and influential emerging donor, has arguably become the 'go-to donor' for many recipient countries in the Asia Pacific (despite calls from the US for recipients to be 'smart shoppers'). This trend will continue as long as large interest-free loans and grants are on offer with few strings attached.

China is not only one of the largest providers of aid in the region but also the largest foreign direct investor. For every Asia Pacific country, Australia included, managing relationships with China is core business. Many countries in the region are playing out their own complicated and drama-riddled versions of Australia's future wedged between Washington and Beijing. In some cases, the balancing act involves becoming caught between the US and China, while for others it is maintaining a peaceful equilibrium between Beijing and New Delhi.

No doubt analysis of Asia's increasingly influential donors and their impact on our region will form a vital aspect of the Asian Century White Paper due out later this year. Throughout 2012-13, the Lowy Institute too will conduct research and host events focused on the emergence and transformative nature of Asian aid donors and their impact on the Asia Pacific.