Donors like China let developing countries make their own decisionsby Romilly Greenhill / March 27, 2013 / Leave a comment
“China will continue to offer, as always, necessary assistance to Africa with no political strings attached,” President Xi Jinping promised on Monday. For decades, developing nations have been forced to jump through hoops in order to access cash from aid agencies. Now they are starting to push back, bolstered by support from “non-traditional” sources of development assistance, including large emerging economies such as China and India, philanthropists such as the Gates Foundation and “social impact investors” such as the Shell Foundation. Xi’s statement of intent underscores the enormous consequences of a rapid growth in aid from non-traditional donors.
In 2011, the World Bank suspended aid to Cambodia over concerns about land evictions in the country’s capital, Phnom Penh. Rather than bow to pressure, Cambodia declared its intention to phase out World Bank lending to fund new infrastructure. At first glance, this is surprising: as one of the poorest and most aid-dependent countries in South East Asia, why is Cambodia refusing support from a major funder of infrastructure?
The answer, of course, is China, which now provides more than twice as much aid to Cambodia as the World Bank, and has shown strong interest in meeting the country’s infrastructure needs. Cambodia likes Chinese aid: it is faster and less bureaucratic than that from traditional providers, it is largely unconditional and it responds more directly to the country’s priorities. Until recently Cambodia could not scrape together the aid it needed to fund transportation, leaving the sector under-funded compared to the social sectors favoured by traditional donors. Today, thanks to China, it has more than enough money for key transport infrastructure.
Cambodia is not alone in having more choice about how it finances its development needs. New research from the Overseas Development Institute suggests that support from newer actors could start to exceed traditional aid. Our estimates suggest that even by 2009, aid from non-traditional providers stood at $53.3bn—31 per cent of all aid. Given rapid growth in emerging economies and new commitments on climate finance, today’s figures are probably even higher. Non-traditional assistance has expanded ten-fold since 2000, when it stood at only $5.3bn—8 per cent of all aid.
In part these trends are being driven by…