Chi­nese aid help­ing Africa

Global Times - Weekend - - BUSINESS - By Song Wei The author is an as­so­ciate re­search fel­low at the Chi­nese Acad­emy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion. bi­zopin­ion@glob­al­

The De­vel­op­ment As­sis­tance Com­mit­tee (DAC) of the Or­ga­ni­za­tion for Eco­nomic Co-oper­a­tion and De­vel­op­ment (OECD) has al­ways em­pha­sized the lead­ing role of re­cip­i­ent coun­tries in aid projects. But the pas­sive sta­tus of re­cip­i­ent coun­tries has per­sisted.

Take Tan­za­nia as an ex­am­ple. Af­ter the Cold War, OECD/DAC coun­tries crit­i­cized the Tan­za­nian gov­ern­ment on the is­sues of cor­rup­tion and weak gov­er­nance. Mean­while, the Tan­za­nian gov­ern­ment ex­pressed its dis­sat­is­fac­tion with the ex­ces­sively dif­fi­cult con­di­tions im­posed by OECD/DAC donors. Un­der these cir­cum­stances, OECD/DAC donors started con­sid­er­ing a freeze on all aid to put pres­sure on the Tan­za­nian gov­ern­ment, which re­sulted in a wors­en­ing re­la­tion­ship be­tween donor and re­cip­i­ent coun­tries.

Against this back­drop, the OECD/ DAC im­proved its aid man­age­ment model by in­tro­duc­ing the Poverty Re­duc­tion Strat­egy Pa­pers (PRSP) and Gen­eral Bud­get Sup­port (GBS), to ease the con­flict while giv­ing more of a say to re­cip­i­ent gov­ern­ments.

The change in the OECD/DAC aid man­age­ment model led the Tan­za­nian gov­ern­ment to es­tab­lish its own aid man­age­ment sys­tem, the Joint Aid Strat­egy for Tan­za­nia.

The OECD/DAC saw the re­form as a ma­jor change to­ward aid ef­fec­tive­ness. Since then, it has be­gun to ac­tively ad­vo­cate the lead­ing role of re­cip­i­ent coun­tries. Ac­cord­ing to DAC donors, the shift from “in­di­vid­u­ally based aid” to “col­lec­tively based aid” led to Tan­za­nia’s own aid man­age­ment sys­tem, which was clearly “led by the re­cip­i­ent.”

But it is worth not­ing that DAC coun­tries im­posed their de­vel­op­ment con­cept on Tan­za­nia’s PRSP and at­tached con­di­tions to their aid through fi­nan­cial as­sis­tance and per­for­mance eval­u­a­tions.

This prac­tice has ac­tu­ally fur­ther weak­ened the Tan­za­nian gov­ern­ment’s abil­ity to de­velop in­de­pen­dently. The Tan­za­nian gov­ern­ment wanted to revi- tal­ize the na­tional econ­omy, while DAC coun­tries be­lieved that the top pri­or­ity should be gov­er­nance im­prove­ment. This forced the re­cip­i­ent gov­ern­ment to set its aid man­age­ment goal at poverty re­duc­tion in­stead of eco­nomic de­vel­op­ment.

With deep­en­ing co­or­di­na­tion with the OECD/ DAC, the Tan­za­nian gov­ern­ment has grad­u­ally found that the PRSP doesn’t re­flect its own de­vel­op­ment needs.

In the process of for­mu­lat­ing the sec­ond PRSP with OECD/DAC donors, the Tan­za­nian gov­ern­ment aimed to lift eco­nomic growth, with pri­or­i­ties given to sec­tors like agri­cul­ture, man­u­fac­tur­ing and in­fra­struc­ture, but the DAC dis­missed this goal. Due to Tan­za­nia’s high de­pen­dence on for­eign aid, it is al­most im­pos­si­ble to achieve these eco­nomic goals on its own.

More­over, since the GBS is cru­cial to sup­port­ing Tan­za­nia’s fis­cal spend­ing, such high de­pen­dence has de­prived the gov­ern­ment of ne­go­ti­at­ing power in af­fect­ing DAC’s aid projects. While main­tain­ing good re­la­tion­ships with DAC donors, the Tan­za­nian gov­ern­ment needs to ac­quire new re­sources by other means to achieve in­de­pen­dent de­vel­op­ment.

Against this back­drop, Chi­nese aid is of par­tic­u­lar im­por­tance to Tan­za­nia’s in­de­pen­dent de­vel­op­ment. In order to guide Chi­nese cap­i­tal into its pri­or­ity de­vel­op­ment ar­eas, Tan­za­nia has taken three ma­jor steps. First, in 2000, the gov­ern­ment launched the Tan­za­nia De­vel­op­ment Vi­sion 2025, with the goal of trans­form­ing Tan­za­nia from a least de­vel­oped coun­try to a mid­dle-in­come one by 2025. In do­ing so, the gov­ern­ment will op­ti­mize busi­ness en­vi­ron­ment and cre­ate more op­por­tu­ni­ties for eco­nomic and so­cial de­vel­op­ment.

Sec­ond, in 2011, the gov­ern­ment is­sued the Five Year De­vel­op­ment Plan to un­lock the coun­try’s growth po­ten­tial by fo­cus­ing on five pri­or­ity ar­eas: in­fra­struc­ture, agri­cul­ture, in­dus­try, hu­man cap­i­tal and tourism.

Third, based on the two ma­jor de­vel­op­ment ini­tia­tives, Tan­za­nia ac­tively com­mu­ni­cated and co­or­di­nated with China on its needs for trans­porta­tion fa­cil­i­ties and other in­fra­struc­ture projects that are cru­cial for im­prov­ing its busi­ness en­vi­ron­ment.

Through these three steps, the Tan­za­nian gov­ern­ment suc­cess­fully used Chi­nese aid to sup­port the pri­or­ity ar­eas listed in its na­tional de­vel­op­ment strat­egy, re­al­iz­ing in­de­pen­dent de­vel­op­ment. OECD/DAC donors op­posed the Tan­za­nia De­vel­op­ment Vi­sion 2025 and the Five Year De­vel­op­ment Plan, be­liev­ing that the PRSP should be its only aid strat­egy plan, but the Tan­za­nian gov­ern­ment didn’t give in this time.

The frag­men­ta­tion of the aid sup­ply has been a prob­lem plagu­ing donors and re­cip­i­ents. Ac­cord­ing to a study by the OECD, each re­cip­i­ent coun­try re­ceives an av­er­age of 263 del­e­ga­tions from donor coun­tries every year, re­sult­ing in up to $5 bil­lion in fi­nan­cial losses. Some re­cip­i­ent coun­tries need to pre­pare for 800 new aid projects and work on 2,400 quar­terly re­ports on aid projects each year. This di­rectly leads to low ef­fi­ciency and waste of re­sources.

There­fore, the OECD/DAC hopes that re­cip­i­ent coun­tries can play a lead­ing role in co­or­di­nat­ing and in­te­grat­ing aid re­sources. But it is dif­fi­cult to ac­tu­ally im­ple­ment the so-called “lead­ing role” prin­ci­ple, be­cause from aid projects to the use of aid fund­ing, re­cip­i­ent coun­tries have al­ways been pas­sive in the de­ci­sion-mak­ing process.

The cur­rent Western aid man­age­ment ap­proach has failed to en­hance the lead­ing role of re­cip­i­ent coun­tries, and it has in­stead strength­ened the de­pen­dence of re­cip­i­ent coun­tries on aid.

In con­trast, China’s for­eign aid not only meets the de­vel­op­ment de­mands of re­cip­i­ent coun­tries, but also helps avoid moral haz­ard for re­cip­i­ents. China’s aid project man­age­ment and su­per­vi­sion model pre­vents the elites of re­cip­i­ent coun­tries from mis­ap­pro­pri­at­ing for­eign aid funds, elim­i­nat­ing the pos­si­bil­ity of cor­rup­tion.

In this sense, China should con­tinue to im­prove com­mu­ni­ca­tion chan­nels with re­cip­i­ent coun­tries, strengthen di­a­logue and co­or­di­na­tion be­tween the two sides, pro­mote the match­ing of China’s aid pol­icy in Africa with re­cip­i­ents’ de­vel­op­ment sit­u­a­tion, and en­hance re­cip­i­ents’ ca­pac­ity for in­de­pen­dent de­vel­op­ment.

Un­like China’s for­eign aid, the cur­rent Western aid man­age­ment ap­proach has failed to en­hance the lead­ing role of re­cip­i­ent coun­tries, and it has in­stead strength­ened the de­pen­dence of re­cip­i­ent coun­tries on aid.

Il­lus­tra­tion: Luo Xuan/GT

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