Asia-Pacific, Development & Aid, Economy & Trade, Financial Crisis, Global, Global Geopolitics, Global Governance, Headlines

China, India Score With Untied Aid

Marwaan Macan-Markar

BANGKOK, Aug 25 2011 (IPS) - Armed with a smile, Don Marut exposes the pitfalls of Western aid to developing countries. At a conference here, the Indonesian recalled the story of how 40 electric-train carriages were sent from Germany to his country for a journey to nowhere.

The second-hand carriages, it turned out, were unsuited for Indonesia’s network of narrow-gauge tracks.

Purchased from Germany under a “tied aid” scheme in 2004 the rolling-stock, built for broad-gauge rails, lies rusting in a corner of Jakarta’s railway station, though it was part of a World Bank-backed railway efficiency project.

Marut has other stories to fault “tied aid”, “a euphemism for the stringent conditions that developing nations have to accept in order to receive a ‘development’ loan from a Western country.

“We have received a warship and sea patrol boats from the West that cannot be used in our waters,” adds the executive director of the International NGO Forum on Indonesian Development (INFID), a Jakatra-based umbrella group of non-governmental organisations that plays watchdog roles.

Such strings under the guise of a ‘development’ agreement have been a regular ruse for richer nations to “use aid to relocate unused technology,” Marut explained, after addressing the conference on aid and development.

“This cannot go on. We are supporting the aid business that is driven by the need for job security among donor agencies,” Marut said.

Marut’s arguments have long been voiced by activists across developing Asia, but countries that have monopolised development aid cannot now afford to ignore them.

Analysts say the arrival of non-Western players like China, and increasingly India, offering millions of dollars in official development assistance (ODA) with no strings attached, is transforming the aid industry.

Consequently, countries like Sri Lanka in South Asia, and Cambodia, Laos and Burma in Southeast Asia, do not have Western doors to knock on, cap in hand; they have these new ODA players to turn to.

Little wonder why a conference in Busan – South Korea’s second largest metropolis – later this year is creating a buzz among activists and analysts of development aid trends.

They regard the fourth High Level Forum on Aid Effectiveness (HLF), from Nov. 29 to Dec.1, as a watershed for the Organisation for Economic Cooperation and Development (OECD), a largely Western, rich-man’s club that has shaped the politics of development aid for decades.

“The OECD’s legitimacy is being challenged by the new donors, especially China and India in Asia, and Brazil in Latin America,” says Antonio Tujan, international director of IBON International, a Manila- based network of grassroots groups drawn from the global south.

“The global economic crisis has added to the OECD’s woes, challenging its existence,” Tujan said.

OECD knows that “developing countries can go to China if they don’t want to accept the traditional aid conditions,” Tujan told IPS. “The Busan meeting will be an OECD-led process but it will mark the crossroads of the changing development landscape.”

The South-South ODA includes China’s contribution of 2.5 billion dollars in 2009 and India’s 547 million dollars in 2008, against the total world aid package of 140 billion dollars in 2009.

However, figures monitored by New York University’s Wagner School of Chinese aid, estimates China’s contribution to be much larger at 27.5 billion dollars in 2006 and 25 billion dollars in 2007.

The university’s figures are based on media reports, but are corroborated by ‘South-South Cooperation: A Challenge to the Aid System’, a publication by IBON, which speaks of a “dramatic increase in Chinese aid and related investments” amounting to 27.5 billion dollars in 2006 and 25 billion dollars in 2007.

“There appears to be consensus that Chinese aid is substantial and increasing in recent years,” the IBON publication says.

Africa remains the main target of Chinese largesse, with the continent receiving over 45 percent of Beijing’s assistance. India has divided its assistance between South Asian nations like Bhutan and Afghanistan and African nations such as Sudan and Ethiopia.

China’s contribution of aid, development assistance and trade in Cambodia, a country still struggling to develop after a 1991 peace accord ended two decades of conflict and genocide, illustrates the speed with which the South-South development cooperation trend is eroding the monopoly of Western donors.

Beijing pumped in 850 million dollars for 14 dam and infrastructure deals in 2008, a dramatic increase from the 45 million dollars it invested in Cambodia in 2003.

Such financial backing has emboldened Cambodian Prime Minister Hun Sen, as also the leaders of other Asian and African countries receiving Chinese help, which comes with few strings attached. Hun Sen now stares down the World Bank and traditional OECD donor countries that insist on conditions like better governance.

“China and India have entered this field with foreign policy and strategic interests in mind,” Kavaljit Singh, director of the Public Interest Research Centre, a New Delhi-based think tank, told IPS. “China wants to get natural resources in return for infrastructure investments, while India wants to secure geo- political returns – a greater voice in the international community.”

Yet, neither Beijing nor New Delhi has revealed what role they intend playing at the Busan meeting, where the South Korean government is under pressure from the OECD countries to have the two Asian giants fall in line with the OECD-led development aid model.

“This is one of the most important political agendas happening behind the scene,” Anselmo Lee, a ranking member of the Korea Civil Society Forum on International Development Cooperation, told IPS.

“They (OECD) want India and China and Brazil because they are aware of their diminishing legitimacy and influence globally,” he added. “The OECD doesn’t feel comfortable with the competition from the South.”