China scares a lot of people in development. Over the last two or three years, increasing attention has turned to the role of â€˜newâ€™ or â€˜non-traditionalâ€™ donors. These labels are generally applied by what we would think of as the establishment donors: the US, UK, Scandinavian countries and the major multilaterals. They consider the â€˜non-traditionalsâ€™ to be those donors who come from outside their cabal of policy voice: South Korea, India, China and Brazil being the most prominent. Given that some of the â€˜establishmentâ€™ donors are relatively recent additions to the group of large-scale donors, and some of the â€˜non-traditionalsâ€™ have long-standing bonds of mutual support with other developing countries I donâ€™t think these labels really work. I find it more accurate to group donors along the lines of when they themselves developed. The first set of donors, centring around Europe and America, are the â€˜first-generationâ€™ of developers while the rest can broadly be classed as â€˜second-generationâ€™ developers. These two sets have different approaches to development.
China is the big one among the second generation donors, and just as Chinaâ€™s policy approach to increasing the power and wealth of its economy has a lot of Western policy makers and economists worried, so has its approach to its relatively new role in Africa begun worrying Western aid agencies. Generally, Chinese aid to Africa draws three major critiques from the first-generation donors. These are:
- Chinaâ€™s aid is too unconditional â€“ they do not penalise poorly or repressively governed countries and do not require the same standards of fiscal and economic management prior to undertaking massive aid projects.
- Their self-interest is too great an influence on their aid â€“ they focus too much on providing business to Chinese firms and in extracting resources for Chinese use, rather than the unalloyed betterment of the aid-recipient country.
- They are far too opaque a donor â€“ they do not provide sufficient information on the volume, distribution and modes of disbursement of their aid. This raises worries that their aid is not very user-friendly. China, for example, does not appear in AidDataâ€™s data set as a donor.
Having worked for a few Governments that receive aid from China, and seen up close the good and bad of all donorsâ€™ practices, Iâ€™m beginning to feel that the first-generation donors are wrong about China. Not only are the some of the criticisms they make of Chinaâ€™s modus operandi either incorrect or hypocritical, it also seems that Chinaâ€™s presence as a donor has a positive consequences that are insufficiently remarked.
Chinaâ€™s aid is largely (though not entirely) disbursed in the form of loans. Many Western observers take the position that China are giving out loans without due consideration of the human rights and economic management record of the Governments who are accepting these loans. This criticism strikes me as very hollow indeed. Firstly, itâ€™s immensely hypocritical. I do not understand how Jeffrey Sachs gets to thank Meles Zenawi in his book and first-generation donors get to so much money into their Millennium Village Project, but China can be criticised for building roads there. Yes, Ethiopiaâ€™s governance leaves much to be desired, but building roads there is as obvious a win for a country with high internal transportation costs as running a bednets campaign. Of course, other donors can argue that they advocate for better governance alongside provision of support, but to my mind this is simply another reason for new donors not to replicate these efforts.
Whatâ€™s more, itâ€™s fallacious to assume that China is just financing any old thing that is requested as long as it gets access to minerals and gets to build roads. Iâ€™ve come across a few instances where requests for loan support have been turned down because the project made no sense or was too politicised. In one country, the President wanted to build a University on his private land using a Chinese loan. He was refused. Other vanity projects, such as a new football stadium, may get the go-ahead â€“ but other donors also fund cultural activities. The money for all these activities might be better used to improve education, but itâ€™s hardly the greatest crime in development practice nor a unique one.
Arguments about the motivation of Chinese support in Africa also strike me as off the mark. They do build roads and provide support in order to get access to natural resources, though this is not the motivation for all of their projects. Yet most donors started out this way, using aid as a method of pursuing mutual gain with developing countries. This is where the common practice of tying aid originated from, and while most donors have technically untied aid, itâ€™s still striking how often contracts funded by a bilateral donor go to firms from that donorâ€™s country. The extent of self-interest as a motivating factor in aid often changes as a donor extends its practice and develops further itself.
The idea of purely altruistic aid is a myth. Every single donor knows it is engaged in a multifaceted relationship with developing countries, some aspects of which are charitable or developmental and others of which are designed to meet their own interests. If China is extracting resources in exchange for cut-price road building projects, how does Europe have the moral high ground when it supports agricultural development on the one hand and the Common Agricultural Policy on the other? Or when the first-developed nations continue to impose a global trading regime which they know limits the possibilities for African countries to develop local industry with a measure of protection? I see no problem with aid being mutually beneficial to all parties â€“ and with Chinese aid, it seems clear that most Governments believe it to be. African Governments do not sign away their natural resources without a bit of thought.
The final criticism is easily the strongest. There is no doubt that Chinese aid is too shadowy. In at least two countries where Iâ€™ve worked, information on the agreements signed with China was incredibly hard to come by â€“ and this was while I was working in the External Finance departments of the Governments in question! Loan agreements can be found, but in-depth M&E and centrally collected information on the extent and distribution of support was much scarcer. When these projects run into problems, it can be much harder to see why these problems have arisen and what can be done about them. One of the roads under construction I drove on in Ethiopia was blocked by the workers, who claimed that they hadnâ€™t been paid by their Chinese overseers. This is exactly the kind of incident that we need transparency about â€“ if they really werenâ€™t paid, why not? That should not be happening on any donor funded project.
Despite these criticisms, Chinaâ€™s modes of interaction with developing countries holds lessons for the West. In all of the countries Iâ€™ve worked in, people want more aid from China, not less. This is understood and acknowledged by the first-generation donors, who responded to pressure from developing countries in the Accra Agenda for Action:
South-South co-operation on development aims to observe the principle of non-interference in internal affairs, equality among developing partners and respect for their independence, national sovereignty, cultural diversity and identity and local content. It plays an important role in international development co-operation and is a valuable complement to North-South co-operation.
There is one major message here: most second-generation donors are far behind the first set in terms of many of the Paris principles, most notably failing to untie aid with sufficient speed and failing to use local Government systems of financial management. But they are way ahead on one of the most important ones: Ownership. While the first-generation donors talk about ownership incessantly while all the time trying to change and influence local policy, second generation donors simply assess the feasibility of a project and then fund it or refuse to fund it. These donors do not try and influence national development strategies, or impose conditions on what proportion of funding should be spent in which sectors (which is a very common General Budget Support conditionality) â€“ they simply fund what is requested for, if itâ€™s considered to be viable.
Developing country Governments appreciate this. It means they feel empowered to pursue their own vision of development, and thus it gives a stronger line of accountability to domestic stakeholders, since they canâ€™t play the â€˜donors made us do itâ€™ card. It also means that itâ€™s much simpler to engage with these donors than others: they will be assessed on the bottom line in development by their constituents, rather than their input and process indicators by foreign donors.
This is the single biggest lesson the desire to engage with China teaches us. Developing countries want simple aid that follows their desires, and want it so much that they will give access to their resources in exchange for it. Thatâ€™s a really strong message that simply doesnâ€™t seem to be getting through, and first-generation donors will find their influence waning fast if they donâ€™t learn it before China and India expand even further into the aid landscape.