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Development Aid: What If We Need to Re-Think the Concept?

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The COVID-19 crisis has increased the feeling of interdependence across the world. Taken together with climate issues raised by the global community at the COP26, the notion of “community of destiny” is supposed to have never been so intense.

However, at the time of calls for collective responsibility and solidarity, the distribution of vaccines has showed crucial inequalities, which questions the philanthropy of states. A failure according to a constructivist approach or an unsurprising scenario for realists.

Looking at this situation through an academic lens leads us to the concept of official development assistance (ODA). This somehow refers to the idea of “state philanthropy”, which is, of course, and without being naïve, not detached from each state’s global influence policy. Assistance is not free, either for donors or for recipients.

The concept originally comes from the Marshall Plan’s idea to re-build Europe in the wake of World War II. It has afterwards continued towards the poorest countries in the world.

Western approach to development

Western nations, represented by the OECD in the field of development assistance, assume a human rights-based approach to development. Primarily, economic development increases social mobilisation, which will then favour democratisation and human rights promotion. This systematic way of thinking development represents how most people in Western countries understand the ultimate aim and sense of development assistance. Therefore, the relationship with repudiated regimes focuses on aid rather than constructive and natural trade based on shared values. Therefore, it actually doesn’t prevent ODA to be spent in the poorest countries, also called “fragile” and sometimes “rogue” states, because of their institutional instability.

However, the development of democracy and the promotion of human rights through economic development is challenged by other development approaches. Nowadays, there are so-called “autocratic” regimes that have great conditions for sustainable economic development and growth of power in the world order. Examples include China or Singapore. Conceptually, we cannot extrapolate these cases by a special affiliation to “Asia”. They are contemporary testimonies that nuance modern theories of economic development through democratisation, which should then promote human rights as the modern Western history is presented.

Institutional capacity is one of the other approaches to development. A country must have strong and well-designed institutions to contain sustainable economic development. This capacity includes the effectiveness of decision making, accountability and the competence of institutions to lead the group.

Yet, the third approach views development through competition and bargaining between elites. Elites must reconcile to enable the group to develop as a whole. This raises the question of development in countries weakened by multi-ethnic conflicts.

These dynamics of development are parallel to the other four main theories whose angle is different: modernisation, dependency, world-systems, and globalisation. In every case, they are simply corresponding to the manner how development is heard in Western societies. Thus, foreign aid policies assume that development corresponds to the above-mentioned theories, which does not mean that it is suitable for all cultures or regions of the world, as some part of the research has pointed out. However, what if, when designing foreign aid policies, development was considered a subjective and biased notion?

Comprehensive approach: assistance shall first assume that development is not a fixed concept

Assistance as understood by the OECD must take into account other development models. However, the current problem is that the measurement grid considers criteria of social, human and cultural norms that are additional to the measurement of material development only. These additional criteria are seen as complementing the material approach. These include, for example, inclusive finance, gender equality or other struggles that some aid recipient countries are not particularly ready or willing to experience.

However, in this model, the relationship between the project parties and the beneficiary is fragile when the values promoted are not shared. The continuity of investments is therefore very limited. Rhetorically, this does not mean that a state needs to extend its values to be successful. This is often the mistake, as values-based businesses can be disrupted by regime changes, the cost of which can become enormous. Therefore, taking into account political alternations and the personalization of foreign relations by each government: an appropriate positioning on a long-term perspective must be based on humility beyond national borders. This assumption in international politics is equivalent to a wait-and-see attitude and pragmatic observation on development issues.

Nowadays, Chinese model vs. Western one

China invests massively in long-term projects, using debt as a leverage for long-term accountability and project-monitoring. Additionally, the Chinese development assistance doctrine insists on a few principles, including the unconditionality of its aid, particularly the influence over the rules. A decade ago, this approach was perceived as a “silent revolution” and it’s become of public notoriety nowadays. The Chinese pledge to contribute to an investment and trade relationship, as opposed to assistance in dealing with injustice. However, of course, when debt repayment becomes difficult, it can become a tool to take control of the strategic sector, a tool used by China, as we have already seen with the Hambantota International Port in Sri Lanka. There may be a gradual material takeover, but China does not directly interfere with values and rules, whereas these should be changed according to Western OECD-based communication. This differentiation of the Chinese approach is a mark of confidence for the counterpart.

In terms of global positioning, China is clear. None of its white papers speak of allies, but partners. Quoting one of them: “history shows that the pursuit of hegemony, alliance and confrontation and the abuse of power in international relations will induce chaos or even war.

Metaphorical comparison with giving coins to a tramp

Most of us are marked every time we see a beggar on the street. When we give, it is either because our heart calls us to do so in a powerful and free-way, or because we trust the beggar’s ability to use the money.

When we don’t give, it is somehow a sign of a lack of desperation in the ability to use a gift well (or simply of greed, of course), and we don’t try – or manage – to understand the functioning of the person in front of us.

The situation that often arises is conditional giving, with the argument that we want to be sure that our coin will be used in a virtuous way. For example, by saying: “You won’t buy alcohol with it, promise? Taking the coin anyway, he may answer “yes, I’ll do some good” to put on a brave face, but in almost all cases he will be upset by this remark. And it is likely that he will ingest this frustration by thwarting the donor’s intended use of the coin.

In this case, the bad outcome is mainly based on the hypocrisy of the donor who in fact does not give unconditionally, which then generates the frustration of the receiver and his irresponsibility.

The method used by development aid can have some of the same effects. Even if states considered ‘rogue’ are enthusiastically helped by activist countries, the feeling that the other wants to change the rules can have the counterproductive effect of rejecting them.

On the other side, Western countries work through an alliance-based model that is reflected in its development assistance policy, whose effects may be questioned.

Conversely, for private sector actors in countries in political conflict, there is often a kind of ‘reward’ for trust, proportional to the risk taken. The case of Total in Russia is a good example. Its projects show very high rates of return. Another broader picture that should be considered is the Belt and Road Initiative, whose development, based on investment rather than aid, is an example (see The Belt and Road Initiative: Towards a New World Order).

The ambiguity of foreign aid: an alternative way of influencing states with non-shared values and without a sustainable institutional relay

Continuing with the ambiguity of foreign aid, its material and reputational returns lead to a rethinking of the coherence between the official intention and the predictable effects. The question “Are we really helping others or just ourselves?” is central.

The promotion of foreign aid is often based on what each nation is and thinks it is. The OECD’s current approach is mainly to seek a global mirror of Western values, ideals and principles. In this logic, when they cannot be found, an aid relationship is established. However, this approach is analogous to the metaphor of giving a coin to a tramp, and poor countries are not tramps.

International interventionism often risks an infantilizing logic

Most commentary and research assume that it is the responsibility of the ‘rich’ to develop the ‘poor’, especially when commenting—in good faith—inequalities in inflows and outflows between rich and poor countries. When was the last time we heard anything positive from the least-developed countries? Although development assistance is tailored to each ecosystem, there is a clear focus on disability rather than capacity, which encourages migration. This approach is contradictory with the idea that each state is sovereign and responsible. Thus, there is an urgent need to defend local capacities and encourage the localism of human capital.

The issue of national responsibility must be taken into consideration. However, some elites obviously have no interest in encouraging this view when they are not themselves responsible. In this case, cooperation with the private sector and civil societies is to be preferred.

Hypothesis: development aid to pre-empt an unfavourable position vis-à-vis developing countries

Finally, it looks like ODA is a way to slight the transformation of world order that demographic dynamics announce nowadays. A way to prepare the next page is to harmonise cultures and prospects of future powers to better bargaining. This bargaining, for former colonial powers, is mainly concentrated around former colonies, as shown by the correlation between ODA volume and former colonies (for instance, see the map of ODA flows to the Arab Middle East and North Africa or Development Assistance As Leverage for Russia’s Footprint in Kyrgyzstan and Tajikistan).

While this is where donors find the most accessible added value, it is also a signal of weakness and limitation of ODA, that remains geographically in the channels of influence of each donor country. For instance, priority countries of the French ODA include Senegal, Ethiopia, Mali and Burkina Faso. Three of these are former French colonies. In its form, ODA is a useful official means of smoothing out future competition between emerging states and dominant states. In substance, it reflects unfavourable trends.

Key values needed in foreign aid policies: humility, prudence and resilience

The following recommendations can be addressed to policy-makers and development aid agencies:

1. Accept the accessibility of development through other ways than the national experience.

2. Acknowledge the cultural or community bias that affects the success of projects, and integrate it into the assistance strategy, not taking it as a risk but rather seeing where it can be leveraged.

3. Be very careful about aid that risks dividing competing communities whose common enemy is potentially the donor country. The ultimate risk is to open up opportunities for hostile rapprochement against the donor country accused of excessive profit and interference.

4. Prioritise the private sector and its metamorphic character to play on interdependence.

5. Use public-private partnerships to interweave strategic projects with economic realism.

6. Use transactional analysis (psychology-based) to put assistance to developing countries and post-colonial treatment into perspective. The damage caused by asymmetries of intent will be alleviated.

From our partner RIAC

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Economy

Friend-shoring: India’s rising attractiveness for an emerging partnership

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There are numerous forces currently affecting investment flows in the global climate for foreign investment. Investor concern has been caused by the many geopolitical issues, which had repercussions even as countries were recovering from the pandemic. Businesses are being forced to re-evaluate the global business environment and potential fault lines as a result of these disruptions. India has constantly improved the business environment (EoDB). It may now advance by utilising the advantages to strengthen its place in the global economy and fulfil the ambitions of its sizable, primarily young population. The country’s business and investment climate has significantly improved as a result of the fast and steady pace at which reforms have been implemented.

Apart from the fact that India is one of the largest economies in the world with the quickest rate of growth, the government’s emphasis on infrastructure and manufacturing, strong consumption patterns, digitization, and a burgeoning services sector all contribute to this optimism. The persistent efforts of the Indian government to lower regulatory hurdles are also fuelling MNCs’ favourable opinion of India. However, India’s expanding domestic consumer base and digital economy are the greater draws. After the US and China, the estimated actual growth in consumption is the third-highest. Given that all of these markets are sizable but relatively saturated and growing at a slower rate, India presents a particularly good opportunity for MNCs seeking growth opportunities in the ensuing ten years.This has acquired more traction in the US context as it has become clear that the nation cannot overcome all production issues on its own and that cooperation with friendly or ally nations is essential for all-around development. The term “friend-shoring,” a hybrid of the terms “onshoring” and “near shoring,” refers to forming business alliances with people who have similar principles and interests.

In a world driven extensively by globalisation, it is inevitable to not just make ally’s or create partnerships that are not only strategic and synergistic, but also facilitate a purpose driven iterative connection between two nations. A strategy used by the US to persuade companies to relocate their sourcing and manufacturing operations to friendly shores—often back to the same shores in the case of the US—is known as friend-shoring or ally-shoring. And the goal is to protect their supply networks against countries with less compatible policies, like China. But is it the best course of action? Global supply chains have changed production by enabling businesses to produce things wherever it is most affordable, thanks to decreased tariffs, lower transportation, and communication costs. This typically means that low-end production shifts to emerging markets and developing countries, while high-value-added inputs (such as research and development, design, advertising, and finance) are provided from established economies.

A commitment to cooperate with nations that “have a strong adherence to a set of norms and values about how to function in the global economy and about how to govern the global economic system” was described as “friend-shoring” in Secretary Yellen’s statements of April 13, 2022. But is it the best course of action? Any type of protectionism will worsen the already shaky global supply chain after the years-long Covid-19 shutdown has had an impact on the world economy. Despite its political unrest, China has been devoting its resources to manufacturing since the 1990s, and many businesses have already established manufacturing operations there since their suppliers are all nearby.

Even though Vietnam, India, and Thailand are also known for their low-cost manufacturing, moving the manufacturing sites could be expensive and risky for businesses because they would need to reorganise their entire supply chain for all materials required. In addition, other Asian countries might not have the full infrastructure needed to support manufacturing in some sectors. The world of today is at its best because of international cooperation. Each country’s disadvantage is made up for by having it use its greatest asset to boost global economic growth. Although there are many differences and even disagreements between nations and we are still far from full globalisation, offshoring does not seem like a good answer for a better future for the global supply.

USA is believed to pursue the “friend-shoring” strategy of deepening economic integration with dependable trading partners like India to diversify away from nations that pose geopolitical and security risks to supply chains. This is in response to an “extremely challenging” global economic outlook and geopolitical instability. She claimed that some economies’ debt loads were becoming unmanageable due to the Russia-Ukraine war-related spike in food and energy costs, and that steps to reduce these debt loads would need to be explored. Countries that already have well-established production and business service networks are those that are seen as friendly partners in the US context. India is attempting to draw MNCs that are moving their subsidiary supply chain networks and activities in this wave of supply chain restructuring and diversification of their specialised ecosystems.

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Pakistan’s elite and the current economic crisis

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Former Pakistan Finance Minister Miftah Ismail in a media interview made some very interesting points. While Ismail lashed out at his successor and current Finance Minister Ishaq Dar saying that the latter’s Anti International Monetary Fund (IMF) approach was one of the key reasons behind the current economic crisis in Pakistan. He also underscored some other points.

 First, he said that if countries like Bangladesh and India have left Pakistan behind, there are some serious deficiencies in Pakistan’s governance model.

Second, Ismail stated that different forms of government – democracy, parliamentary democracy, dictatorship – have been tried out, but the country is invariably ruled by a small elite, and this is amongst the key reasons for the numerous challenges the country is facing today.

In recent years, has been increasing criticism of Pakistan’s foreign policy and its excessive economic dependence upon other countries for its economic survival.  While earlier strategic commentators and analysts questioned the skewed nature of Pakistan’s ties with the US, in recent years several strategic commentators have begun to question the excessive dependence upon Islamabad and the terms and conditions of China Pakistan Economic Corridor (CPEC), and the lack of transparency of the project.

If one were to look at the current economic crisis which has engulfed Pakistan, there have been a series of opinion pieces critical of domestic policies, the country’s dependence upon external sources for aid not just the US, but also Gulf Countries and China and how the IMF rescue program would impact certain sections of the population more than others.

Maleeha Lodhi, a former Pakistani diplomat, and a prominent writer and commentator, in a hard hitting article titled Elite Politicsfor Dawn (December 5, 2022)argues:

‘The availability of external resources as a result of Pakistan’s foreign policy alignments during the Cold War and beyond created a habit of dependence on ‘outside help’. This habit urged successive governments — representing rural and urban elites — to avoid economic reform, mobilise adequate revenue or tax its network of influential supporters’. 

Touqir Hussain in an article An underwhelming foreign policy written for The News (November 23, 2022) highlights how Pakistan’s dependency upon China could harm the bilateral relationship. Says Hussain:

‘Because of the dependency syndrome, even the China connection has become ever more important for Pakistan, and not for all the right reasons. It is fomenting a popular view that with China at its back Pakistan does not need to care about other relationships, inciting anti-Americanism which has become in the public mind a badge of ‘independent’ foreign policy’.

S Akbar Zaidi in an article IMF as Saviour for the Dawn (January 26, 2023) makes an interesting point about how the unequal impact of the IMF program and how the elite would not just be able to deal with it but also benefit in the long run. Says Zaidi:

‘A fistful of dollars coming in, prices being upwardly adjusted, an exchange rate which is supposedly ‘market-driven’, will offer false hope to our elite while it grumbles about the tough measures of the IMF’. 

There has also been a suggestion to rethink Pakistan’s approach towards India and focus more on geo-economics. Shahzad Chaudhry, a prominent strategic commentator, in an opinion piece published in Express Tribune praised India’s foreign policy for managing to balance ties between the US and Russia, in the aftermath of the Ukraine crisis. While praising India for having been able to strike a balance he dubbed this as diplomatic coup. Chaudhry also said that Pakistan should rethink its foreign policy vis-à-vis India and focus on ‘geo-economics’.

Pakistan PM, Shehbaz Sharif in an interview to Al Arabiya TV (a Dubai based channel) had himself stated that Pakistan could not afford another war with India and had also alluded to his willingness to resume talks (The Pakistan PMO however said that Pakistan would only resume talks with India if the latter reversed the decision to revoke Article 370 in Jammu and Kashmir).

In conclusion, while Pakistan clearly has its task cut out if it is able to realize the pitfalls of excessive dependence upon external countries will it be able to put its economy firmly back on track. It is also important for Pakistan to strengthen economic ties with neighbours in South Asia rather than looking at the outside world. For this it will require Pakistani leaders to think out of the box.

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Guangdong special economic zones at China

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Guangdong Province in southern China is distinguished by the economic development. The sign been approached by “Made In Guangdong” is becoming so famous globally, besides the Guangdong industries and its unique culture.

  Guangdong represents one of the most important provinces of China for a number of political, economic, social and natural reasons. Indications of the success of the openness experiment pursued by China since the late seventies of the last century are evident in it.

Guangdong special economic zones have made great achievements. As the province with the largest economic output in China, south China’s Guangdong Province has achieved tremendous economic development in the past 40 years, thanks to the establishment of special economic zones.

 According to my information, the Guangdong region has established the “Zhuhai Doumen” intelligent manufacturing economic development zone recently, after the Guangdong Provincial Government officially approved the establishment of the “Zhuhai Doumen intelligent manufacturing economic development zone”, which will implement the existing provincial-level economic development zone policy.  It is the third regional economic development zone in “Zhuhai” after “Foshan Industrial Park and Liangang Industrial Zone”.

 Guangdong Province is an economic powerhouse in southern China, and the province will promote high-quality development this year by fostering new engines of growth and strengthening cooperation and communication in the regions of (Guangdong-Hong Kong-Macao Greater Bay) to deepen reform and opening up.

 Guangdong Province, a major part of China’s foreign trade and industrial hub, accounts for about one-tenth of China’s GDP and is the largest of all Chinese provinces.

 Guangdong Province pays close attention to the progress of China’s modernization and the overall picture of reform and opening-up and major national strategic planning. It firmly attaches importance to the reform and opening-up policy by strengthening cooperation between the province and the “Hong Kong and Macao” regions, aligning the development of Guangdong with the “Northern Metropolis” plan of Hong Kong and the economic diversification strategy of Macao, implementing the “Greater Bay Area Connection” project in a more in-depth way, and working with “Hong Kong and Macao” together to build a world-class bay area, injecting vigor and strong impetus into its modernization efforts”.

 It Is remarkable that most of the cities of Guangdong Province are crowded with visitors from all over the world, especially Arabs and Africans, who come to them for the purpose of trade and search for investment. The province is considered one of the regions characterized by the diversity of its industries, quality and attractive prices, as well as commercial activities in various fields.

 It Is also distinguished by the beauty and sophistication of its buildings, which embody the aesthetics of modern Chinese architecture, as well as the spread of green spaces and vibrant squares throughout the day. It is also distinguished in terms of weather, with its atmosphere that resembles the tropical atmosphere with heavy rain, and the various cities of Guangdong Province are also characterized by easy access to it from different parts of the world throughout the day, as well as ease of movement between its various cities, thanks to the presence of an infrastructure that makes most of the cities of the province at the forefront of attractive cities for investment globally.

  Due to the existence of the commercial ports, Guangdong has a long experience in terms of commercial exchanges regionally and globally.

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