Foreign Aid

Private capital flows through foreign direct investment and portfolio investment now exceed $1 trillion annually. This has deep income, wealth distribution, and human rights effects for people around the world—creating opportunity for many, but leaving some behind. International economic rules govern these capital flows by regulating banks and multinational investors, determining property rights, and establishing legal claims and mechanisms for redress. Yet vulnerable communities, such as subsistence landholders, informal workers and entrepreneurs, marginalized religious and ethnic groups, and slum dwellers, have virtually no voice in determining the rules of the global economy and lack effective representation to protect their interests within the developing international legal framework. Accountable governance is critical to protecting human rights, advancing shared opportunity, and promoting inclusive and sustainable development, but is fundamentally lacking at the global level. In the United States, organizations like the Legal Aid Society provide pro-bono services to poor clients faced with day-to-day legal challenges. But no such organization or network exists globally to represent poor communities regarding international matters. Although a number of international advocacy groups currently mobilize public action and pressure policymakers regarding some issues, these organizations are not directly accountable to the constituencies they serve because they do not directly represent vulnerable groups or individuals through client-based relationships. Moreover, all these efforts fall far short of addressing the real needs of affected communities in terms of capacity, reach, and scope. This challenge can be addressed by establishing a global network of legal offices to provide pro-bono client-based representation for vulnerable local communities affected by international economic policy. These advocates for local communities would help level the playing the field, improve social accountability, and ensure that the rules of the global economy work better for everyone. Similar to a standard consulting firm or corporate law firm, this network of pro-bono legal clinics would provide advice, lobbying, and counsel at all stages of the legal and policymaking process: including aiding legislative drafting by congresses and parliaments, rule-making by regulatory bodies like the Securities and Exchange Commission, treaty negotiation and drafting, arbitration within dispute-resolution forums like the International Centre for Settlement of Investment Disputes, policy-setting by international standard organizations like the Financial Stability Board, and litigation through domestic courts. International economic laws are complex and influence the lives of vulnerable groups in several different ways. Expert advocates would represent affected communities on the full range of issues and circumstances in which international laws and norms have significant local effects. This social accountability network should tackle the following challenges: representing communal landholders who are being forcibly displaced by foreign investment “land grabs” and development projects such as hydroelectric dams and oil and mining projects representing local communities whose access to subsistence livelihoods or resources are threatened by global climate change agreements influencing new global banking and finance regulations to protect the interests of small-scale microcredit borrowers and entrepreneurs in the global south protecting local fishing communities whose livelihoods are being eviscerated by the global fishing industry advocating on behalf of communities living near sites of fuel extraction and natural resource exploitation whose livelihoods are threatened by environmental pollution promoting intellectual property rights in trade and investment treaties that advance access to essential medicines and medical technologies A new network of advocates for vulnerable communities would address a critical challenge of global economic governance by advancing social accountability—a loosely based Lawyers Without Borders would ensure the rules of the global economy work for everyone, not just the rich and powerful.

We tend to underrate the importance of racism as a factor in the ongoing crisis in Mali. A short item from Radio France Internationale–English is a good reminder. It reports a statement by a spokesman for the French foreign ministry calling for the release of those arrested “because of the color of their skin” in the Kidal area. Last weekend, residents of Kidal claimed to the press that members of the Tuareg National Movement for the Liberation of Azawad (MNLA) who control the district were attacking black people with the goal of driving them out. Predictably, MNLA spokesmen are saying that they were looking for “infiltrators,” presumably sent by the Bamako authorities against whom MNLA has fought. Tuareg, Arabs, and Berbers regard themselves as “white,” while they tend to see the Bamako political class as “black.” The upcoming late July elections in Mali, which international allies and potential donors are strongly advocating for are likely to exacerbate racial tensions. Many fear that if the elections are rushed, they will provide only a veneer of legitimacy without addressing the core issues facing Mali, such as persistent racism and the alienation of the north that sparked the current crises.

At the Mali Donors Conference in Brussels on May 15 the United States announced $32 million in new humanitarian assistance to support Malian refugees in neighboring countries and to the internally displaced. The same day, the U.S. Department of State spokesman said that the Obama administration will request from Congress $180 million in FY 2014 for bilateral assistance. That funding would kick-in after the Mali elections, scheduled to take place in July. As required by U.S. law, the Obama administration terminated or suspended $188 million in assistance to Mali following the coup in March, 2012. However, the U.S. continued to provide $7 million in democracy assistance programing and $83 million in health support. With the additional $32 million pledged at Brussels, the press spokesman said the United States will be providing $181 million in humanitarian assistance—almost the same amount that had been suspended post-coup. The figures add up to only $122 million; either the he misspoke or did not mention other U.S. assistance. Given Mali’s high profile and ongoing humanitarian disaster, U.S. assistance—both humanitarian now and bilateral after the Malian elections—is very small. But, total U.S. foreign assistance hovers around only 1 percent of the federal budget, though a November 2010 World Public Opinion Poll indicates that the “average” American thinks that it is around one quarter. The July elections and the restoration of constitutional government will make Mali eligible for the projected $180 million in assistance in FY 2014. That may be a significant motivation for the calling of elections in July, which many observers believe to be unwise. Election preparations have hardly started, and security is not yet established in the northern part of the country. Poor elections dominated by southern politicians risk further splitting the country. Africa Confidential has a good overview of the current state of Mali’s politics and the arguments against early elections.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Sir Michael Barber, who is the U.K. Department for International Development’s (DfID) (unpaid) special representative on education in Pakistan, the chief education advisor at Pearson, and from 2001 to 2005, was the chief advisor on delivery to Prime Minister Tony Blair. In the article he discusses an educational reform program he helps lead in Pakistan and the broader debate over the effective delivery of foreign aid. In many countries, there are two camps: those who want less aid because it is ineffective, and those who want more because it is fundamental to global justice. I propose an alternative to this fruitless debate. I support government’s commitment to aid but surely the aim should be to end it in time, not because it has failed but because it was demonstrably successful. This is what we in the development community should want, and it is also what visionary leaders in the developing world, including Pakistan, want. They look forward to their country succeeding without aid. In the meantime they want support that is effective and demonstrates results. This demands a radical and rigorous approach to aid. The Punjab Education Reform Roadmap, which I have been leading along with Shahbaz Sharif, who recently left office as chief minister of the Pakistani province of Punjab, suggests a way forward. When we set the goals for Punjab some donors accused us of being “too ambitious” and “too urgent.” We pleaded guilty. The risks of moving too slowly in Pakistan are much greater than the risks of moving too fast. When we began implementation of the roadmap in August 2011, only 82.8 percent of enrolled students attended school each day, only 80.7 percent of teachers attended class, and only 68.9 percent of facilities had functioning electricity, drinking water, toilets, and boundary walls. The results after two years speak for themselves: as of December 2012, student attendance was up to 92.1 percent, teacher attendance reached 92.1 percent, and 90.9 percent of facilities were up to standards. This translates to approaching 1.5 million extra children now enrolled in school, and another million, who had been formally enrolled but rarely turned up, attending school every day. Schools serving three million children have had their facilities repaired. More than 90 percent of teachers are now present every day, with new lesson plans and coaching to help them teach and new textbooks for every pupil from next month. In addition, the program has given over 140,000 out-of-school children from poor families vouchers that they can take to any registered private school. Non-government providers have been encouraged to set up new schools where government provision is weak or non-existent. It is one of the largest voucher programs in the world, and a model of effective public-private partnership in education. There is evidence of improved outcomes, too. Two years ago Punjab-India and Punjab-Pakistan were level-pegging; now Pakistan is out in front. Perhaps most important of all, more and more people in Punjab believe that this time, after decades of failure, they will succeed. How was this achieved? To start, we set clear, ambitious targets for each district and the whole province and developed a system to monitor progress in real time. By collecting data from all 60,000 government schools monthly, we’ve been able to check regularly whether we are on track to achieving these goals. By focusing on school-level data, we were able to tell district leaders exactly which schools are lagging and even which teachers did not attend school in the prior month. This allows the systems leaders to immediately take action to resolve issues and improve performance.  We’ve avoided the classic error of focusing purely on enrollment and ignoring quality. Second, we established routines to review progress and ensure a constant focus on implementation. In each conversation, we ask officials at all levels of the system whether they are on track to meet their goals and how they respond when they are not. Where they are off track we offer a combination of pressure and support. As a result, we’ve established a system of sharp accountability and tackled corruption head-on by insisting on merit-based appointments. Since the start of the roadmap 81,000 teachers have been hired on merit. Most important of all, the roadmap was never a separate aid initiative; it was a partnership with the committed chief minister, Shahbaz Sharif, to improve the entire schools system, which serves over twenty million children. The aid money certainly helped to bring about this success, but aid is under 5 percent of Punjab’s total expenditure on education. The real keys have been the program’s design, based on good evidence of what works around the world, and the relentless focus on implementation. Through floods, outbreaks of dengue fever, and the many crises that afflict Pakistan, the routine tasks of implementation--checking impact at the front lines, reviewing effectiveness, and adjusting accordingly--have continued. We’ve persisted to deliver the change that was needed. We’ve refined our approach throughout, but we’ve never compromised on our vision or the ambitious goals that we set at the start. We’re starting to see the impact of the “science of delivery,” which Jim Yong Kim, president of the World Bank, describes as fundamental to delivering development outcomes. The success in Punjab contributes to the evidence of what works. For all the gains, Punjab’s education system remains far short of real quality. The progress is far from irreversible. Although we have moved with breathtaking speed, it is not fast enough. After this month’s elections, Punjab’s new leaders will need to continue what has been started for years to come. Yes, real change is a slog. In the meantime there are three clear lessons for aid policy. First, the case for aid can be sustained only if every penny is spent well. Second, we know quite a bit, and are learning more, about the “science of delivery” required to deliver development aid effectively. Third, if we get the partnership for reform right with developing country governments, transferring the entire responsibility for development, including funding, onto their taxpayers will become possible as well as desirable.

On the new Ask CFR Experts feature today, I consider the question of whether the United States should continue economic aid to Egypt. "The answer," I write, "is a resounding yes." As I add, however: ...Washington is unlikely to increase outright economic aid substantially. Arguably, other forms of assistance, including increased foreign direct investment and trade, and technical and financial support for continued economic reform (particularly on transitioning away from costly and inefficient subsidies), stand to have a bigger positive impact on Egypt’s economy and democratic transition than more monetary aid to the Egyptian government. You can read the full answer here.

Yesterday on his blog, CFR senior fellow John Campbell wrote about Brazil’s involvement in and assistance to Africa. As he argues: Brazil’s expanding role in Africa is overshadowed in the international media by China and India’s larger role. (So, too, is South Africa’s role.) But, Brazil’s approach to Africa appears to be the more broadly based, with important political and developmental aspects, as well as economic. You can read the full post here. The Development Channel has also been following the role of emerging donors through Emerging Voices posts and a Question of the Week series about China and Africa. Last month, CFR senior fellow Isobel Coleman analyzed the proposed BRICS development bank, a potentially important milestone for emerging donors.

Last week on my blog, I reviewed USAID’s Water and Development Strategy, focusing on the link between water and food security. As I write: As the global population continues to climb toward 10 billion, and more people enjoy the higher caloric intake of middle class life, finding sustainable ways to improve agricultural productivity is increasingly important. As the USAID strategy makes clear, more careful water management will be a critical part of the solution. You can read the full post here.

Yesterday on my blog, I discussed the Obama administration’s proposed reforms to U.S. food aid. As I note: A 2010 interview with former USAID administrator Andrew Natsios serves as a sobering reminder of what’s at stake. “I’ve seen children starve to death when there was a surplus of food in their local markets, but there was no one to buy the food because we didn’t have the money to do that, so people died.” You can read the full post here.

Vaccination against polio and measles is opposed by many conservative Islamic elements in northern Nigeria. A consequence is that polio remains endemic; there were 122 cases in 2012, over half of the global total. A measles outbreak in northern Nigeria earlier this year killed thirty-six children and infected over 4,000 between February 16 and March 9. Health officials say this is a direct result of parents refusing to vaccinate their children. While popular opposition to vaccination has many roots, they are primarily political and social in nature. My colleague at the Council on Foreign Relations, Laurie Garrett, has called to my attention an excellent analysis of northern Nigerian opposition to polio vaccination that was published by the Integrated Regional Information Networks (IRIN). In addition to a discussion of the shortcomings of some of the earlier vaccination campaigns, the article correctly identifies the Nigerian suspicion of the West as fed by memories of colonialism, questionable pharmaceutical trials by a Western company almost two decades ago, and what many Nigerian Muslims regard as a U.S. war against Islam in Iraq and Afghanistan. Skeptics in the region allege that a Western motive for promoting vaccination is the intentional decreasing of male fertility through vaccination to reduce Muslim birth rates. IRIN has also issued an excellent analysis of the opposition to the measles vaccination, where the dynamic is similar to that of opposition to polio vaccination. IRIN makes the important point that polio and measles vaccines are often confused in the popular mind. While there is little in the reports that is new to those who follow polio in northern Nigeria, IRIN’s analysis is the most comprehensive and lucid I have seen available to non-specialists. In my view, however, the analysis may over-emphasize the effects of the U.S. role in Iraq and Afghanistan, and not emphasize enough the northern regional suspicion of the federal government in Abuja, which is a primary sponsor of both vaccination programs. I am also a bit skeptical that, more than fifty years after the British left Nigeria, colonial memories play much of a role.

Yesterday I published an article on ForeignPolicy.com posing ten questions about the BRICS development bank, recently announced by BRICS leaders, and its implications for global development. One question is whether developing countries will welcome the bank. As I write: Probably. China is known for extending loans and resources without conditionality around touchy subjects like governance, and if the BRICS development bank follows suit, it’s hard to imagine many countries saying no to easy money. Still, there’s likely to be some skepticism, in no small part because of China’s inevitably outsized role in the new bank and also because of the mixed reviews China gets from its global south trading partners. You can read the article here and an excerpt on my blog here.

This week a team from the International Monetary Fund is in Cairo yet again, attempting to reach agreement with the Egyptian government on a $4.8 billion loan to plug Egypt’s increasingly serious external financing gap and budget deficit. Egypt’s foreign currency reserves—in precipitous decline as the Central Bank continues to prop up the exchange rate in efforts to avoid skyrocketing costs for wheat and other staple imports—have dropped from more than $36 billion in early 2011 to less than $14 billion at the end of March.  Egypt’s budget deficit now stands at nearly 11 percent of GDP. The sticking point in the loan negotiations is the IMF’s insistence that the Egyptian government slash fuel subsidies and replace them with better-targeted social protections for vulnerable groups and a more progressive tax structure. The IMF summarized in November that “fiscal reforms are a key pillar under the [proposed $4.8 billion dollar loan] program. The [Egyptian] authorities plan to reduce wasteful expenditures, including by reforming energy subsidies and better targeting them to vulnerable groups. At the same time, the authorities intend to raise revenues through tax reforms, including by increasing the progressivity of income taxation and by broadening the general sales tax (GST) to become a full-fledged value added tax (VAT).” Costly energy subsidies are a significant drain on the government’s purse, unfairly help the rich at the expense of the poor, and put the country on a growth path that is environmentally (as well as fiscally) unsustainable. Energy subsidies amount to almost 21 percent of Egypt’s total budget every year—more than US$24 billion annually and approximately 12 percent of the country’s total GDP. The dangerous external financing gap and budget deficit could be nearly erased just by eliminating fuel subsidies. Although energy subsidies were initially intended to help the poor, the rich benefit disproportionately, because they consume a larger share of the subsidized energy. According to a recent African Development Bank report on Egypt, “the top 40 percent of the population enjoy about 60 percent of the energy subsidies while the bottom 40 percent receive about 25 percent of these subsidies.  These differences are more drastic in the urban sector where the top 40 percent of the population receive about 75 percent of energy subsidy benefits, and more than 90 percent of gasoline subsidies.” In short, Egypt’s fuel subsidies are a reverse Robin Hood transfer from the poor to the rich. The subsidies also trap Egypt on a path of environmentally unsustainable growth, with severe long-term consequences for the environment. Artificially low energy prices lead to excessive energy consumption, as Egyptians choose to use artificially cheap fuel instead of switching to more sustainable renewable alternatives like wind and solar, or improving energy efficiency. Of course, eliminating energy subsidies will indeed hurt the poor in the short-term. The most vulnerable can barely get by day-to-day now, and rely on energy subsidies to provide a cushion for survival. Fuel subsidies therefore would need to be replaced immediately and transparently with targeted cash transfers to the poor. This move from fuel subsidies to targeted cash transfers is exactly what the IMF is demanding as a condition of its loan package. Unsurprisingly, entrenched elites in Egypt who now benefit from the generalized energy subsidies are resisting fiercely, and playing on populist fears and rhetoric to mobilize broader public opposition. Is the IMF now on the side of social justice and environmental sustainability in Egypt?

Emerging Voices features regular contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Paul Callan, Jasmin Blak, and Andria Thomas of Dalberg Global Development Advisors. Callan is Dalberg’s Global Operating Partner and leads the firm’s Strategy and Performance practice; Blak and Thomas are based in Dalberg’s Washington, DC, office. In the article, a follow-up from their post on Chinese foreign aid and investment last week, they highlight characteristics of aid flows from other important emerging donors. The first blog in this series addressed the attention given to Chinese foreign assistance. Yet China is only one of several emerging donor countries that are providing an increasingly significant contribution to development aid. Official Development Assistance (ODA) from China is estimated at $2 billion annually, whereas Saudi Arabia gave over $5 billion in 2011, and South Korea and Turkey gave $1.3 billion each. Many emerging donors give more ODA as a share of Gross National Income (GNI) than China’s 0.04 percent, including Hungary (0.11 percent), Poland (0.08 percent), and the United Arab Emirates (UAE—0.22 percent). The changing landscape of foreign aid will be driven as much or more by other emerging donors as by China alone. It is therefore important to understand the broader set of emerging donor countries. Which are the emerging donor countries? At Dalberg, we define this group of countries as those which: Have become substantial donors within the last 20 years; Are not part of the OECD’s Development Assistance Committee (OECD-DAC) or have only joined it in the past decade; and Received aid and/or other development assistance themselves in the recent past (and may still be doing so). With this definition, emerging donors include a wide range of countries, including the likes of Brazil, India, South Africa, Saudi Arabia, UAE, Hungary, Poland, Turkey, and South Korea, as well as China. Emerging donor contributions have quintupled in the last five years; overall, they account for an estimated 7-10 percent of global aid flows from donor countries. In contrast with traditional OECD-DAC donors whose aid volumes are expected to stagnate in the medium term, aid from emerging donors is projected to double in the next five years, which means they could contribute close to 20 percent of total donor funding by 2020. Emerging donors employ approaches to providing aid that are sometimes quite different from those of traditional donors. But, just as there are differences between traditional donors, there are also differences between emerging donors. Let’s look at some of the features of emerging donor development aid in more detail: Expert advice and in-kind contributions. Many emerging donors feel that their greatest contributions can come from non-monetary support in the form of shared expertise from their own development. Some donors also feel that in-kind contributions mitigate the risk of funds being misused by recipient countries. Brazilian aid focuses heavily on providing “made in Brazil” solutions, especially in health, agriculture, and education. South Korea strongly believes that its aid should share experiences from South Korea’s own development and has invested in multiple large-scale advisory programs such as the South Korea International Cooperation Agency (KOICA)’s International Cooperation Center and the Knowledge Sharing Program of the Ministry of Strategy and Finance. India has partnered with the African Union to create the Pan-African e-Network, Africa’s largest long-distance education and tele-medicine initiative. The Indian government is providing in-kind investments totaling $125 million over five years to set-up the system and transfer knowledge to local implementers. Explicit prioritization of national interests. Many emerging donors are not shy about saying that their development assistance is linked to national interests, including economic cooperation, promotion of regional stability, religious or cultural ties, and commercial opportunities. For example, “mutual benefit” or “win-win” economic development cooperation is a central tenet of Chinese and Indian assistance and characterizes India’s cooperation with many African countries. Prioritizing regional stability is another common motivating factor. For example, the majority of India’s aid supports infrastructure projects in neighboring countries such as Nepal, Bhutan, and Afghanistan, where India recently became the fifth-largest aid donor. Saudi Arabia and Turkey direct their aid primarily to fellow majority-Muslim countries. For example, Turkey provided assistance to Egypt following the Arab uprisings and over $500 million in public and private aid to famine-hit Somalis in 2011. However, some emerging donors, especially some Eastern European countries and South Korea (which joined the OECD-DAC in 2010), emphasize “altruistic” objectives and look to the Nordic countries as role models. Thus, motivations vary significantly among emerging donors, and there is no clear divide between traditional and emerging donors because both groups include donors with more altruistic and more national-interest-focused objectives. Cooperation with traditional donors. Emerging donors as a group are enthusiastic about cooperation with each other and with traditional donors. Triangular cooperation initiatives, which normally partner a traditional donor from OECD-DAC with an emerging donor and a beneficiary developing country, are becoming common. In 2011 and 2012, India both received advice from Brazil on enhancing its social protection scheme in Delhi and provided information technology and outsourcing expertise to eight African countries in partnership with the World Bank. In Brazil, trilateral projects represent one-fifth of the total technical cooperation projects. For example, Brazil is working with Mozambique and the United States in a triangular cooperation focused on sharing the successes of the Brazilian response to the AIDS epidemic to enhance the strategy and execution of Mozambique’s own AIDS response. Though China has in the past been accused of prioritizing unilateral development cooperation, it is increasing its collaboration with other donors, especially through triangular cooperation arrangements as well as its recent partnership with the World Bank to promote global economic governance and development. In this short post, we have touched upon a few features of emerging donors. But, as a whole, they are not understood very well. As their aid becomes increasingly important to recipient countries, development policymakers and practitioners will need to understand emerging donors – as a group and individually – much better.

Emerging Voices features regular contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Paul Callan, Jasmin Blak, and Andria Thomas of Dalberg Global Development Advisors. Callan is Dalberg’s Global Operating Partner and leads the firm’s Strategy and Performance practice; Blak and Thomas are based in Dalberg’s Washington, DC, office. In the article, they analyze China’s foreign aid and investment in the developing world and advocate more accurate reporting to enable better comparisons of Chinese financial flows to those from traditional donor countries. China has significantly expanded aid to and investment in developing countries in recent years. This expansion has been the subject of much debate, with many development scholars and policymakers seeking to understand how Chinese foreign assistance compares with that of “traditional” OECD donors. However, many analyses compare Official Development Assistance (ODA) from traditional donors to a more varied collection of financial tools employed by China. These apples-to-oranges comparisons sometimes give an inaccurate picture of the global aid and investment landscape. A more careful analysis shows that while China gives relatively little ODA, its broader foreign assistance flows already match or exceed those from the United States and other OECD countries. ODA–defined by the OECD to include grants, interest-free loans, and concessional loans–is the most frequently cited metric for foreign aid. China does not give much aid by this measure: its ODA was estimated to be $2 billion in 2010, which equates to 0.04 percent of its Gross National Income (GNI). By comparison, U.S. ODA was $30 billion in 2010, equivalent to 0.21 percent of GNI, and all members of the OECD’s Development Assistance Committee (OECD-DAC)—the main group of traditional donors—gave $128 billion in ODA in 2010. Why, then, is China viewed as a significant donor? To understand, we need to look at other types of government assistance and at private sector funding flows. Official assistance can be defined more broadly by adding to ODA a range of funds outside the OECD’s definition, such as export credits, natural-resource-backed lines of credit, subsidies for private investment, and mixed credits (combined concessional and market-rate loans). These are called Other Official Flows (OOF) by the OECD-DAC. OOF are usually distinguished from ODA by traditional donors because of concerns about the development implications of strings frequently attached to OOF arrangements, such as tying the funds to the use of products and services from the donor country. China’s export credits and other types of OOF are larger than its ODA. Chinese OOF to Africa alone are estimated to have been about $5 to 6 billion in 2007. The United States and other OECD-DAC countries also provide various forms of OOF, but at a scale far below that of China. Annual U.S. OOF to all developing countries, net of repayments, never exceeded $1 billion during the period 2005 to 2010. To take one example, the Export-Import Bank of the United States (Ex-Im Bank) authorized just under $10 billion in loans and other financing to Africa during the last eight years, during which time its Chinese counterpart (EXIM) is reported to have authorized $38 billion for the continent. Foreign Direct Investments (FDI) are private financial flows that count as neither ODA nor OOF. In China’s case, however, FDI is relevant to the discussion of foreign aid because state-owned companies likely account for a substantial proportion of FDI, making it harder to distinguish between public and private flows. For example, the single largest direct Chinese investment in Africa to date is the $5 billion purchase by the state-owned Industrial and Commercial Bank of China Ltd. of a 20 percent stake in South Africa’s Standard Bank in 2008. In all, China’s FDI to developing countries was estimated to be approximately $17 billion in 2010, representing an FDI to GNI ratio of 0.30 percent, roughly equal to the United States’. Looking at Sub-Saharan Africa specifically, China’s FDI to GNI ratio is greater than that of the United States, though its absolute number is slightly less ($12.7 billion in 2007 to 2011 versus $16.6 billion). Some of the confusion in the conversation about aid and investment stems from differences in philosophy. The Chinese government explicitly considers other developing countries to be business partners more than aid recipients in its economic diplomacy strategy. Consequently, the foreign assistance described in the government’s 2011 “China’s Foreign Aid” white paper and 2006 “African Policy” paper outlines many forms of non-ODA finance that China considers cooperative, including export buyer’s credits, preferential trade relationships, and support for Chinese firms investing in developing countries. OECD-DAC members, by contrast, distinguish clearly between monies that they consider aid to developing countries (and the poor within them), and other flows related to commerce. As China and other emerging donors come to contribute more to developing countries, it would be beneficial to have more accurate and consistent reporting across all donors. Comparable reporting standards could draw from both OECD definitions and emerging donor conventions, such as the Chinese practice of treating only the reduction in interest on concessional loans (rather than the whole loan) as ODA. More consistent data would enable developing countries and international development actors to better understand the nature of financial flows to their economies, and consequently to design better policies to harness these flows. The next post in this series will examine aid and other financial flows from emerging donors outside China.

Last month, the Council on Foreign Relations introduced a new feature, Ask CFR Experts, that invites the public to submit questions to CFR scholars. In today’s answer, CFR’s Terra Lawson-Remer proposes ways for international organizations to bolster civil society groups in developing countries. As she explains:   ...supporting civil society from the outside is riddled with danger. When international actors get involved in the domestic affairs of other countries they risk upsetting complex power dynamics and promoting autocrats. This meddling can also incite a backlash against perceived imperialism.   Previous questions and answers have addressed such topics as Mexico’s drug cartels, the health effects of climate change, challenges facing the Democratic Republic of the Congo, and U.S. assistance to Egypt. You can find the whole series here. We welcome your questions, especially those about the development issues discussed on the Development Channel. Submit a question via this form.  

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Julie Fisher, a current associate and retired program officer of the Kettering Foundation whose book, Importing Democracy: The Role of NGOs in South Africa, Tajikstan and Argentina, will be released by the end of March. Here, she discusses how democratization NGOs can bolster civil society and government accountability by strengthening a country’s loyal opposition. In a classic study written over forty years ago, Ghita Ionescu, a political scientist, and Isabel de Madariaga, a historian, described loyal opposition as “the most advanced and institutionalized form of political conflict.” Loyal opposition unites support for a democratic constitution and political system with opposition to a particular political regime. Most scholars tie loyal opposition to political parties. In many developing countries, however, democratization NGOs promote new and different forms of opposition. Because democratization NGOs are afraid of losing their nonpartisan image, these forms are not tied to political parties. Indeed, democratization NGOs sometimes become a part of the opposition themselves. Although this may not build loyal opposition in the traditional sense, it does contribute to policy dialogue and push governments to become more accountable to their citizens. On the other hand, political parties are too often the orphans of the democratization movement. Building deeper democracies will ultimately require this to change. One way that democratization NGOs become part of a loyal opposition is to join or organize a coalition on socioeconomic issues of interest to other NGOs. In South Africa, democratization NGOs were leaders in a civil society coalition called the Treatment Action Campaign that successfully sued the government over its failure to prevent mother-child transmission of HIV through antiretroviral drugs. Since the South African legal system is strong and independent of the executive, this decision also reinforced government accountability, conformity to the constitution, the right of judicial review, and children’s rights. Another example comes from Tajikistan, where the League of Women Lawyers provided a draft law and space for public discussions about human trafficking to Dubai. The league organized a wide coalition of NGOs that successfully promoted an anti-trafficking law. Advocacy related to political and legal processes is often even more visible at the provincial or municipal level. With support from national democratization NGOs and forty citizen monitors of the city council in Rosario, Argentina, an NGO called Ejercicio Ciudadano (Citizen Practice) cooperated with the city in creating a transparency agreement that NGOs in six other provinces subsequently adopted. In Tajikistan, a democratization NGO called Jahan teaches local police about human rights. When I asked how they were able to do this given Tajikistan’s authoritarian government, Shahlo Juraeva, the director of Jahan, explained that the regime “doesn’t want trouble at the municipal level.” Democratization NGOs also strengthen local civil society through their support for political dialogue. In Argentina, Fundacion Ciudad (City Foundation) uses public deliberation to build ties between NGOs and community organizations. In a poor neighborhood in Buenos Aires province, a series of eight deliberative forums co-sponsored by Fundacion Ciudad and a local community library led to a program employing local teenagers to pick up garbage on a daily basis. Once citizens decided to launch the effort, the provincial government cleaned up a huge backlog of garbage and provided financial support. The garbage company provided the teens with gloves and uniforms. The success of Fundacion Ciudad suggests that democratization NGOs could help create a stronger loyal opposition by enlisting ordinary citizens who belong to community organizations. Democratization NGOs that join coalitions could also do more to educate their NGO partners about the political process and invite them to join political networks. While a loyal opposition based on civil society is clearly a step forward from autocratic rule, further democratic progress may depend on political parties. Parties are a vital part of the democratic process, but many struggle with small constituencies or leadership based on individual personalities. This privileges narrow ideologies and personal loyalties over policy proposals that address the concerns of citizens. To deal with these pitfalls, democratization NGOs need to overcome their fear of being labeled partisan. NGOs could strengthen their existing efforts to build a loyal opposition by, for example, hosting multiparty workshops with a focus on constituency building. Strategic networking among NGOs would help build this missing piece of the democratization puzzle: stronger political parties.