A call for renewed commitments of Asia Pacific donors to the world’s marginalized
As the world faces a food, fuel and debt crisis brought about by the pandemic, increasing conflict and progressing climate emergency, donor countries and Official Development Assistance (ODA) have a crucial role in mitigating the impacts of these crises for the marginalized. Last April 2022, the Organisation for Economic Co-operation and Development – Development Assistance Committee (OECD-DAC) released the preliminary ODA statistics for 2021. Last year, overall aid reached USD 178.9 billion, which reflects an increase of 4.4% from the 2020 ODA. The rise in total ODA is largely due to the assistance for recipient countries’ COVID-19 response, specifically through vaccine donations. Excluding aid for COVID-19 vaccines, total ODA only rose by 0.6% or USD 1.07 billion.
This minimal increase in ODA commitments comes in a time of rising poverty, widening inequalities, escalating conflict and life-threatening disasters. While much assistance is needed by developing countries to address these impacts, donor countries have failed to uphold their commitments to address the needs of the world’s marginalized and vulnerable populations. This trend seems to ring true with the performance of Asia Pacific donors as well, especially with how they have used and disbursed aid last year.
Lacking in commitments
The total ODA contributed by Asia Pacific donors saw a rise in real terms. South Korea’s ODA rose by 20.7%, New Zealand with 13.8%, Japan with 12.1%, and Australia with 4.5%. The significant increase in South Korea’s aid is guided by its goal to double its ODA between 2019 to 2030, and with its USD 200 million pledge for vaccine supply. Both Australia and New Zealand continue to disburse the majority of its aid to its priority areas and countries. Japan, even with its minimal increase, is the largest donor in the region, as it focuses on health systems strengthening and fostering economic growth.
While the OECD-DAC and donor countries have prided themselves for the overall increase in ODA, the numbers also show donors’ failure to uphold historical commitments. The overall ODA in 2021 only represented 0.33% of the combined gross national income (GNI) of donor countries, far from their 0.7% commitment. Donors from the region all failed to reach the target, with Japan only committing 0.34%, New Zealand with 0.28%, Australia only committing 0.22%, and South Korea with 0.16% of their GNI.
Inadequate response for conflict and climate emergencies
Majority of the donors from the region have declared that addressing conflict and the impacts of climate change remains part of their priorities. In 2020, Japan leads the region’s donors with 78% of its bilateral allocable aid designated for climate change, followed by New Zealand with 29% and South Korea with 9%. Australia currently has no recent data available for its climate-related efforts. While it seems promising, there is more money given to adaptation efforts, rather than mitigation actions that frontline communities urgently need. Funding for mitigation from Asia Pacific donors only total USD 4.49 billion over a total of USD 15.35 billion. In spite of these, development finance remains inadequate in alleviating the destructive impacts of climate change to the most marginalized. With this, CSOs continue to call for climate finance to be additional to ODA.
Donor countries have also recognized the need to focus on coursing financing to fragile and conflict-affected states. With this, a significant percentage of their ODA in 2020 is designated to fragile contexts. South Korea promised almost half of its bilateral ODA (43.4%) to fragile contexts, followed by Japan with 35.9%, then Australia with 33.5%, and New Zealand with 22.4%. In 2021, Asia Pacific donors contributed USD 7.81 billion to fragile and conflict-affected contexts.
However, there is a resounding decrease in the funding for the peace pillar for Triple Nexus programs. Except for New Zealand, all the region’s donors have reduced their disbursements to peace programs, which is crucial in addressing the root causes of conflict. With this, it is imperative to highlight the equal role of the peace pillar, with the humanitarian and development pillars in implementing the Triple Nexus approach and attending to states of fragility.
Emerging private sector bias
There is also a stress on channeling aid through multilateral institutions and international finance institutions (IFIs), as they receive 30% of bilateral ODA, in contrast to the 13% dedicated to civil society organizations. While the majority (20%) was given to the United Nations and its subsidiary bodies, a large amount was also given to IFIs such as the International Monetary Fund-World Bank (IMF-WB) and the Asian Development Bank (ADB). IFIs remain to be the preferred channel to “invest” in development projects despite CSO reports demonstrating destructive impacts on developing countries, with the incurring of debt, militarization of communities, violation of rights and the degradation of the environment.
Private sector entities are presented as the most viable solution to the ‘financing gap’ in meeting the Sustainable Development Goals (SDGs). With this, market-based solutions of green, sustainability or SDG bonds, which private sector partners can garner profit from, can incur more debt for developing economies without significantly contributing to development outcomes. A former investment officer for BlackRock, an investment management company, has revealed that these bonds have been promoted due to their high returns for the private sector, without significant contributions to development.
Majority of ODA still remains to be disbursed bilaterally, but largely in the form of loans and with private sector entities as implementing partners. The region’s donors delivered most of this bilateral aid in the form of loans to support infrastructure projects. In 2020, majority of Japan’s bilateral aid (68%) were in the form of loans. Under the Australian Infrastructure Financing Facility for the Pacific (AIFFP), USD 2.1 billion out of USD 2.44 billion or 85% of the aid for infrastructure was channeled in the form of loans. As donors still prioritize giving loans over grants, there is a looming threat of the debt crisis for developing countries.
Infrastructure-led development projects also largely benefit the private sector while contributing negative impacts on communities and the environment. For example, the Tangguh Liquefied Natural Gas Expansion Project in West Papua is undertaken by the ADB with BP PLC, China National Offshore Oil Corporation, Mitsubishi Corporation, among others. The project has been reported to have led to the displacement of indigenous communities, human rights violations with the deployment of Indonesian armed forces, and environmental degradation.
Persisting donor interests despite the world’s crises
Furthermore, bilateral assistance to countries is utilized by donor countries to strengthen economic and military ties with recipient governments. Aid is weaponized to garner support for donors’ security interests. There is a stress on channeling aid to Southeast Asia and the Pacific, as exhibited in donor countries’ strategies. Japan is guided by its Free and Open Indo-Pacific Strategy that aims to strengthen ties with Asia and Africa for mutual development. Australia has its Pacific Step-up that mobilizes finances for its neighboring countries and Southeast Asia. South Korea has its Country Partnership Strategy that dictates its priority areas, focusing on Southeast Asian countries. Lastly, New Zealand has its Pacific and Global Development Cooperation Programs, where much of the aid is being spent on.
All of these policies are aligned with the US-led Indo-Pacific Strategy under the Biden administration. This strategy is part of Biden’s pivot to Asia, which meant diverting aid flows into the region and fostering strategic partnerships with Asia Pacific countries. While Japan and Australia are part of the Quad, South Korea and New Zealand work closely together with the US on joint agreements, projects and military exercises. The Indo-Pacific Strategy is pursued by the US with its allies in order to strengthen its economic and security ties, while countering China’s influence in the region.
The US-led strategy largely dictates how donors channel, allott, disburse and use their aid. In the Indo-Pacific strategy, there is an emphasis on an economic framework in the region that largely benefits these donor countries and the United States, leaving developing economies further behind. Furthermore, as the United States widens its sphere of influence in the region, there will be increased tensions with China that can lead to the exacerbation of conflict and possibility of war.
Recommendations
Despite the nominal increase in ODA in 2021, the ways on how aid is disbursed and used by Asia Pacific donors are largely ineffective in addressing the multidimensional crises the world faces today. As ODA policy and practice remain largely shaped by donor interests and not the needs of the marginalized, ODA will continue to fall short in providing genuine, sustainable development for all.
With this, the Reality of Aid-Asia Pacific urges donor countries, from the region and beyond, to:
1. Meet and exceed the 0.7% GNI target without further delay and separate from in-donor refugee costs, debt cancellation and principal purpose projects for climate finance;
2. Meet the 0.2% GNI commitment to LDCs and other countries in chronic conflict and state of fragility;
3. Establish a human rights-based framework and anchor all forms of development finance on the four development effectiveness principles;
4. Mainstream gender equality and women’s empowerment;
5. Address other inequalities such as those based on economic marginalization, disabilities, race, ethnicity, or age;
6. Reverse closing civic spaces and authoritarian measures, institute enabling legal frameworks and allocate ample resources to CSOs;
7. Increase country programmable aid, grants, demand-led technical cooperation, and support for domestic resource mobilization rather than loans, informal and formal tied aid;
8. Deploy ODA only in projects/activities directly related to building capacities of developing country private sector, i.e. small-scale enterprises that support the creation of decent jobs and livelihoods;
9. Stop shaping humanitarian and development strategies according to their own foreign policy, geopolitical and security interests; and
10. Respond to the climate emergency without diminishing ODA and/or provision of loans for these purposes.