Foreign Aid

Foreign aid discredits itself

(Oct. 05, 2010) China’s ability to play both sides of the foreign aid game—as giver and receiver—highlights one the many contradictions in the development “industry”, writes Brady Yauch.

After recent evidence showed that China was receiving hundreds of millions of dollars in foreign aid funds to fight diseases such as malaria that were almost non-existent in the country—and at the expense of other developing countries suffering thousands of deaths from these same diseases—there are new reports revealing that this is just the tip of the iceberg and that China is receiving billions of dollars in foreign aid each year. Many are now asking why, when China spends billions of dollars on lavish projects such as the 2008 Olympics and the Shanghai Expo, it deserves any aid at all.

Welcome to the wacky world of foreign aid.

According to the Associated Press (AP), China received $2.6-billion in aid funds from donor countries in 2007-2008. Of this, Japan handed over $1.2 billion, with Germany giving about half that amount, followed by France and Britain. The U.S gave China $65-million in 2008 to promote safe nuclear energy, health, human rights and disaster relief.

The report also says China is one of the biggest borrowers from the World Bank—taking out about $1.5 billion a year.

The foreign aid handouts to China come as the country holds more than $2.5-trillion of foreign reserves and, hands out itself, billions of dollars in aid to less developed countries. According to Deborah Brautigam’s, “The Dragon’s Gift: The Real Story of China in Africa” China gave more than $2.5-billion in aid to African countries alone in 2009—along with $375-million in debt relief and more than $1.5-billion in concessional loans from its export-import bank.

China has also recently pledged to give $10-billion in concessional loans to Africa.

And last year, China spent hundreds of billions of dollars on its own stimulus program to combat the global economic downturn of 2008.

China’s Commerce Ministry defends taking foreign aid, saying the country is still a developing country with 200 million poor people and major environmental and energy challenges.

China is not the only questionable aid recipient under fire. British aid to India is reportedly about to be slashed [PDF] after years of strong economic growth in India.

Defending their honour, Indian officials jumped the gun and said India could do without the aid money. According to the Financial Times, India’s finance minister, Pranab Mukherjee called Britain’s aid to India “peanuts” in proportion to overall aid. He said he would rather surrender such funds if the British government decided to cut it.

In recent years India has also whittled down to six the number of countries “allowed” to give it foreign aid. The fact that India is picking and choosing which countries can give it aid money suggests that foreign aid is used primarily for geopolitical power politics and not poverty alleviation. It also raises the question of who, exactly, needs who in this relationship.

Furthermore, India, like China, is itself, a foreign aid donor, giving money to countries such as Burma and Afghanistan and in sub-Saharan Africa.

More profoundly, aid to booming countries like India and China, who still claim millions of poor, raises the inevitable question: who, ultimately, is responsible for the development of a country’s poor, particularly when that country is flush with cash?

According to AP, China is particularly adept at presenting itself as either a global power or poor developing country, depending on the circumstance.

“It is proud of having lifted half a billion people out of poverty and is beginning to flex the muscle that comes with being an economic power,” the report says. “Yet when, for instance, it is called on to agree to binding reductions in carbon emissions, it replies that it can’t because it’s still a developing country.”

Claiming to be a “developing” country in order to bring in cash, while offering subsidized loans and cheap financing to projects in Africa and Southeast Asia for geopolitical reasons, provides more than enough evidence for developed countries to turn off the foreign aid taps immediately to countries like China and India. If these countries truly care about their poor, they can raise living standards for their citizens through political and economic reforms internally, without needing to go to the world with begging bowls.

Brady Yauch, Probe International, October 5, 2010

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