Aid and development

International aid and development assistance are important contributors to the economy of the Lower Mekong region. All Lower Mekong countries receive official development assistance (ODA), with Thailand also contributing ODA as a donor. Nevertheless, the region accounts for only about 1% of the world’s total ODA received, a low figure considering the conflicts that the region has faced in the last five decades and the resulting developmental and humanitarian challenges.

Source: World Bank. Net official development assistance and official aid received (current US$). Created by ODI April 2016. Licensed under CC BY-SA 4.0.

Total ODA figures

The total amount of ODA received in the Lower Mekong was US$7.2 billion in 2014, US$2 billion less than the previous year.1 This drop in funding was due to a funding increase in 2013 to Myanmar, which dropped significantly again in 2014. Net ODA and aid relief to all other Lower Mekong counties increased in 2014. While the Thai government began to repay its outstanding development loans in 2000, they were again a net recipient in 2014.

Up until 2012, Vietnam received by far the highest annual amount of ODA of Mekong countries at US$4.1 billion, which is more than five times the amount received by the second highest recipient, Cambodia.2 However, in 2013, the amount of ODA Myanmar received increased almost seven times to US$3.9 billion.3 Myanmar’s increase came as it continued to remove barriers to trade and restrictions on foreign entities operating within its borders. Western donors, such as Australia, the European Union and the United States, had committed only limited humanitarian aid in Myanmar following the 1962 military coup, complaints of the repression or rights, and intermittent political instability over several decades. They began expanding assistance and re-establishing local offices following moves towards greater transparency and democracy, especially after 2011.4

In 2013, ODA comprised 5.6% of Cambodia’s gross national income (GNI) 4.0% of Laos’ GNI and 2.5% of Vietnam’s. This places all three countries in the “medium aid dependency” category.5 In the same year, Thailand was repaying more of its ODA than it was receiving.6 For comparison, the average percentage of ODA to GNI for developing countries in East Asia and the Pacific was 0.1% of GNI in 2013.7 Although Vietnam received the highest level of ODA in 2013, Laos and Myanmar both received the highest rate of ODA per capita at US$63, followed by Cambodia (US$55), Vietnam (US$46) and Thailand (-US$0.4).8 The average for the Lower Mekong was US$45, compared to the world average of US$19.9

Top donors

The majority of ODA to developing countries comes from the 29 members of the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD). Fifteen of these are among the region’s top donors.

Chinese contributions

Although not listed in the chart of the 15 top donors to the Lower Mekong, China is the fourth largest monetary contributor to the region. The exact amount is difficult to determine, as China does not classify its assistance according to ODA standards set by the Development Assistance Committee (DAC), and so estimates are based on “ODA-like” flows.10

The establishment of the China-led Asian Infrastructure Investment Bank in October 2014 will add a further US$40 billion for infrastructure, while also giving China greater influence in regional development and policy.

Aid for infrastructure development

Donors and development assistance agencies such as the Asian Development Bank (ADB), have prioritized infrastructure projects to meet the demands of these transitions. These projects include hydropower generation and grid extension, road and bridge construction.11 The ADB alone has funded infrastructure projects worth about US$11 billion since 1992.

A man operates a bulldozer during the leveling of and upgrading of a road base in Cambodia. Photo by Asian Development Bank, taken on 15 February 2011. Licensed under CC BY-NC-ND 2.0.

A man operates a bulldozer during the leveling of and upgrading of a road base in Cambodia. Photo by Asian Development Bank, taken on 15 February 2011. Licensed under CC BY-NC-ND 2.0.

Finding a balance

Large projects, such as infrastructure development, have far-reaching and sometimes unintended effects.  The environmental and social impact of such projects, such as the mass relocation of people living on affected lands,  sometimes results in criticism of the donors involved. In providing aid to promote economic development, responsible donors aim to balance the needs of governments, the private sector and the rights of local communities.

Aid and development terms
Official Development Assistance (ODA):Financial aid given by governments and related agencies of developed countries to promote the economic development and welfare of developing countries. Aid may take the form of grants or concessional loans. Loans and credits for military purposes are, however, generally excluded.
Bilateral aid:Bilateral ODA flows direct from a donor government to a recipient government. Some key bilateral donors include Japan (JICA), China, Australia, France (AFD), Switzerland (SDC), and the United States (USAID).
Multilateral aid:Multilateral ODA is channelled through development agencies such as the World Bank, the European Union, the Asian Development Bank (ADB), and various United Nations (UN) organizations that draw from more than one government’s assistance to provide support to a country.
Development Assistance Committee (DAC) donors:The majority of ODA to developing countries comes from the 29 members of the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD). The DAC donors have to abide by the DAC guidelines in formulating and reporting on the national development cooperation programs. DAC members are mostly European states, but also include Australia, Canada, and the USA.
Non-DAC donors:Donors are outside the OECD-DAC member group. They are often referred to as ‘new’, ‘emerging’, ‘non-traditional’, or ‘non-western’ donors. Non-DAC donors as a whole are increasingly using ‘aid’ as one part of a larger set of foreign policy instruments—which may encompass traditional grant aid, lines of credit, concessional loans, trade, investment, and technical cooperation—in their engagement with partner countries. With non-DAC donors such as the BRICS (Brazil, Russia, India, China and South Africa) growing in economic clout, the role and influence of non-DAC donors in changing the aid landscape is set to increase, particularly in the Lower Mekong region.

 

Last updated 13 February 2016

References

  • 1. World Bank. “Net Official Development Assistance and Official Aid Received (Current US$). Accessed 17 June 2015. http://data.worldbank.org/indicator/DT.ODA.ALLD.CD.
  • 2. World Bank. “Net official development assistance and official aid received (current US$). Accessed 17 June 2015. http://data.worldbank.org/indicator/DT.ODA.ALLD.CD.
  • 3. OECD. “Query Wizards for International Development Statistics.” http://stats.oecd.org/qwids. Accessed 28 March 2015.
  • 4. “Burma, History.” Accessed 22 July 2015. http://www.usaid.gov/burma/history.
  • 5. OECD defines “low aid dependency” as an ODA/GNI ratio below 3% and “high aid dependency” as greater than 9%. OECD. 2003. Harmonising Donor Practices for Effective Aid Delivery. Paris: OECD, 111; World Bank. “Net Official Development Assistance and Official Aid Received (Current US$).” Accessed 17 June 2015. http://data.worldbank.org/indicator/DT.ODA.ALLD.CD.; World Bank. “GNI, Atlas Method (Current US$).” Accessed 22 July 2015. http://data.worldbank.org/indicator/NY.GNP.ATLS.CD.
  • 6. World Bank. “Net Official Development Assistance and Official Aid Received (Current US$). Accessed 17 June 2015. http://data.worldbank.org/indicator/DT.ODA.ALLD.CD. Data not available for Myanmar.
  • 7. World Bank. “Net ODA Received (% of GNI).” Accessed 17 June 2015. http://data.worldbank.org/indicator/DT.ODA.ODAT.GN.ZS/countries/1W-4E?display=graph.
  • 8. World Bank. “Net ODA Received Per Capita, (Current US$).” Accessed 22 July 2015. http://data.worldbank.org/indicator/DT.ODA.ODAT.PC.ZS.
  • 9. Figures based on 2013 ODA levels reported by OECD, and 2013 population figures provided by the Asian Development Bank.
  • 10. Estimates based on various sources. China released a White Paper in 2014 that stated it gave US$14.1 billion in foreign assistance from 2010-2012, an average of US$4.7 billion annually. Additionally, 30.5% of this assistance went to Asian countries – approximately US$1433.5 million, which would likely place China below the World Bank and above Australia. The People’s Republic of China, Information Office of the State Council. 2014. “White Paper: China’s Foreign Aid.” Accessed 22 July 2015. http://www.scio.gov.cn/zxbd/wz/Document/1374915/1374915.htm; Kitano, Naohiro and Yukinori Harada. 2014. Estimating China’s Foreign Aid 2001-2013. Japan: JICA Research Institute. Accessed 22 July 2015. https://jica-ri.jica.go.jp/publication/assets/JICA-RI_WP_No.78_2014.pdf.
  • 11. For example, JICA funded the Can Tho Bridge in Vietnam. JICA. 2010. JICA and Mekong Delta. Hanoi, Vietnam: JICA. Accessed 22 July 2015. http://www.jica.go.jp/vietnam/english/office/others/c8h0vm000001siky-att/brochure_05_en.pdf.
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