Politics, Business & Culture in the Americas

Rio+20: Accommodating New Global Donors

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Heads of state from over 100 countries and tens of thousands of representatives from nongovernmental organizations and businesses will descend on Rio de Janeiro this month for the United Nations Rio+20 Conference on Sustainable Development. With the slogan “The Future We Want,” participants will aim to put in place a universal framework to tackle the interlinked challenges of economic and social development, poverty eradication and environmental protection.

Leading up to the summit, however, negotiations are stalled amidst disagreements between developed and developing countries on what should constitute the roadmap to sustainable development. Developing countries are cautious to commit to a framework that might restrain their economic development, and developed countries—most battling severe economic crises—are reticent to include language that would require them to aid poorer nations with implementation, financing and the technology needed to meet agreed goals.

The deadlock is emblematic of a broader shift in the global power structure whereby developed countries, now less able to commit significant levels of resources to multilateral efforts, are leaving a void in global governance that emerging and middle-income economies are gradually beginning to fill. As these new actors rise to global prominence, however, the standoff also points to the difficult path we face in solving global challenges.

In an age fraught with economic malaise and fragmented political interests, can there truly be a unified vision of a future we want?

Rio+20 is unlikely to yield any binding international agreements, and most experts have already deemed the summit a failure. Even so, a look at how some of the largest emerging economies including India, China and Brazil are leveraging their growing economic heft as donors of development aid can provide a glimpse into the kind of future they envision for the world.

Official data on development assistance by so-called “emerging donors” varies considerably as countries lack transparency in reporting and have varied definitions for what constitutes aid. Still, even conservative estimates show that emerging economies are aggressively joining the ranks of international donors, backed by a philosophy that—at least theoretically—represents an alternative to that of traditional donors, specifically members of the Organization for Economic Cooperation and Development (OECD).

Members of the OECD’s Development Assistance Committee (DAC) continue to be the largest contributors of development aid globally. But foreign assistance by Brazil, Russia, India, China, and South Africa (BRICS) is growing rapidly against the backdrop of declining assistance from traditional donors. Development aid by the BRICS grew by an average of 19 percent in 2010, compared to a 1.5 point growth in OECD top aid programs, and a subsequent 3 percent drop in 2011.

China provides the bulk of foreign assistance: $3.9 billion in 2010, according to conservative estimates. High-end estimates for 2009 show China’s contribution at $25 billion, making it the second-largest provider of development aid after the U.S. Indian and Brazilian assistance remains more modest at $680 million and $1 billion respectively, although recent reports by the International Monetary Fund (IMF) and the Center for Global Development argue that India’s infrastructure financing in Africa is now comparable to that of DAC donors, and that Brazil’s foreign assistance can be as large as $4 billion per year—roughly equivalent to that of Sweden, Norway and Canada.

To be sure, China, India and Brazil have a longstanding tradition of assisting fellow developing countries, and have historically done so under the umbrella of what they call South-South cooperation. Rhetorically, this means that they regard recipients of foreign assistance as equal partners and recognize the mutual benefits of aid. In turn they stress a policy of non-interference in their affairs and tend to provide aid bilaterally and without conditions.

In practice, mutually beneficial cooperation means that Southern donors tie their assistance to economic or geopolitical considerations. For instance, the OECD reports that China and India often provide aid in the form of “packages” that can include loans, grants, debt relief, preferential trade and investment agreements, and provisions that require a recipient country to purchase the donor’s goods and services. An extreme example has come to be known as China’s “Angola Model,” where China finances infrastructure projects through oil-backed concessional loans; Chinese companies are contracted for the projects, and supplies and labor are sourced from China.

Critics, particularly in the West, fear that such aid does not create horizontal relationships and can instead result in higher levels of indebtedness for developing countries. Echoing the trouble with the Rio+20 negotiations, they argue that unconditional aid also undermines the rules-based regime that developed countries have been moving toward over the last two decades: an aid regime intended to foster transparency and macroeconomic stability, and protect human rights and the environment.

Beyond the obvious double standards embedded in such criticism—after all, the U.S. and Soviet Union spent decades giving aid to dictators during the Cold War, and aid by most nations continues to be influenced more by realpolitik than by selflessness or goodwill—one cannot argue that more choice is inherently bad for developing nations, or expect that emerging economies will not try to advance their own interests.

Southern donors have a lot to offer developing countries. Even in the case of Angola, it was the local government that appealed to China for loans to build critically needed infrastructure when loans by the IMF seemed too inflexible. Aid by Southern donors tends to be targeted to infrastructure and other productive sectors, which developing countries need and developed nations shy away from, preferring to fund poverty alleviation and social sector initiatives. Being themselves developing countries, Southern donors also have relevant knowledge, experience and technical expertise to offer other nations.

Without leaving lessons and rules behind, in today’s fragmented environment we need to accommodate myriad modes of development. The 2005 Paris Declaration and Accra Agenda for Action, which make up the backbone of the developed world’s aid regime, were issued against a clear North-South divide—one that is ever more elusive. Today, the BRICS and other emerging countries are reshaping the world, and the international community must find a platform that reflects this new reality.

Moving away from the DAC to a more decentralized platform for negotiations on aid and development is a good start. Here, the OECD’s voice can be represented as equally as that of other donors. In return, the BRICS and other non-DAC members should strive to be more transparent in reporting foreign assistance and its effectiveness. Their reluctance to sign on to a global framework that requires transparency stems partly from a lack of capacity to track data, but also from their unwillingness. Many of these “emerging donors” are also large recipients of aid and house much of world’s poor, making foreign aid a politically sensitive subject at home and abroad. Engaging in more common projects between Northern donors, Southern donors and a recipient country—what is often called “triangular cooperation”—can help transfer knowledge about data collection and build goodwill among participating countries.

Ultimately, countries like India, China and Brazil use foreign aid not only to advance their interests, but also to gain more clout in Western-dominated international institutions. They seek to be a part of the system as much as they want to democratize it. And their intentions are not so different than the West’s. Brazil is hosting the Rio+20 Summit, whose agenda has been largely driven by the governments of Colombia and Guatemala. These countries have similar long-term goals; they just need more flexible platforms for international engagement.

Estefanía Marchán is a researcher with Gateway House: Indian Council on Global Relations, located in Mumbai, India. This article has been republished on Gateway House’s blog.

Tags: Brazil, China, Development Assistance, Environment, India, Sustainable development
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