Whither Japanese Foreign Aid?

This chapter identifies the overall trends in Japan’s official development assistance (ODA) policies for the health sector in developing countries from 1990 to 2020 and its future post-COVID-19 prospects. Since the end of the Cold War, watershed events have repeatedly changed the landscape of international cooperation in the health sector. Like other international aid donors, Japan has devised priorities and strategies for ODA based on a set of international and domestic factors in a constantly changing world. Numerous studies on Japan’s ODA have examined international and domestic factors that impact the formulation of the country’s aid policy. This chapter aims to add to those studies by combining recent debates on international cooperation and foreign aid, the right to health, and world health system reforms to explore and analyze Japan’s ODA for health in developing countries. The guiding research questions were as follows: What were the major trends in Japan’s ODA policies in the health sector from 1990 to 2020? Which international health debates and international cooperation factors exerted influence on those trends? What are the prospects of Japan’s ODA given the COVID-19 pandemic and its impacts? The research relied on primary sources, specifically Japan’s ODA official documents and the Organization for Economic Cooperation and Development’s (OECD) ODA quantitative databases, as well as secondary sources, such as academic literature on international cooperation and foreign aid for health. Our preliminary findings revealed that Japan’s ODA in the health sector from 1990 to 2020 centered on two main axes: infectious diseases and maternal and child health, both of which are oriented toward strengthening the healthcare system. Given this goal, it seems relevant to consider that Japan’s health system is based on the assumption of the need to provide universal health coverage, a concept currently supported by the World Health Organization (WHO), in contrast to the universal health system, and that the implications of this choice on Japan’s ODA and developing countries’ health policies are yet to be fully understood. The COVID-19 pandemic has put substantial pressure on health systems globally and international cooperation for health; thus, it has the potential to affect and even change Japan’s ODA for the health sector in developing countries.

The paper deals with official development assistance (ODA) policies of the USA, the EU and China in the comparative context of latest developments. The development approaches of the three actors under investigation demonstrate common features as well as idiosyncrasies in terms of management, resources, and ideological justification. All actors strive towards complex model of influence through ODA including tying together economic projects with sociocultural heft and security. The underlying trends characteristic of the USA, and in significant degree of the EU approaches combine traditional aim of reshaping sociopolitical institutions of target countries with growing securitization concerns. In the case of the U.S., one can speak of ‘militarization’ of ODA which means blurring the lines between military aid (and goalsetting) and traditional development assistance. China is on the way of reforming its international development cooperation industry, seeking to transform it into a more complex toolset of influence, better coordinated, and more closely knit to foreign policy and security objectives. In contrast to the Western paradigm, Beijing avoids imposing its model of development and threat perception upon the aid-recipient countries. The analysis concludes that “soft power” concept is being sidelined in the world of great power rivalry by more complex and hybrid formats of foreign influence which combine sociocultural, political, geoeconomic, and military instruments, with development assistance playing a role of one of the primary foreign policy resources. New dimensions of rivalry associated with industrial and technological race in energy, climate, and supply chains are coming to the fore in ODA policies. The role of sociocultural influence toolkit is growing given information and communication technologies progress, proliferation of non-state actors in international relations, and increasing activity of China in the area, which challenges the dominant positions the Western actors have enjoyed for over 30 years.

BackgroundWhen countries reach the middle-income threshold, many multilateral donors, including Gavi, the Vaccine Alliance (Gavi), begin to withdraw their official development assistance (ODA), known as graduation. We hypothesised that bilateral...

Numerous academic works have critiqued Japan's Official Development Assistance (ODA) programme for being mercantilist and failing to promote democratization and human rights (Orr 1990; Rix 1993; Arase 1995, 2005). Such accounts assess Japan's ODA policy from Western theoretical perspectives that advocate Western approaches, such as military and economic interventions to contain repressive states. While receptive to these criticisms, Japanese policy-makers have perceived their country's international role in ‘bridging’ (kakehashi) terms and structured their ODA accordingly, as this paper details in the case of Japan's ODA policy towards Myanmar.1 The rationale behind Japan's kakehashi approach lies in the construction of Japan's self-identity as a state able to reenter international society after World War II through focusing on economic development rather than military and coercive action. Proponents of the kakehashi approach construct Japan both as a model of successful democratization through development which other states can learn from, as well as the means through ODA to ‘bridge’ the divide between repressive regimes and liberal democratic capitalism. This critical approach examines Japan's kakehashi or bridging strategy in terms of Japan's response to the anti-government protests in September 2007, Cyclone Nargis in May 2008, and in the build up to parliamentary elections in November 2010 in Myanmar to demonstrate the permanence of this approach in spite of a change of government in Japan. In so doing, the kakehashi approach reveals opportunities to engage with, rather than contain, repressive regimes, thereby raising the possibility of enticing such states back into international society though economic incentives.

The least developed agrarian countries often face an ironic situation where well‐intentioned foreign aid adversely influences their economies. This study explores the unintended consequences of official development assistance (ODA) from donor countries on agricultural exports from recipient countries by appreciating their domestic exchange rates. Motivated by the fact that ODA accounts for a larger share of their total GDP, we first examine whether ODA inflows increase the real effective exchange rate of the recipient country. Leveraging data from 47 countries over the period 2001–2018, we find that ODA inflows lead to real exchange rate appreciation, particularly in recipient countries with floating exchange rate regimes that are more susceptible to exchange rate fluctuations. Moreover, our results reveal that ODA inflows decrease agricultural exports in low‐income agrarian economies adopting floating exchange rate regimes. By taking a unique perspective of ODA as an inflow of foreign capital, this study highlights the importance of understanding the exchange rate regime and agricultural trade of the agrarian economy when providing international aid.

Trends and Issues in Development Aid

This study estimates the effect of official development assistance (ODA) on tourism demand of recipient countries for donor countries. We analyzed a panel dataset of 15 recipient countries of Switzerland’s aid from 2005 to 2017, for which data are available. We used both tourist arrivals at lodging establishments, particularly hotels, in Switzerland and hotel nights as proxies for recipient countries’ tourism demand in Switzerland. Using a modified gravity model of trade for empirical testing, we found that an increase of every US$1000 ODA to recipient countries would generate 3.6 tourist arrivals and almost four hotel nights in the following year, after controlling for the effects of GDP and population of recipient countries, the exchange rate and the distance between recipient countries and Switzerland, and trade facilitators. We conclude that ODA generates a positive externality on donor countries, namely, that recipient countries incline to increase their imports from donor countries, at least partially in the form of inbound tourism in donor countries.

In 2009 Hubbard and Duggan published their book ‘The Aid Trap’ which argued that a thriving private business sector in the recipient country must be encouraged. Otherwise foreign aid simply reinforces debt, poverty and dependency. This debate between neoliberal and neo-Keynesian approaches influenced the formation of effective foreign aid `strategies from new ODA donors such as South Korea. South Korea’s role in the ODA debate represents a more general geopolitical shift by emerging nations. The paper provides a critical assessment of South Korea’s state-led and soft power ODA policies by focusing on initiatives on aid effectiveness and fostering private/public partnerships (PPP’s). The paper goes on to critically consider and judge these eliteled ODA initiatives by addressing a grassroots NGO perspective.

Introduction Japan was the largest Official Development Assistance (ODA) donor in the world throughout the 1990s. From the beginning of Japan’s engagement in 1954,2 foreign policy makers, especially those affiliated with the Ministry of Foreign Affairs (MOFA), constantly endeavoured to underline the importance of Japan’s ODA as an indispensable humanitarian instrument for alleviating global poverty and human suffering. Japan’s efforts, mostly in the form of loans, clearly had a positive impact on the economies of developing countries, especially those in Asia. However, it is undeniable that Japan used its ODA in the pursuit of its own interests. As a country that had abandoned any aspiration to become a military power, Japan had to rely on ODA as a primary tool of its foreign policy. In the post-1945 era, ODA was used to rebuild relations with neighbouring countries in Asia that distrusted Japan on account of its previous imperialist conduct. Used as a form of reparation,3 it paved the way to resources and markets in Southeast Asia. According to David Arase, ODA played a central role in advancing Japan’s economic power. It helped establish a wide production and trade network in Asia, relativizing the country’s comparative disadvantages, most notably its lack of natural resources and high labour costs (Arase 1995, pp. 142-146). Japan’s ODA mirrored the basic policy of unarmed neutrality set by Prime Minister Shigeru Yoshida, which later became known as the Yoshida Doctrine. Following this doctrine, Japan focused mainly on promoting its economic growth, while leaving military defence to the United States. To use the analogy of a former deputy minister at the Ministry of International Trade and Industry (MITI),4 Naohiro Amaya (1979-1981), Japan was to exercise its power as a merchant nation, leaving power politics to samurai nations such as the USA or the Soviet Union (Amaya 1980). Although the country had the economic potential to become a samurai nation, it refrained from participating in “power games”, thus earning the reputation of being a pacifist country or civilian power (Maull 1990). Against this backdrop, Japan used its ODA largely to enhance its national economic growth by supporting the economic advancement of neighbouring countries through the development of economic infrastructure such as roads,bridges, dams, railways, port facilities and power plants. This was necessary to gain access to the valuable natural resources Japan was lacking. Eventually, these projects promoted the free movement of goods and capital, allowing Japan to implement an economic strategy – best described as the Flying-Geese Model – that was strongly influenced by the Japanese economist Kaname Akamatsu, according to which the promotion of economic development in Asia would eventually lead to positive economic synergies (Akamatsu 1962). Because Japan was mainly pursuing economic interests, it was reluctant to attach political conditions linked to human rights or good governance to its ODA. This stood in sharp contrast to other donors, such as the USA.5 Just like the country’s foreign policy in general, Japan’s ODA was characterized by its passive and low-profile stance.6 This explains why Japan’s position as a globally leading ODA donor was barely noticed internationally. The lack of field expertise as well as the long-lived request-based system demonstrated Japan’s reluctance to become involved in the internal affairs of other countries.7 In fact, until the 1990s Japan did not use its ODA as an instrument of political sanction, either positive or negative (Nikitina and Furuoka 2008). This neutral political stance was a way for Japan to maintain its autonomy and independence to the greatest extent possible in order to benefit from economic relations with countries beyond the ideological fringes of the international stage.8 A general ODA strategy was not formulated until 1992, when Japan published its first ODA Charter – four decades after the country became active as a donor. This long-delayed announcement of an official ODA policy indicates that there was domestic resistance to the creation of general rules that may have limited the use of ODA as an economic tool (Arase 1995, p. 166). On 13 December 2013, Japan signed an ODA loan agreement amounting to 18.7 billion yen with the Republic of the Philippines to provide ten new patrol vessels. On 1 August the following year, Japan signed a non-project grant agreement with Vietnam for the provision of six refurbished vessels worth 500 million yen (MOFA 2015c). The provision of these boats was part of Prime Minister Shinzō Abe’s new political doctrine, announced in Jakarta in January 2013.9 One of its key principles is to protect the “open, free, and peaceful” seas from the “rule of might”. To a large extent this doctrine was addressing China’s growing assertiveness in the region. Consequently, for the sake of “free and peaceful” seas, trilateral cooperation among the Association of South East Asian Nations (ASEAN) countries, the USA and Japan needed to be strengthened (Kantei 2013b). This utilization of ODA for security purposes is not a completely new feature. In a wider sense ODA has long been an indispensable tool in ensuring national security, especially after the oil crisis in the 1970s, when Japan included its ODA in the “comprehensive security” strategy outlined by a task force appointed by Prime Minister Masayoshi Ohira (1978-1980). This group came to understand that the destabilization of certain areas in the world could affect Japan’s complex resource and trading network. As a result, Japan diversified its aid to include strategically important countries, such as China, Egypt, Jamaica, Kenya,Somalia, South Korea, Sudan, Tanzania and Zimbabwe (Akaha 1991, pp. 332-333). However, the case of capacity building measures that included the provision of patrol boats stood in clear contrast with previous ODA efforts that were strictly limited to non-military areas. The provision of patrol vessels to the Philippines and Vietnam has a military dimension, even if the official statements declare differently. They are defined as “military vessels” under the Export Control Trade Ordinance definition of the Ministry of Economy, Trade and Industry (METI) (METI 2005). The government argues that coastguards are part of law enforcement agencies under civilian jurisdiction, making the support a non-military contribution. At least in the case of Vietnam this argument is debatable, however, since the coastguard in Vietnam comes under the control of the country’s Ministry of National Defence (Global Security 2015). In whatever way the use of ODA to provide patrol boats may be defined from a legalistic standpoint, it is obvious that it represents a new balancing strategy against China, which is becoming increasingly assertive in its territorial claims in the region. By means of patrol boat provision and coastguard training, Japan is supporting the US pivot towards the Asia-Pacific region. The relevance of Japan’s ODA in the new regional security strategy was emphasized in the Japanese-US 2 + 2 Joint Statement of October 2013, which set out the future plans of both countries:The Ministers welcomed the strategic use of Official Development Assistance by Japan, such as providing coastal patrol vessels and training for maritime safety to regional partners, and recognized the importance of such endeavors in promoting regional peace and stability.

The global response to the HIV pandemic since the 2000s has been an unprecedented success, with rapid scale-up of HIV prevention and antiretroviral treatment (ART) programs [1]. Although most low-and-middle-income countries are transitioning towards domestic public funding because of shrinking donor funding, Official Development Assistance (ODA) remains an essential component of HIV financing, especially in sub-Saharan Africa [2]. The coronavirus disease 2019 (COVID-19) pandemic produced an economic crisis characterized as the worst since the Great Depression in the 1930s [3]. The International Monetary Fund (IMF) estimates that reduced economic output and trade because of COVID-19 -- and its impactful countermeasures, such as lockdowns and curfews -- will shrink the world gross domestic product (GDP) by 4.4% in 2020, and will only gradually recover over the next years [4]. These declines can have devastating effects on donor and domestic healthcare financing for the years to come, including for HIV. We estimated the potential impact of the global recession on HIV financing in the 10 countries with the largest ART programs in sub-Saharan Africa -- Ethiopia, Malawi, Mozambique, Tanzania, Uganda, Kenya, Nigeria, Zambia, Zimbabwe, and South Africa -- over the next 5 years to illustrate potential gaps due to the economic crises, and propose urgent mitigation strategies to ensure continued service delivery. Together, these countries account for roughly 70% of HIV-infected people worldwide [5] and spend an estimated US$7.5 billion on HIV annually, of which almost two-thirds (i.e. about US$ 4.7 billion) comes from ODA [6]. We used IMF economic projections on GDP growth and published estimates of current domestic spending and ODA for HIV in each country [4,5]. We first calculated the share of GDP spend on HIV from domestic sources, and the proportional share of ODA from donor countries. We then developed four scenarios to reflect possible effects of GDP declines and political choices in HIV financing, and calculated the net difference to a no-COVID-19 counterfactual using IMF country-specific economic projections from before the pandemic (Fig. 1).Fig. 1: Estimated impact of the coronavirus disease 2019-related global recession on HIV financing in the 10 countries with the largest HIV programs in sub-Saharan Africa.Figure 1 shows the projected net difference in country-specific HIV/AIDS budget over the next 5 years for four scenarios, compared with a no-COVID-19 counterfactual, for Ethiopia, Malawi, Mozambique, Tanzania, and Uganda (low-income), Kenya, Nigeria, Zambia, and Zimbabwe (lower-middle-income), and South Africa (upper-middle-income). Estimates were generated using data on projected country-specific GDP growth from the IMF [4], and latest data on country-specific domestic and donor funding for HIV/AIDS as provided by the Joint United Nations Programme on HIV/AIDS (UNAIDS) [5]. All estimates are reported in 2019 US$. If the share of GDP designated for HIV in both domestic and donor countries remains unchanged, we estimate a gap of about US$1.9 billion over 2020–2024, a decline of about 5% compared with funding over 2015–2019 (Fig. 1, scenario 1). If the share of GDP designated for HIV falls by an initial 10% in both domestic and external sources in 2020 and 5% in the subsequent years -- representing a shift of funding to other sectors, such as COVID-19-related healthcare, economic relief funds, or payment of government debts -- we estimate a cumulative gap of US$4.1 billion, amounting to a decline of about 11% in total funding for HIV (Fig. 1, scenario 2). Compensating for gaps in ODA would require substantial increases in domestic HIV funding: by roughly 10% (upper middle-income countries), 15% (lower middle-income countries) or 20% (lower income countries) (Fig. 1, scenario 3). Even in an extremely optimistic scenario, in which the absolute amount of donor funding remains unchanged, domestic HIV spending would need to increase by about 5% to maintain current funding levels (Fig. 1, scenario 4). Such increases appear unlikely, as most of these countries already struggled to expand domestic HIV funding in the pre-COVID-19 era [6]. Although it is challenging to speculate which of these scenarios will predominate, current events suggest that our most pessimistic scenario, including additional cuts in donor funding on top of the budget declines caused by GDP fluctuations (scenario 2), is at least partly unfolding. The UK government recently announced to consider temporarily cutting foreign aid spending from 0.7% to 0.5% of gross national income [7], a decline of over 25%, and other donor countries may follow suit. For nine out of the 10 countries studied, 77--94% of funding for care and treatment comes from ODA [6]; making these political decisions a direct threat to continuation of ART programs. The only exception is South Africa, where only 18% of the HIV budget stems from ODA and continuation largely depends on local political decisions. However, as South Africa has been severely affected by the pandemic, reprioritization of domestic resources may well be necessary to finance the COVID-19 response and economic recovery. If we assume scenario 2 to unfold, we can roughly calculate the detrimental effects on service provision for HIV-infected people. For the 10 countries in our analysis, about US$3 billion [6], enabled 13.6 million people to receive life-saving ART pre-COVID-19 [5]. If relative funding distributions between treatment and prevention are maintained, the most extreme funding shortfalls of $850 million for 2021 (11% compared with 2019) in scenario 2 could, therefore, mean that approximately 1.5 million people enrolled in HIV care could not be served any longer. Interruption of ART could have direct implications for the health of HIV-infected people: potentially resulting in increased incidence of AIDS-defining illnesses, treatment resistance, and AIDS-related mortality. Moreover, extended lockdowns could lead to decreased ART adherence because of poor access and drug stock-outs, and many key-population outreach programs have been reduced or halted. Several mathematical modelers forecast that, of all interventions currently in place for HIV prevention and control, interruption of ART delivery because of COVID-19 will have the biggest impact on relative changes in mortality, and, together with interrupted condom availability, the biggest impact on relative changes in incidence [8]. Whereas shifting funding within limited HIV budgets away from prevention programs to ensure treatment continuation during the crisis might seem to be an attractive short-term solution, this could have a detrimental impact on the HIV epidemic in the long-run. The complex nature of HIV financing makes creating accurate predictions challenging, and our estimates should thus be interpreted as cautionary rather than predictive. In our analyses, we explored the effects of the COVID-19-related recession on HIV financing by making a simplified assumption of a linear relationship between country-specific GDP and HIV financing. Although this seems reasonable, validating our assumption against past observations (e.g., trends in GDP versus trends in HIV financing) is complex, as detailed yearly country-level data is not always available. Next to the direct GDP-dependent effects of COVID-19 countermeasures, several political decisions and indirect economic disruptions might further adversely affect HIV financing. First, aid distribution for HIV might increasingly be prioritized for low-income countries alone. Although this might mean that the poorest countries in the world are slightly more protected, lower middle-income and upper middle-income countries would need an accelerated process towards country-ownership. Second, several non-governmental financing schemes will be disproportionally affected by the pandemic. For instance, the air tax levy used to finance Unitaid, accounting for approximately 6% of the Global Fund to Fight AIDS, Tuberculosis and Malaria budget [9], will be severely affected by air travel restrictions. Third, financial gaps and shifts in sources indirectly supporting the HIV response, such as international research funding or the announcement by the USA to halt funding to the WHO [10], might adversely affect the HIV response and its financing for years to come. Fourth, domestic funding for HIV may be affected by the severity of the COVID-19 pandemic in the African nations and the political response. The proportion of the population infected with COVID-19, the strength and resilience of the local health system to respond to the COVID-19 pandemic, and the political structure and leadership in a country are all factors that are likely to influence the level of funding appropriated to fight HIV. Regardless of how the financial and political complexities unfold and affect prevention and treatment programs in the individual countries, it is critical to implement mitigation strategies to compensate for the financial gaps. First, continuation of HIV service delivery could be ensured and efficiency improved through accelerated implementation of differentiated care -- by enabling less frequent ART pick-ups [11], shifting tasks to community health workers [12], integrating HIV/COVID-19 prevention [13], and focusing on prevention for key populations. Second, resources could be pooled at regional level (facilitated for instance through the Southern African Development Community) to better leverage emergency funding, sharing of human capital and knowledge, and expertise in health program management. Third, integration with other health services could improve efficiency, and simultaneously accelerate progress towards universal health coverage [14,15]. Integration will also force a conversation about reprioritization across all health areas, essential to overcome the broader health system challenges introduced through the COVID-19 pandemic. Most importantly, mitigation strategies should strengthen the HIV response by using existing resources more efficiently, rather than shifting funding from other resources to fill gaps, so that health service provision for other population needs is not endangered. The COVID-19 pandemic is putting acute pressure on HIV programs in high-burden countries. With potential declines in funding of as much as 5% or 11%, the scale-up of HIV prevention and treatment in sub-Saharan Africa could come to halt or even reverse. But, as with any major crisis, the pressure to innovate under challenging circumstances could ultimately result in an HIV response and general health system that is more integrated, efficient and sustainable, improving resilience to future crises, and bolstering efforts to end the HIV pandemic by 2030. Acknowledgements Conflicts of interest There are no conflicts of interest.

Introduction More than a decade ago, the World Bank argued that “underlying the litany of Africa’s development problems is a crisis of governance.” Poor quality institutions, weak rule of law, an absence of accountability, tight controls over information, and high levels of corruption still characterize many African states today. Aid levels have been reduced in many parts of Africa during the past decade. Yet in many of the countries with poor governance records, aid continues to contribute a very high percentage of government budgets. This article explores the institutional impact of these high levels of aid and the way that large amounts of aid are delivered. There are many reasons why governance is poor in much of sub-Saharan Africa. Colonialism did little to develop strong, indigenously rooted institutions that could tackle the development demands of modern states. Economic crisis and unsustainable debt, civil wars, and political instability have all taken their toll over the past 2 decades and more. It is difficult to separate the impact of these problems from the possible impact of foreign aid, which is often high in countries that suffer from precisely these problems. Theory provides conflicting guidance here. On the one hand, aid can release governments from binding revenue constraints, enabling them to strengthen domestic institutions and pay higher salaries to civil servants. Aid can provide training and technical assistance to build legal systems and accounting offices. In many countries, aid personnel (sometimes expatriate) manage important government programs, and the infusion of resources and technical assistance can give an important boost to the efficiency and effectiveness of governance, if only in a partial sense. Yet despite these likely benefits, it is also possible that, continued over

There is growing awareness that the necessary solutions for improving nutrition outcomes are multisectorial. As such, investments are increasingly directed toward "nutrition-sensitive" approaches that not only address an underlying or basic determinant of nutrition but also seek to achieve an explicit nutrition goal or outcome. Understanding how and where official development assistance (ODA) for nutrition is invested remains an important but complex challenge, as development projects components vary in their application to nutrition outcomes. Currently, no systematic method exists for tracking nutrition-sensitive ODA. To develop a methodology for classifying and tracking nutrition-sensitive ODA and to produce estimates of the amount of nutrition-sensitive aid received by countries with a high burden of undernutrition. We analyzed all financial flows reported to the Organization for Economic Co-Operation and Development's Development Assistance Committee Creditor Reporting Service in 2010 to estimate these investments. We assessed the relationships between national stunting prevalence, stunting burden, under-5 mortality, and the amount of nutrition-specific and nutrition-sensitive ODA. We estimate that, in 2010, a total of $379·4 million (M) US dollars (USD) was committed to nutrition-specific projects and programs of which 25 designated beneficiaries (countries and regions) accounted for nearly 85% ($320 M). A total of $1.79 billion (B) was committed to nutrition-sensitive spending, of which the top 25 countries/regions accounted for $1.4 B (82%). Nine categories of development activities accounted for 75% of nutrition-sensitive spending, led by Reproductive Health Care (30·4%), Food Aid/Food Security Programs (14·1%), Emergency Food Aid (13·2%), and Basic Health Care (5·0%). Multivariate linear regression models indicate that the amount of nutrition-sensitive (P = .001) and total nutrition ODA was significantly predicted by stunting prevalence (P = .001). The size of the total population of stunted children significantly predicted the amount of nutrition-specific ODA (P < .001). The recipient profile of nutrition-specific and nutrition-sensitive ODA is related but distinct. Nutrition indicators are associated with the level of nutrition-related ODA commitments to recipient countries. A reliable estimate of nutrition spending is critical for effective planning by both donors and recipients and key for success, as the global development community recommits to a new round of goals to address the interrelated causes of undernutrition in low-income countries.

Why are foreign official flows mostly procyclical when countercyclical flows would raise welfare in recipient countries without added costs to donors? The prevalent set of explanations relies on the behavior of donor countries, as they are the ones who decide the timing of their official flows. The present study tests this by considering Chinese official flows, which are known to be demand driven. We examine the business cycle characteristics of China's official financing in the form of Official Development Assistance (ODA) and less concessional Other Official Flows (OOF) to developing countries and compare it to the business cycle characteristics of bilateral and multilateral aid commitments from traditional donors. Using data on China's official finance commitments over the period 2000 to 2014, we find that both China's ODA and OOF commitments are mostly acyclical with respect to recipients' output fluctuations and procyclical with respect to their fiscal revenue. We conclude that official flows fail to be countercyclical even when recipient countries are in the driver's seat.

This paper empirically analyzes the relationship between China’s foreign aid and the digital service trade of Belt and Road Initiative (BRI) countries, using panel data from 2005 to 2017. We find that under the framework of the BRI, China’s foreign aid has a significantly positive impact on the digital service exports of recipient countries. This positive effect remains robust after addressing potential endogeneity concerns and conducting various robustness checks. Furthermore, the analysis reveals that Other Official Flows(OOF) is more effective than Official Development Assistance(ODA) in enhancing the digital service exports of recipient countries. Moreover, the positive impact of China’s foreign aid is particularly pronounced in high-income countries compared to middle- and low-income countries. Additionally, industry-level heterogeneity analysis shows that China’s foreign aid significantly promotes the export of “other business services.” In contrast, its impact on other industries is less evident. Finally, mechanism analysis indicates that the promotion of digital service exports by China’s foreign aid primarily operates through improvements in human capital and institutional quality in recipient countries.

Purpose This explorative study aims to compare and analyze the behavior of a traditional and an emerging donor, namely, Germany and South Korea, in the field of climate change-related official development assistance (ODA). It analyzes their ODA projects in 2013 in four Southeast Asian countries severely affected by climate change, namely, Cambodia, Laos, Myanmar and Vietnam. It also adapts the existing framework to categorize ODA allocation according to receiving countries’ need and merit and donors’ self-interest. Design/methodology/approach The paper first describes both countries’ policies and activities. It then uses a country’s vulnerability to climate change as a measure of its need, its climate change readiness as a measure of its merit and its bilateral trade volume in environmental goods with donor countries as a measure of donors’ self-interest to analyze the allocation of climate-related ODA. Findings Results suggest that Korean ODA in the field of climate protection is driven more by receiving countries’ need and merit, but self-interest seems to be important for both donors. In addition, many projects labeled as adaptation or mitigation projects only have a weak link to these goals. There are limitations to the present paper. First, it could only analyze projects in 2013 because there are no earlier project data available in the Organization for Economic Cooperation and Development’s Creditor Reporting System. Second, because of the simplifying assumptions of the need–merit–self-interest framework, possible other determinants of aid allocation were deliberately ignored. Finally, this explorative study is restricted to four vulnerable countries in Southeast Asia. Originality/value To the best of the authors’ knowledge, this is the first paper to compare a traditional and an emerging donor’s behavior and to explore the allocation of climate-related ODA using the need–merit–self-interest framework.