By Samantha Prior
South Korea is often viewed as a developmental success story; over the last fifty years it has been successfully transitioning from aid recipient to aid donor. In 2010 South Korea became a member of OECD, marking a significant step in its efforts towards becoming a major aid donor. Here are some notable statistics that give a sense of Korea’s evolution from recipient to donor:
Overall growth is stunning: In the post-war period South Korea was one of the world’s poorest countries with a per capita income of $64, and received large amounts of aid, specifically from the U.S. (12.7 billion between 1945 and the late 1990s, according to the Korean government), to repair its broken economy. The South Korean economy has steadily improved over the last 50+ years (it is currently the world’s 12th largest economy), which enabled it to start giving aid in the end of the 20th century. The Korea Eximbank’s Economic Development and Co-operation Fund (EDCF) was created in 1987, followed by the Korea International Co-operation Agency (KOICA) in 1991.
By Samuel Ha
Foreign Direct Investment (FDI) now exceeds official development assistance (ODA) flows in Asia, Latin America, and Africa. Yet despite the falling “bull market” for ODA, many low-income countries continue to rely on foreign assistance to drive economic activity. According to a recent report published by the Center for Global Development, ODA flows to low income countries exceeded FDI by 72 percent in 2012, and in many cases accounts for a huge portion of the government budget. ODA is particularly critical as it often supports public goods that the private sector will not support and low-income countries cannot afford. Here are the main takeaways from the report:
- Aid is effective when aid levels are neither too low nor too high.
The finding that aid levels are subject to a Goldilocks principle of not too little or too much is intuitive, but has received little attention. However, the OECD-driven Global Partnership monitoring framework which tracks global progress on aid effectiveness and donor harmonization did not fully discuss appropriate levels of aid. In addition, the report notes that no mechanism exists for donors and recipients to analyze and moderate aid levels up and down to maintain optimum levels of aid. Continue reading