This article argues that while geopolitics does have a significant influence on foreign aid allocation and can be seen as the main driver, political concerns do not constitute the only factor that influences official development assistance (ODA) flows.
The MENA region received the largest amount of aid per capita in 2005 with 54 Billion US Dollar, two Billion more than per capita flows to Sub-Saharan Africa. Despite the need for aid flows to MENA due to problems of attracting direct foreign investment and research that highlights the fact that 80 percent of the world’s poor live in middle-income countries, this difference reveals a certain distortion of ODA disbursement. Studies have shown that donor interests constitute an important determinant for the geographical allocation of aid (Harrigan 2011). Furthermore, strategic links between two countries, for instances ties to former colonies, protectorates also positively influence the amount of ODA that the respective country receives.
Bilateral ODA is seen as influenced by donor’s geopolitical interests in particular. This, however, does not only concern members of the OECD DAC but also the so called “new donors” that include countries from the Arab Gulf. A substantial proportion of Arab aid is allocated to countries that display features of Arab solidarity, such as not maintaining diplomatic relations with Israel. Thus, geopolitical concerns can affect aid objectives of multilateral partnerships, as shown by the collective efforts of Arab states, in addition to protection of singular national interests.
The Flow of Funds
Multilateral donors are perceived as being more neutral in their aid allocation but are in fact also influenced by geopolitical interests as a voting power analysis of the IMF and the World Bank reveals. According to Harrigan and El-Said (2009), the US has a disproportionate weight in voting in these institutions and can therefore exercise more influence over the geographical flow of funds. This bias based on the geopolitical interests of the US can also be illustrated through an analysis of the timing of IMF and World Bank loans to Algeria. Algeria, similar to other oil-exporting countries, faced serious economic issues following the sharp drop in oil prices in the 1980s. Even though the country had already started the process of economic liberalisation by itself, thus fulfilling the usual requirements for IMF and World Bank loans, the country did not receive any significant IMF and World Bank support until it changed its domestic and international policy in 1988. Once the previous anti-Western regime collapsed and a more Western friendly regime took its place, along with creating a new constitution, the IMF and World Bank moved in, granting loans.
Even though geopolitics play a role in aid allocation, also a low GDP per capita, high debt service ratio, a sharp decline in reserves and other economic factors also increase the chances of receiving loans. Furthermore, a country that imports goods from a donor country has an increased likelihood of receiving ODA from that country. As shown above, ODA flows are strongly influenced by geopolitical interests of the donors, but also by a variety of other factors such as economic aspects and diplomatic relations.
About the Author:
Lena Gomer is currently pursuing a Master’s degree in Near and Middle Eastern Studies and Arabic at the School of Oriental and African Studies (SOAS) in London. She has gained insights into the MENA region through volunteering and an internship at the Arab Countries Water Utilities Association in Amman, Jordan. At IFAIR, the author serves as regional director for the MENA region.