Governing aid from China through embedded informality: Institutional response to Chinese development aid in Laos

Abstract

This study explores how Laos PDR has its adjusted institutional settings in response to China’s aid. The study argues that the donor-oriented approach is not sufficient to explain Chinese overseas development assistance (ODA) to Laos. An alternative explanation, using a recipient-oriented approach, is instead presented so that the divergence of necessity, development paths and norms, and attempts of the recipient country to change its institutional structure in response to the operation of the donor, can enhance understanding of the characteristics of Chinese aid to Laos. The study demonstrates that although Laos has attempted to systematically institutionalize the administration of ODA, the institutional configuration of Chinese ODA is informally embedded and based on flexible strategy, limited transparency, and personal relationships. Chinese ODA disbursements are open to negotiation, even if the purpose of ODA projects contradicts Chinese policy. The ODA framework developed by Laos is limited in transparency and depends on the preferences of donors. This study illustrates that personal relationships have affected the smooth implementation of projects. Such ‘embedded informality’ helps facilitate positive perceptions of high-ranking Laotian government officials towards Chinese ODA in terms of responsiveness to the latter country’s land link strategy, fast project approval periods, and high predictability of project approvals.