Reciprocal Relations between Official Development Assistance Recipient and Donor Countries: Case of South Korean Overseas Construction Business and Southeast Asian Countries’ Economy

Suk-Won Lee,Ju-Hyung Kim,Jae-Jun Kim

doi:10.3390/su9122274

Abstract

In developing countries, official development assistance (ODA) is generally perceived to be an alternative means to develop infrastructure. Donor countries may expect benefits such as increased construction project orders in recipient countries. However, it remains arguable whether ODA contributes to reciprocal relations between recipient and donor countries. The case of South Korea can provide empirical data given that its government has expanded the amount of ODA to encourage overseas construction business while supporting Southeast Asian countries. In this research, gross national income (GNI), gross domestic product (GDP), foreign direct investment (FDI), and construction project orders awarded by South Korean construction companies in Vietnam, Bangladesh and Sri Lanka are analyzed according to the variation of ODA awarded by South Korea. The analysis results show that the influence of ODA upon economic situation of recipient countries varies according to their economic volume and development policy. From the donor country’s perspective, enhanced performance of construction business can be expected by means of cooperation with local construction business.

Highlights

Sector-specific aid has direct effects on foreign direct investment (FDI) and aid-financed infrastructure has provided higher preference to foreign investors than other aid [1,2]
The purpose of this study is to examine the correlations among the construction project orders awarded by South Korean companies in Vietnam, Bangladesh, and Sri Lanka—the recipient countries of its official development assistance (ODA)—variation of ODA donations by it, and economic fluctuations in these recipient countries
In this study, the causality between the amounts of ODA support from South Korea to Vietnam, Bangladesh, and Sri Lanka and the economic variables and number of construction project orders awarded by South Korean companies was identified

Summary

Introduction

Sector-specific aid has direct effects on foreign direct investment (FDI) and aid-financed infrastructure has provided higher preference to foreign investors than other aid [1,2]. Understanding the discourses and contentions in aiding recipients between the EU and China will provide key insights as to how South Korea will assume a bridging role between conventional donors and emerging donors. It is under such circumstances that South Korea held the 13th National Assembly Financial Forum for International Development in July 2015. The participants in this forum discussed practical solutions to support overseas construction businesses. The South Korean government has expanded the budget for ODA and establishment of a strategy for maintaining competitive advantages in the Asian region to counter the establishment of the Asian Infrastructure Investment Bank (AIIB)

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Conclusion