Official Development Aid Research Articles

Migrant Remittances and Human Security

The estimated number of people who live in a country other than their country of birth has raised over the past five decades. With the rising number of migrants around the world, one of the significant implications of migrant movements, international remittances have increased over time and exceeded the level of official development aid described as government assistance dedicated to advance the economic development and prosperity of developing countries. Consistent with the rising level of international remittances, a proliferation of research examining the impact of remittances on development in remittance-recipient countries has occurred in recent years. While the effects of remittances upon development in recipient states have been broadly studied, the relationship between remittances and human security in remittance-recipient countries has been insufficiently investigated. In order to fill this gap, this study theoretically discusses and empirically examines the link between migrant remittances and human security. It argues that remittances enhance human security by providing remittance-recipients with extra income to meet their socioeconomic needs and increase their personal safety, which enable them to free from want and free from fear. The findings of quantitative analysis conducted based on a global data set show evidence that migrant remittances improve human security in remittance-recipient countries.

The impact of official development aid flows on business internationalisation

AbstractThis article analysis how official development aid (ODA) flows impact the international growth opportunities and processes of private firms in donor and recipient countries. It explores the differentiated impact of bilateral and multilateral aid flows, as well as flows coming from the Development Assistance Committee (DAC) and non‐DAC donors. The study relies on a systematic literature review of the empirical articles published between 2005 and 2021 in internationally recognised academic journals. The review provides a comprehensive overview of the topic and identifies conclusive findings, existing gaps, avenues for future research and policy implications. Overall, the literature shows a positive impact of ODA flows on the international growth opportunities for firms in donor countries, whether derived from their direct engagement in aid‐financed projects or from non‐direct effects like the reputational capital and positive image accrued by donor countries in recipient ones. Conversely, empirical evidence relative to the impact on firms in recipient nations is mixed and points to the existence of factors that condition the impact of ODA flows, among them, the institutional strength in recipient countries and the formulas through which ODA flows are channelled.

Assessing economic effects of foreign aid and capital flows on real economic growth

The study sought to investigate the effect of foreign aid and capital flow on real economic growth for the SADC region. Eleven member states of the SADC region are selected for analysis based on data availability. In the study, foreign aid is represented by official development assistance (ODA), external debt (EXTD), and debt service cost (DSC) while the inflow of foreign direct investment represents capital flow (FDI). Annual percentage growth of per capita Gross Domestic Product (GDPpc) is used as a proxy of real economic growth. Trade balance (TRO) is included in the model regression as a control variable. The study employed panel econometric models. The results of panel ARDL indicate that ODA and FDI were found to have a negligible effect on real growth in the short run but contribute positively and significantly in the long run. This revelation supports the view that ODA and FDI are essential determinants of growth. On the other hand, EXTD together with its associated costs was found to have a detrimental effect both in the short run and long run. Based on the results of the study, the authors put forward the following policy recommendations for the SADC region: most importantly, there ought to be effective management of external debt by SADC countries to reduce their overdependency on external debt for their domestic needs. Given the positive effect of FDI in the region, the SADC region needs to intensify its efforts in devising measures that will attract foreign investors to the region which among others include pursuing inclusive and sustainable economic growth. Lastly, there is a need for effective management and official development aid to ensure sustainable growth.

Asymmetric Analysis of the Impact of Foreign Capital Inflows on Economic Growth in Nigeria

Foreign capital inflows remain volatile and their impact on economic growth remains uncertain due to persistent challenges relating to policy inconsistence insufficient infrastructure and fluctuations in Global oil price. The volatility of these inflows posed challenges, raises concern on their impact on economic growth. This study examined the impact of foreign capital inflows on economic growth in Nigeria from 1990 – 2023.The variables of interest are real gross domestic product (RGDP), foreign direct investment (FDI), remittance (REM) foreign portfolio investment (FPI) official development assistance (ODA) external debt (ED) government expenditure on health (GEH) and government expenditure on education (GEE).This study employed a Nonlinear Autoregressive Distributed lag (NARDL) model and Granger causality test. The finding from the NARDL model showed that Foreign Direct Investment, Remittances, Official Development Aid, External Debt, government expenditure on health, and government expenditure on education all exhibit substantial impacts, with positive changes in these variables associated with increased economic growth, and negative changes leading to decreased economic growth in both short and long run period. The finding further revealed significant asymmetric impacts between Foreign Direct Investment, Remittances, Official Development Aid, government expenditure on health, and government expenditure on education with exception of External debt in the short run .This study recommends that to unlock Nigeria’s full growth potential, policymakers should boost absorptive capacity of the economy through improve infrastructure, security, and legal frameworks to effectively utilize incoming capital and accelerate sustainable economic growth. Furthermore, prioritize health and education spending to develop a skilled and healthy workforce, ultimately boosting domestic activity and productivity.

Economic Growth or Downfall? Reviewing the Economic Resonance of Remittances in Pakistan

Background: The remittance sent by migrant workers to their home countries has a significant impact on the country’s economic development. Remittance positively influences the economy and GDP of developing countries. migrant workers yearly send billions to their home countries. Remittance is incessantly outpacing a country's official development aid and has become the second most significant source of economic development other than the FDI (Foreign Direct Aid). Aim: The study aims to review, analyse and summarise the existing literature regarding the impact of remittance on Pakistan’s economy. Methodology: The study comprises a qualitative research design. Data was collected through numerous articles related to remittances and their impact on the economy, particularly, Pakistan’s economy and GDP growth. Results: The results of the study determined the positive impact of remittance inflow on Pakistan’s economy. The results discussed the increasing inflow of remittances from the fiscal year 2013 to the fiscal year 2022 along with the determinants of expected decline in remittance. Conclusion: The outcomes revealed the uprise in remittances inflow to Pakistan from FY13 to FY22. The study showed the yearly percentage of increasing remittances, along with highlighting the factors of the expected decline in the remittance inflow in the upcoming years.

Analyzing development finance flows in the Western Balkans’ energy sector: a 2008–2020 perspective

BackgroundDevelopment finance is vital for low- and middle-income countries to enhance their sustainability agendas, as it provides essential funding necessary to close domestic financing gaps, including in the energy sector. Coal is still a vital power source for the energy sectors in the Western Balkans (i.e., Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia). The energy sector is a critical component in the five countries’ pursuit to decarbonize (i.e., follow the net zero pathways) due to its central role as a primary contributor to greenhouse gas emissions and a critical enabler of sustainability transition. This article presents a mapping exercise of development finance for five Western Balkan countries’ energy sectors. The study conducted a scoping literature review and detailed analysis of the five countries’ energy sector-related development finance flows from 2008 to 2020. This aimed to provide insights into the development finance flows for renewable and non-renewable energy sources in five Western Balkan countries.ResultsThe scoping literature review indicated a significant gap in knowledge about the effects and effectiveness of development finance in the Western Balkans. Data analysis identified US$3.2 billion in energy development finance in the examined countries. The disbursement ratios were above the global average of 63%. Serbia received the highest proportion of the total funding, while Montenegro obtained the highest funding per capita. The data analysis did not establish a connection between adopting the Paris Agreement in 2016 and increasing development finance flows for renewable energy projects. Around one-third of the disbursed development finance was invested in projects for energy supply using non-renewable sources. Official Development Aid loans represented 37% (US$1.2 billion) of the total funding, contributing to the increase in indebtedness in the five countries. European-based bilateral and multilateral development finance providers were the most important actors in the five examined countries.ConclusionsThe amount of the disbursed development finance was insufficient to cover a significant percentage of the needs of the surveyed countries. Although carbon-intensive energy infrastructure received considerable funding, the total amount of disbursed energy development finance ranged between 0.15 and 0.62% of the average gross domestic product for the analyzed countries during the study period. Based on the research findings, we recommend that development finance providers and recipient countries pay greater attention to planning for strategic funding disbursement.

POLITICAL LEADER AND ODA: EFFECTS OF THE OVERSEAS PRESIDENTIAL VISIT ON BILATERAL OFFICIAL DEVELOPMENT AID IN SOUTH KOREA

Overseas presidential visits are an essential diplomatic activity that support official development aid (ODA) for humanitarian and strategic purposes worldwide. This study examines the effects of such visits on bilateral ODA allocation by focusing on South Korea, which achieved economic development through foreign aid, subsequently becoming a donor country. We find that presidential diplomatic visits abroad increase ODA agreements in visiting countries, confirmed through multiple robustness checks. ODA is increased through several aid delivery channels (concessional loans, public institutions and summit meetings in recipient countries) with heterogeneous effects across regions. Thus, political leaders’ diplomatic visits are crucial to ODA allocation.

Role of Official Development Assistance, Foreign Direct Investment and Trade Openness in Reducing Income Inequality: An Empirical Analysis from Selected Asian Countries

Income inequality has been increasing steadily in developing economies. Many factors are responsible for such income inequality and deteriorated economic growth in Asian economies. For this reason, a lot of debate has been made about reducing income inequality. Though the existing study also takes into account the important role of official development assistance, foreign direct investment, and trade openness in reducing income inequality in selected Asian countries, the study found that official development aid, foreign direct investment, trade openness, and labour force participation have greatly reduced income disparity in 10 Asian nations. For growth, good production and exports require more jobs. Globalization and international ties should be prioritized. Finally, economies need a stable economic and political environment to attract aid and foreign investment and grow and expand.

Nexus Between Official Development Aid, Institutional Quality and Economic Growth: Evidence from CLMV countries

This study examines the effect of country-specific Official Development Aid (ODA) and institutional quality on economic growth for Cambodia, Laos, Myanmar, and Vietnam (CLMV) countries from 2002 to 2017. Our results indicate that: First, the impact of ODA from Germany, Japan and France on economic growth is conditional on the level of institutional quality of CLMV countries. The ODA has a negative impact on growth when institutional quality is low. Beyond a threshold of institutional quality, ODA promotes economic growth. Second, the results are robust after controlling for outliers and endogeneity in the model. Third, the further analysis provides evidence that the mitigating effect of institutional quality works through both labour productivity and human capital growth channel. Based on the findings, this study offers some imperative policy recommendations to both donor countries and ODA recipients.

Assessing the Effectiveness of Japanese Official Development Aid in Myanmar: A Case Study of the Grant Assistance for Grassroots Projects in the Chin State Education Sector

Abstract: Japanese Official Development Assistance has benefited educational development by hook or by crook. Japan has been providing grant aids for grassroots development in Myanmar for more than half a century, which has had a significant degree of effectiveness for the recipients. The Japan Grant Assistance for Grassroots Projects has specifically benefited the education sector in Chin State, Myanmar, especially in building infrastructures for schools, including providing buildings, desks, and plumbing facilities. It is suggested that there are still quite a few primary factors requiring development to access quality education in Myanmar. Based on extensive research among educators and relevant officials in Chin State, this research surveys existing issues for educational infrastructure in the state and assesses some of the challenges for educational development in the region. It also assesses how Japanese Grant Assistance for Grassroots Projects has assisted the barriers. The scope of this research is from 2015 to 2020.

Economic Growth, Foreign Direct Investments and Official Development Assistance Nexus: Panel ARDL Approach

Scholars and practitioners are torn between diverging viewpoints on the contribution of foreign assistance and foreign direct investment to the economic development, economic growth, and prosperity of Africa. This paper aims to examine the long-term and causal relationship between foreign direct investment, official development assistance, and economic growth for 20 selected African countries from 2000–2018. Autoregressive distributed lags and the error correction model were used as the primary estimation techniques. The results indicated a notable positive long-term cointegrating relationship between official development assistance and economic growth, and between economic growth and foreign direct investment, as well as a cointegrating link between foreign direct investment and official development assistance. Economic growth was found to promote official development assistance, while foreign direct investment was found to encourage economic growth and official development assistance was found to promote economic growth in the long run. Since foreign direct investment and official development assistance are important to economic growth in a spiral effect, African countries are encouraged to put in place policies that attract foreign direct investment and official development assistance. Thus, African countries should align their foreign and domestic investment and official development aid policies with their national developmental goals to attract foreign donations and investments.

Capital flows to low-income sub-Saharan Africa: an exploratory review

PurposeThe purpose of the paper is to examine macroeconomic and institutional factors that influence capital flows to low-income sub-Saharan African (SSAn) countries. It analyzes capital flows in a disaggregated manner: foreign divert investment, portfolio equity and portfolio debt. There is a gap in the empirical literature in examining the factors that are important for various types of capital flows to low-income SSAn countries. Low-income SSAn countries attract very low levels of foreign investment compared to other developing economies in the SSAn region and other developing economies and this paper attempts to make a contribution in this area.Design/methodology/approachThis paper examines data on capital flows and that of various push and pull factors. Trends and dynamics of capital inflows and their macroeconomic and institutional drivers are analyzed for low-income sub-Saharan African countries. Such an analysis has not been fully explored for low-income SSAn countries.FindingsCapital inflows to low-income sub-Saharan Africa (SSA) have increased sevenfold since the 1990s, dominated by foreign direct investment (FDI). They overtook official development assistance and aid in the 2010s. Mozambique and Ethiopia attract the largest size of FDI compared to other low-income SSAn economies, with natural resources as key factors in the former. The largest share of FDI to low-income SSAn countries comes from other SSAn countries, mostly South Africa and Mauritius. Among macroeconomic push factors, capital inflows are more closely related to commodity prices, while the volatility index and global liquidity are also important. Among macroeconomic pull factors, trade openness and economic growth appear more closely related to capital inflows. The surge in capital inflows in the 2000s also followed the implementation of several regional trade and investment agreements in the region. The improvement in internal conflict in the 1990s and mid-2000s seems to have helped support the increase in capital inflows during that period. This institutional quality variable appears to more closely track capital inflows compared to other institutional quality indicators. There were also improvements in the investment profile, law and order, and government stability in the 1990s to early 2000s when capital inflows picked up.Research limitations/implicationsThis study focuses on low-income SSAn countries, which are less studied in the empirical literature and that face immense developmental needs that require foreign and domestic capital.Practical implicationsFindings of this paper can shed light to policy makers on the factors that are most important to help the region attract capital inflows and areas where further improvement is needed in the macroeconomic and institutional environment.Originality/valueThere is a gap in the empirical literature in examining the factors that are important for attracting capital flows to low-income SSAn countries. To our knowledge, this study may be the first to explore dynamics of capital flows against institional quality for low-income SSAn countries at a disaggregated level.

Aid for Trade is more effective when the trading environment is more predictable

AbstractAid for Trade (AfT) has been provided as part of the official development aid package to help developing countries better integrate into the global trading system. This article investigates whether AfT flows promote investment‐oriented remittances (IOR) inflows in a more predictable domestic trading environment. AfT interventions drive IOR inflows in countries that implement trade measures of good quality (i.e. those which lower both trade costs and trade costs volatility). These findings underline the role of AfT flows in promoting the development of the private sector in developing countries where the trading environment can be made increasingly predictable.

Should We Provide More Economic Aid to Recipient Countries in Crisis?: Focusing on the Effectiveness of Financial Aid

This study analyzed the impact of bilateral aid among official development aid on recipient countries. The significance is that the effect of aid was investigated in a complex manner by dividing the perspective of economic growth measured by Gross National Income (GNI) per capita and quality of life measured by the Human Development Index(HDI). In addition, limited empirical analysis by continent or country in previous studies was expanded to cover all recipient countries. Official Development Assistance (ODA) data from 2005 to 2019 were collected. A data sample of bilateral aid from 60 countries was constructed from the official development aid data from 88 recipient countries. According to the Fixed-Effect (FE) and Random-Effect (RE) model estimation coefficient, the donor’s continued support was a statistically significant variable. This study concluded that the donor country’s continuous aid is important, but the recipient country’s political and administrative capabilities are also important factors in improving people’s economic quality of life.

Bilateral and multilateral aid perspectives of economic growth in sub-Saharan Africa

PurposeThe purpose of this study is to determine the impact of disaggregate official development aid (ODA) on economic growth, and ascertain whether bilateral and multilateral aid played complementary role with private sector, government sector and external sector in driving growth of sub-Saharan African economies.Design/methodology/approachThe role of bilateral and multilateral aid in economic growth of sub-Saharan Africa (SSA) is investigated in this study. The vector error correction model (VECM) and generalized method of moments (GMM) techniques are employed in estimating the short-run and long-run impacts, over the period 1980–2020.FindingsThe estimation results reveal that the effect of bilateral aid is positive, and more significant than multilateral aid. Their effect on economic growth is, however, less significant than the effects of domestic private investment and government spending. Nonetheless, aid complemented private and government sectors in facilitating growth. External trade is the only exogenous variable in estimation that is insignificant. The results further reveal that economic growth is unable to significantly respond to its own lag. Generally, the estimation results conform to theoretical expectations.Practical implicationsOne major implication of the findings is that SSA countries have benefited substantially from development aid. It is, therefore, important for these countries to develop stronger institutions that would attract more inflows of development aid.Originality/valueThe study was motivated by the fact that less attention has been given to the role of disaggregate ODA in economic growth of African countries. Previous research works have tended to focus more on aggregate ODA. Furthermore, adequate research has yet to be done on how ODA complements the private sector, government sector and external sector in facilitating growth of African countries. These issues are investigated in the study.

Political Leaders, Economic Hardship, and Foreign Aid Allocation

AbstractWhile political leaders’ role in foreign policy choices has received increasing scholarly attention, surprisingly less is known about how they affect the allocation and distribution of official development aid. This study examines how the material background of political leaders influences their aid allocation strategies in donor countries. We contend that leaders with economic hardship experience distribute more foreign aid than those without such experience. Through socialization, leaders with economic hardship experience become more supportive of public good provisions that address problems related to poverty and inequality. Resultantly, they exhibit more favorable attitudes toward development assistance programs targeting developing countries. We find that political leaders who experienced economic difficulty in their youth are likely to provide more foreign aid, especially social and economic infrastructure aid, than leaders without such experience. By introducing the political leaders’ role, this study contributes to the literature on the interaction between domestic politics and foreign aid.

Buying influence? Rotating leadership in ASEAN and allocation of Chinese foreign aid

Abstract China has expanded its economic footprint in Southeast Asian countries by providing a growing amount of development finance to the region. We examine the allocation of Chinese foreign aid toward Southeast Asian countries exploiting the exogenous variation of rotating leadership within Association of Southeast Asian Nation (ASEAN). As the ASEAN Chair possesses the agenda-setting power and represents the organization, China strategically allocates more development aid to the ASEAN Chair to augment its influence in the region. Our analysis of Chinese aid allocation between 2000 and 2017 finds that taking the leadership position at ASEAN appears to be significantly associated with an increase of official development aid flows from China, while other commercial flows are only weakly associated with the leadership position. Our findings underscore the importance of considering the regional context in examining foreign aid allocation and show that a donor can target a regional organization to exert its political influence in the region.

The UN MDGs in Indonesia: Analyzing Its Failure in Eradicating Poverty in Indonesia

The United Nations (UN) Millennium Development Goals (MDGs), an international development movement oriented towards human welfare and global poverty eradication with measurable goals and targets, had hit the deadline by 2015. Its implementation reaped various contestations and claims regarding its success and failures in eradicating poverty in Indonesia. The Indonesian government claimed to have succeeded (on the track) in meeting the MDGs targets in eradicating poverty by reducing half of the number of Indonesians who earn one dollar per day (purchasing power parity/PPP) for the period 1990-2015. Meanwhile, the reality on the ground showed the contrast. Many Indonesian people lived in poverty and had minimal access to public health and education facilities. UNESCAP reported that Indonesia was one of the countries in the Asia Pacific region, which was alarming to achieve the MDGs. Based on such contradictions regarding the MDGs' poverty eradication mission in Indonesia, this article aims to examine why the MDGs program had not been able to overcome the problem of poverty in Indonesia? This article employs norm life cycle (dynamics) theory to investigate the problem behind UN MDGs' inability to overcome poverty in Indonesia. UN MDGs were considered a global norm in this article, substantiating the poverty eradication mission. Using the norm life cycle theory theorizing the three stages of norm development, starting from norm emergence, cascade, and internalization, this article reviews and investigates how Indonesia had dealt and performed in each of those norm life cycle stages within the framework of global poverty eradication norm. Based on the theoretical approach used, this article argues that the inability of UN MDGs to resolve poverty in Indonesia was due to the excessive use of statistical and quantitative basis of poverty eradication efforts rather than a more qualitative and welfare building approaches. Moreover, a systemic problem existed upon MDGs' coordination and implementation on the Indonesian government and donor countries/institutions. It included the lack of commitment to official development aid (ODA) realization, renegotiation and elimination of Indonesia's foreign debt, and rampant corruption in the national development and poverty eradication funds.

Corruption, foreign aid, and international trade

AbstractCorruption has varying effects on international trade flows. Through the lenses of the institutional and transaction costs theories, we propose a novel institutional analysis of foreign aid as a formal institution that moderates the negative impact of corruption on international trade. We investigate this framework using a sample of the imports and exports of 30 Organization for Economic Co‐operation and Development (OECD) member countries and their 150 trading partners from 1995 to 2018. We analyze two main types of bilateral foreign aid within this framework: official development assistance and aid for trade. We present three main findings. First, the trading partners' corruption has a negative impact on OECD bilateral imports and exports. Second, both forms of foreign aid moderate the negative effect of the trading partners' corruption on OECD countries' exports. These findings confirm that OECD member countries are willing to export to very corrupt countries. Third, official development assistance does not moderate the relationship between corruption and imports, meaning that OECD countries do not import from corrupt locations. However, aid for trade still moderates the negative impact of corruption on OCED countries' imports. Overall, we confirm that foreign aid negatively moderates the adverse effect of corruption on exports but not on imports. Thus, foreign aid as a formal institution deserves more attention from OECD policymakers and managers of MNEs as a mechanism for reducing corruption and boosting international trade.

Korea’s official development aid to MENA region countries

The aim of this study is to increase the effectiveness of Korean aid provision for countries in the Middle East and North Africa (MENA) region, which are important ODA recipient countries from a Korean perspective, but have not been studied extensively in Korea. Although there are twenty countries in the MENA region, in this study five countries, Egypt, Algeria, Libya, Iran and Iraq, which are considered important from a Korean perspective, are targeted. The analysis includes an examination of the regional characteristics and the long-term development plans of these five countries, and the size and contents of aid projects provided by Korea to these countries. It is expected that as a result of this analysis Korea will be able to carry out aid projects involving these countries more effectively in the future.