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Special Workshop 2012.6.1

Korea’s Development Cooperation and Direction of ODA

Yoo Soo Hong

ODA

□ ODAs are official flows to or for developing countries that are provided:

• for developmental purposes

• by the official sector (Government, public funds)

• as grants or

• as “soft loans”

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Examples of ODA Activities

• Development projects – schools, clinics, water supply systems, etc.

• Emergency aid for natural or mkan-made disasters

• Contributions to multilateral development agencies

• Food aid, emergency and developmental

• Aid to refugees

• Debt relief outlined by Paris Club Agreement

• Officially financed Ssholarships for students in developing countries

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Non Eligible ODA Activities

• Military or security assistance

• Cultural programmes for the donor’s nationals resident in other countries

• Aid from NGOs financed from private sources

• Foreign direct investment

• Official export credits or other commercially motivated transactions

• Guarantees on private export credits or investments

• Reduced tariffs or other concessions on imports from developing countries

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Official Development Assistance, 1998-2008

(Net Disbursements, in billions of US Dollars)

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By All Donors

Source: OECD Database

Korea’s Success Story in ODA

TodayYesterday

Aid

Recipient

Aid

Donor

the world's

successful case

Korea’s participation in OECD DAC in 2010

Korea’s Per Capita Income

U$ 78

1960

U$ 19,200

2008

Foreign Aid

U$ 33.1bn 6

Joining DAC of OECD

– Korea plans to triple its economic aid to poor countries around the world to 0.25 percent of gross national income (GNI) by 2015 to help achieve more balanced global economic growth.

– Korea's entry into the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) on Nov. 25, 2009 suggests Korea has joined the league of the world's wealthiest countries.

– Korea is the second Asian country after Japan to become a DAC member.

– The membership is expected to help it deepen economic partnerships with underdeveloped countries, which will emerge as Korea's major trade partners in the long term. By participating in various development programs in the countries, Korea can promote social and cultural exchanges as well.

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– Korea will provide $100 million in food aid to countries suffering from food shortages and droughts in 2010-2012, while gradually increasing its assistance to underdeveloped nations.

– Korea hopes to help developing countries lift themselves out of famine and poverty, and to this end, share Korea’s past development experiences. While financial support is important, finding the right development model that befits each country can be a more fundamental way of overcoming poverty.

– Whether in the form of low-interest loans, grants-in-aid, or technical cooperation, ODA helps developing countries in moving forward.

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Sharing Experience

– Korea is the only country that successfully turned into an industrialized country through receiving ODA.

– Korea should share its experiences. Developing countries are also seeking Korea's know-how in economic development, education and IT. Experts advise that this expertise could help set up a unique ODA model for the country.

– Simply giving out money could result in aid dependency of recipient countries, diminishing production incentives and failing to pull them out of poverty. In other words, ODA should be in harmony with the recipient country's development strategies.

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Determinants of Development Aid

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Considerations for ODA Determination

Source: KOICA (http://www.koica.go.kr. 2008).

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Major Donor Countries

Source: OECD

ODA to GNI Ratio

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Source: OECD

Evolution of Korea’s ODA (mil. US$, %)

13Sources OECD.dat.

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Korea’s ODA by Type

Source: KOICA

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Korea’s ODA Trends

Source: KOICA

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Korea’s ODA by Region, 2006-2009

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Korea’s ODA by Purpose

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Korea’s Sectoral ODA

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Korea’s ODA Future Commitments

Development Aid Under Attack

• Aid to developing countries is strongly criticized.– Scholars and policymakers increasingly express doubt that

development aid will• Increase economic growth• Alleviate poverty• Promote social development• Foster democratic regimes• Or, have a positive sustainable impact

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Capacities for Utilizing AID

InstitutionalCapacitiesPolicies, strategies andimplementing tools are inplace to ensure efficientcoordination andmanagement of aid.

Human CapacitiesSkilled, trained personnelare in place to implementpolicies and strategies,and to maintain thegovernment-donorinterface.

Structural / Economic CapacitiesCapacity of the recipient country’s economyto absorb additional aid with minimaldistortion (“Dutch disease”) etc.

“Capacities”

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Capacities by Entity

• Recipient government– Capacity to own, manage and implement.

• Donor agencies– Human and institutional capacity to deliver assistance in an

effective manner.

• Other key stakeholders (e.g. civil society, private sector)– Capacity to complement government; advocate for effective

use of aid, and exert ownership over development processes.

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Capacity Building Dimensions

National policy institutions

S&T organizations -- -- universities, public and private R&D institutes/technology diffusion institutions

Enterprises – both users of knowledge and creators of new knowledge

Labor Force

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Acquisition

Assimilation

Improvement

Creation

Capacity Building Stages and Model

Developing

Country

Newly-Industrializing

Country

Advanced

Country

Imitation internalization generatingS&T & R&D

Stages

Development

Stages

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References

Sawada, Yasyuki. 2010.”Official Development Assistance” Views from Japan and East Asia”.

Spire Research and Consulting. 2007.“The Rising Tide of Asian

Investment in Asia”. (Google)

Todo, Yasuyuki. 2010. “Is Foreign Aid a Vanguard of FDI?” The

University of Tokyo and RIETI.

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