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Aid allocation of the emerging Central and Eastern European donors

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Abstract

This paper examines the main characteristics of the (re-)emerging foreign aid policies of the Visegrád countries (the Czech Republic, Hungary, Poland, Slovakia), concentrating on the allocation of their aid resources. I adopt an econometric approach, similar to the ones used in the literature, for analysing the aid allocation of the OECD DAC donors. Using this approach, I examine the various factors that influence aid allocation of the Visegrád countries, using data for the years between 2001 and 2008. The most important conclusion is that the amount of aid a partner country gets from the four emerging donors is not influenced by the level of poverty or the previous performance of the recipients (measured by the level of economic growth or the quality of institutions). The main determining factor seems to be geographic proximity, as countries in the Western Balkans and the Post-Soviet region receive much more aid from the Visegrád countries than other recipients. Historical ties (pre-1989 development relations) and international obligations in the cases of Afghanistan and Iraq are also found to be significant explanatory factors. This allocation is in line with the foreign political and economic interests of these new donors. Although there are clear similarities between the four donors, this paper also identifies some individual country characteristics.

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Notes

  1. Danielson and Wohlgemuth (2005) argue that donors such as Sweden are not driven by altruism, but rather a kind of ‘enlightened egoism’. This refers to the fact that such countries have recognised that instead of seeking short-term economic and foreign policy benefits, it is in their long-term national security interest to decrease global poverty.

  2. A detailed scientific analysis of these pre-1989 development policies is missing from the literature. One must not, however, underestimate the importance of these policies. For example, in the 1970s, Hungary spent an average of 0.7 per cent of its national income on various forms of foreign aid, which is an extremely high level (although the methodologies for calculating both national incomes and aid levels in the Eastern Bloc at the time do not permit comparisons with Western donors and current aid levels) (HUN-IDA 2004; Szent-Iványi and Tétényi 2008). Michaux (2002: 19) is therefore clearly mistaken in stating that Central and Eastern European countries have no development traditions.

  3. The Czech Republic became a member of the OECD in 1995, followed by Hungary and Poland in 1996 and Slovakia in 2000. This, however, did not mean automatic membership in the OECD DAC, where the four countries have only observer status to this day.

  4. In the case of the EU, this pressure mainly comes from softer acquis, such as Council statements and declarations. In 2002, the European Council reaffirmed that the ODA/GNI target of 0.7 per cent must be reached by 2015, with an intermediate goal of 0.39 per cent by 2006 (European Council 2002: 6). In 2005, a new intermediate goal was established for 2010 of 0.56 per cent, and a separate goal was set for the new member states of 0.17 per cent (Bucar and Mrak 2007: 7). In addition, in 2005, a joint statement by the Commission, the Council and the Parliament, entitled the ‘European Consensus on Development’, created a new framework for the EU's common development policy and established many requirements for the individual member states (European Consensus 2006).

  5. Hungary and the Czech Republic even manage two provincial reconstruction teams in Afghanistan.

  6. Freedom House publishes two indices in their annual report ‘Freedom in the World’, one measuring political rights, the other measuring civil liberties. Both are rated on a scale of 1–7, with 1 representing the highest and 7 the lowest level of freedom. I have taken the two indicators and averaged them across countries to get a single indicator measuring the quality of political institutions.

  7. In its World Governance Indicators initiative, the World Bank publishes six indices: voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; rule of law; and control of corruption. The rule of law index measures ‘the extent to which agents have confidence in and abide by the rules of society, including the quality of contract enforcement and property rights, the police and the courts, as well as the likelihood of crime and violence’ (World Bank 2009b: 1). These factors are one of the main determinants of whether it is worth making long-term investments in an economy. Thus, the rule of law index is a reasonably good measure of the economic institutions, which affect long-term growth and the effectiveness of aid. ‘Rule of law’ is measured on scale of −2.5 to 2.5, where lower scores mean lower-quality institutions.

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  1. Faculty of Economics, Corvinus University of Budapest, Fővám tér 8, Budapest, H-1093, Hungary

    Balázs Szent-Iványi

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  1. Balázs Szent-Iványi
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Szent-Iványi, B. Aid allocation of the emerging Central and Eastern European donors. J Int Relat Dev 15, 65–89 (2012). https://doi.org/10.1057/jird.2011.19

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