Towards convergence and cooperation in the global development finance regime: closing Africa's policy space?

Abstract

The revival of China's interest in Africa is often highlighted as being an opportunity to provide African governments with a choice between development partners that may strengthen negotiation leverage and thereby carve out policy space to define and implement policies that affect social and economic development. This article critically reviews the most recent developments in Chinese and Organisation for Economic Cooperation and Development (OECD) approaches to development finance to Africa. It argues that although we can detect a number of incidents that point towards more policy space for African governments, the revival of China's development finance does not fundamentally alter the power relations between African countries and their financiers, as the tendency now is towards convergence and cooperation between China and Development Assistance Committee (DAC) donors—not divergence and competition, which could have created policy space as it did prior to the end of the Cold War. This follows the trend of other ‘emerging’ donors who increasingly play by DAC rules and thereby minimize the future possibility of playing out one partner against the other.

Notes

¹ ‘Foreign aid’ in principle encompasses all resources transferred by donors to recipients. ‘Development aid’ is a narrower term that takes into consideration the purpose of the transfer. ‘Official development assistance’ (ODA) is the term used by the DAC of the OECD to define flows from official agencies in developed countries which seek to enhance social and economic development and that are concessional in character (OECD 2014). Development finance, in contrast, covers what is comparable to ODA as well as other flows that may not officially be classified as ODA either because they are not concessional enough or because their purpose is not first and foremost developmental. This type of finance stems from a variety of government institutions and inter-governmental organizations. Flows of this type, which is characteristic of most of China's engagement in Africa, may be provided at highly competitive terms and may contribute greatly to economic development and welfare.

² ‘Emerging donors’ is the term most often used to describe state actors that provide aid and development finance outside the realm of DAC (see for example Woods 2008). In fact, most of these actors are not new on the development scene. They are at most emerging in the minds of politicians, commentators and researchers. Likewise, most of them perceive themselves not as ‘donors’ but as equal partners pursuing a common goal. Nonetheless, the term is used here to describe state actors providing aid and other types of finance to developing countries that do not follow the prescriptions of DAC.

³ ‘Traditional’ donors are defined by their membership of the DAC.

⁴ It should be noted that there is no systematic link between increased policy space for African political elites and increased social and economic development for the population at large. This article takes no normative stance on whether or not increased policy space is good or bad. It only uses the concept to analyse the consequences of the changes in the current aid regime.

⁵ It is important to bear in mind, though, that China has adopted several Washington-Consensus-like policies in the past three decades albeit not always in the same manner and sequence as suggested by the IFIs (de Haan 2011).

⁶ China's presence in Zambia has also had a large impact on Zambian domestic politics, specifically in terms of revitalizing the debate over who is to be considered a Zambian citizen and thus who is eligible to benefit from affirmative action institutions (see Kragelund 2012a).

⁷ As usual in the literature dealing with these issues, facts and figures are ambiguous. For instance, while Africa–Asia Confidential (2009) reports that China Export–Import Bank finances 85 per cent of the costs of the Gibe dam (US$1.9 billion), the official webpage states that China Export–Import Bank finances 85 per cent of the power transmission line from the dam to the substation, amounting to approximately US$34 million (Ethiopian Electric Power Corporation (EEPCo) 2012).

⁸ Just as Western stereotypes of Chinese approaches to development are well documented (see for example Braütigam 2009), the Chinese literature on the subject is at times one sided. Mohan (2013), for instance, criticizes Li for representing this group of Chinese scholars.

⁹ During FOCAC V, China pledged credit lines worth US$20 billion but these credit lines did not meet the requirements for ODA and hence cannot be compared to the large-scale pledges of 2006.

¹⁰ In internal foreign policy documents China has always included the term ‘aid’. What is new is that this term is also used in official Chinese documents addressed to the international aid community.

Additional information

Notes on contributors

Peter Kragelund

Peter Kragelund is an associate professor at the Department of Society and Globalisation, Roskilde University. His interests include changes in the global economy and how they affect developing countries, especially in Africa. Email: [email protected]