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Korea Becomes 16th-largest ODA Donator
From Beneficiary to Donator
Korea Becomes 16th-largest ODA Donator
  • By matthew
  • May 2, 2013, 12:01
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In 2012, Korea gave foreign aid worth US$1.55 billion in total, becoming the 16th-largest donor country in the world, just three years after joining the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) as its 24th member.

According to OECD data published on April 3 this year, the amount of official development assistance (ODA) offered by Korea last year increased 17.1% year-on-year from US$1.32 billion, the rate of increase higher than any of the 23 other DAC members. Korea also moved up one notch to 16th place in terms of total ODA. “The accomplishment is especially significant in that no less than 15 out of the 24 member nations cut their ODA in 2012 due to the global economic recession,” said the Prime Minister’s Office.

However, the ODA to gross national income (GNI) ratio of Korea increased by merely 0.02%p to 0.14% between 2011 and 2012, third from last following Italy and Greece, with the DAC member average standing at0.29%. The per-capita ODA amount rose by US$4.4 during the same period to US$31.

In the meantime, last year’s combined ODA offering from the DAC amounted to US$125.59 billion, recording a 4% year-on-year decrease. The top five countries were the United States, Great Britain, Germany, France and Japan, with another five -- Luxembourg, Sweden, Norway, Denmark and The Netherlands -- exceeded the minimum ODA-to-GNI ratio of 0.7% as suggested by the UN.

The US$1.55 billion offered by Korea is divided into US$1.16 billion in bilateral aid and US$0.39 billion in multilateral aid. The former is characterized by the supply of goods and financial support directly to recipients, while the latter is made via international organizations.

Bilateral aid increased by 17.4% from a year ago, while credit assistance and grant-type aid reached US$470 million and US$700 million, respectively, with a growth rate of 12.4% and 21%, respectively. The credit assistance-to-grant ratio remained almost the same, at approximately 40:60, compared to the year before.

54.8% of Korea’s ODA last year went to Asian nations, while support for African countries expanded to 22.4% of the total. By industry segment, transportation, logistics, education, medical and healthcare, and water resources management topped the list. Grant-type aid was provided to133 countries by 41 organizations, including the Ministry of Foreign Affairs and Trade, Ministry of Education, Ministry of Strategy and Finance and the Korea International Cooperation Agency (KOICA). Two-way support via international organizations and project aid posted a growth rate of 129% and 20%, respectively. In the same year, the Economic Development Cooperation Fund (EDCF) approved concessional loans of roughlyUS$1.1 billion for 18 projects in 13 countries.

From Tied to Untied Aid

As regards to the method of providing ODA, some criticize that the loans do not allow for the various conditions of recipient nations but instead are simply provided unilaterally for the sake of administrative expediency. In general, credit assistance is provided in the form of tied aid, meaning Korean companies take part in EDCF projects irrespective of the opinions of recipients, and this therefore can restrict the participation of local firms. Furthermore, a series of problems have been reported in terms of the repair and maintenance of installations and equipment malfunctioning with regards to some projects due to a lack of understanding of local conditions.

Nowadays, the worldwide trend is shifting from tied to untied aid and the international community is also calling upon the Korean government to follow suit. In this case, it will be inevitable for Korean enterprises to have to put up with some losses in the short-term. However, international open tender will bring more good than harm in the end regarding the good will and sincerity of such development assistance.

More than 80% of Population against Expansion of ODA

Korea has successfully turned itself from a recipient to donor country as shown in statistical data, yet experts are pointing out that the country still has a far way to go. The OECD said in its recent report, “Korea has become an international benchmark model in the field of ODA, but we’re hoping that it will continue increasing the scale of aid, especially in the form of untied assistance.”

In response, the Park Geun-hye government is planning to raise the ODA-to-GNI ratio to at least a quarter of a percent by 2015. However, more than a few people, including some in the government, are opposed to the plan even despite the figure being far less than the UN’s recommendation (0.7%) or the OECD average (0.33%).

The Ministry of Strategy and Finance conducted a survey in March this year regarding public awareness of the Knowledge Sharing Program (KSP). Of the 1,000 adult respondents, 53.8% replied that the current ODA budget is at an appropriate level, while 31.5% said the budget needs to be reduced or the projects themselves stopped, with reasons given including deteriorating domestic economic conditions and the necessity to help the underprivileged in Korea first. Approximately 40% answered they did not know that their tax money was used in ODA projects.

In regards to the issue, civic groups such as ODA Watch criticized the ministry as trying to deter the expansion of the budget to that end while increasing the ratio of credit assistance instead of grant aids by taking advantage of such survey that were carried out without providing sufficient prior knowledge.

It has also been pointed out that the management of overseas ODA projects needs to be centralized in order to strengthen efficiency. At present, the Export-Import Bank of Korea is in charge of credit assistance, whereas grant aid is supervised by the KOICA. In addition, more than 30 related organizations, local governments and public-sector agencies are moving ahead with their own projects, resulting in duplicated and inconsistent work. However, the Prime Minister’s Office has recently said that it is not contemplating the matter as of now.