Development aid from authoritarian regimes
An (iron) fistful of help
Jun 4th 2009
From
The Economist print edition
China, Iran, Russia and Venezuela have been doling out largesse. Should Western democracies be worried?
CONGO and the International Monetary Fund are arguing about a bail-out. What’s new, you might ask. Dog bites man. But the sticking point is, unexpectedly, not the country’s economic policy, but how exactly to repay a $9 billion credit that Congo secured last year from China.
China’s deal with Congo, and the disputes arising from it, are examples of a growing trend. Authoritarian governments are using their money to buy influence abroad. Sometimes the money comes as a commercial loan; sometimes, as a grant; frequently, as both. These flows are changing the business of aid, undermining attempts by Western countries to improve their programmes and encouraging recipients to play donors off against each other.
The use of aid to win friends and influence people is not new. America and the Soviet Union both used aid as a weapon in the cold war. Now a 21st-century equivalent is emerging. A study this week by a group of American institutions, Freedom House, Radio Free Europe/Radio Liberty and Radio Free Asia, looks at the use by China, Iran, Russia and Venezuela of what it calls “authoritarian aid”. The study, “Undermining Democracy”, is the first attempt to estimate the global scale of such operations.
China’s assistance programme is the most active. In 2007 its leaders said they would offer African countries $20 billion in new financing (they did not say on what terms or over what period). Hu Jintao, the president, repeated a promise to boost aid and cancel debts during a trip to Africa this February. The World Bank says China already gives Africa $2 billion a year (more than the bank itself does). China does not publish aid figures and a study in 2007 for the Centre for Global Development, a think tank in Washington, DC, put the figure lower, at $1.5 billion-$2 billion a year (with a third to a half for Africa). But all estimates agree that aid has been rising relentlessly (see chart) and that China, once a recipient, is now in the middle rank of donors, on a par with Australia or Spain, though with more commercial lending.
Over the past ten years, Venezuela’s aid has been comparable to China’s, though it is now falling behind. Gustavo Coronel, a critic of President Hugo Chávez, says Mr Chávez has made $43 billion worth of foreign “commitments” since 1999. Roughly $17 billion could be described as aid, including cheap oil to Cuba and cash transfers to Bolivia. The report estimates that Venezuela’s cheap-oil programme alone is worth $1.7 billion a year, though its most flamboyant feature—cheap heating oil for poor Americans—was recently scrapped.
Russian and Iranian aid is more impenetrable than China’s but flashes of information light up the murk. Iran offered $1 billion to Lebanon’s Shias to help them rebuild their ruined houses after the 2006 Israeli war. This year, Russia offered Kyrgyzstan $2 billion, a gesture made, by amazing coincidence, just after Kyrgyzstan had thrown out American forces. Russia has long used energy prices and debt forgiveness to cajole or punish neighbours.
If you include another generous undemocratic donor, Saudi Arabia—whose aid, $2 billion in 2007, fluctuates as much as the oil price (see chart)—then total “authoritarian aid” comes to $10 billion a year and possibly more. That is a substantial, though not a game-changing sum. It is almost 10% of total aid from rich countries, and about what Britain or Japan gives.
But its significance lies not just in its total value. Autocracies offer an alternative to western aid in several ways. In the past decade rich countries have tried to improve a dismal record of development spending by linking aid closely to the priorities of recipients (rather than financing a big project which the country does not need) and by demanding good governance. China and the rest do not.
Much of their aid is overtly political. Iran’s offer of free electricity to Shia parts of Iraq is one example, Venezuela’s bankrolling of Cuba another. Most is steered towards a few friendly regimes, or (in China’s case) places with natural resources. China has pledged $600m to Cambodia, more than ten times as much as America. It has given Myanmar $400m in the past five years; American aid to the country is worth about $12m a year.
Naturally, help from harsh regimes is rarely encumbered with pesky demands for good governance. This makes it welcome to corrupt officials and even to those merely sick of being lectured by Westerners. Alas, it can encourage bad governance. China, the report says, is training 1,000 Central Asian policemen and judicial officials “most of whom could be classified as working in anti-democratic enterprises”. The report concludes that authoritarian regimes are using aid to boost their soft power. If so, the spread of authoritarian aid is a challenge to more than just Western ideas of the right sort of giving.
