[Why-Briefing] We're Struggling Too... Do We Really Have to Help Poor Countries?

How ODA Helping Developing Countries
Is Connected to National Interests

Editor's NoteWe provide a clear understanding of complex and rigid diplomatic issues through the ‘Why-Briefing’. By thoroughly investigating comments left by readers on diplomatic articles, we aim to pose the question ‘Why’ regarding diplomacy and seek answers.

South Korea's ODA-to-GNI ratio ranks third from the bottom among DAC member countries. In 2018, the DAC recommended that Korea set a schedule and targets to increase its ODA scale to 0.30% of GNI by 2030. (Data as of 2022)

"We are struggling ourselves, so why should we help other countries?"

This is a common comment on articles about Official Development Assistance (ODA). ODA is a program that uses tax money to help citizens of developing countries. It aims to eradicate poverty, promote economic development, and improve social welfare in the international community. As nationalism strengthens, people question the necessity and validity of ODA. "Is there any real benefit?" "Isn't it just ‘giving away’?" "If it must be done, shouldn't it be based on exports?"

The Power of Soft Power

Such skepticism often arises because the benefits returned from ODA are closer to ‘soft power’. Soft power is the ability to attract and lead other countries by leveraging the appealing aspects of one’s own culture and values. It differs from ‘hard power’, which achieves results by building military or economic strength in other countries. Although it is closer to intangible values, it can lead to long-term national power enhancement.

A representative example is the Nordic countries (Sweden, Norway, Denmark, Luxembourg). Their ODA/GNI (Gross National Income) ratio exceeds 0.7%. They use a significant portion of their fiscal revenue as ‘grant aid’ to help developing countries. However, they also clearly gain long-term benefits through soft power. Nordic countries often entrust aid to international organizations such as the World Bank, Asian Development Bank, and United Nations Development Programme (UNDP), and based on this, they dispatch a considerable number of personnel to international organizations led by the UN.

They directly engage in UN policies, lead agendas, and exert influence. They establish their status as countries with a global civic consciousness and spread the Nordic-style ‘social democratic model’ to the international community. Moreover, many developing countries still hold potential as global factories and markets despite the weakening of free trade agreements such as the World Trade Organization (WTO). To establish friendly and neighborly relations in trade and exports with developing countries, ODA can be a long-term help.

President Yoon Suk-yeol announced on the 31st at the National Assembly plenary session that the 2024 ODA budget has been increased to a record high of 6.5 trillion won. Photo by Hyunmin Kim kimhyun81@

The Concept of ‘Advanced Countries’

The true definition of an advanced country is often evaluated based on its contribution to the international community. Advanced countries are not defined as ‘countries that prosper alone, wealthy nations, or strong powers’. China, India, and Qatar are examples. Despite ranking 2nd and 5th in GDP and 1st in GDP per capita respectively, these countries are not part of the G7. Advanced countries are often identified by their membership in the Development Assistance Committee (DAC) within the Organisation for Economic Co-operation and Development (OECD). To maintain legitimacy and be recognized as exemplary countries with national prestige, they must be ‘countries with high-income economies that fulfill social responsibilities toward developing countries.’

All G7 members?the United States, Japan, the United Kingdom, France, Germany, Italy, and Canada?are DAC members. China, while an emerging donor country, is considered a country that deviates from DAC norms. It provides large-scale aid to Asia, Africa, and Latin America based on principles of non-interference and equality, but uses ODA as part of the Belt and Road Initiative or economic development policies. It has failed to link trade and investment with ODA, focusing on tied aid and loans, which has trapped African countries like Kenya in a ‘debt trap’. Much of its support is conditional on vested interests. At one point, a committee opposing the ‘Chinese aid model’ was even established within the OECD DAC.

Support for Aid vs. Criticism of Aid

Nevertheless, since the establishment of the DAC in 1960, there has been ongoing debate about whether ODA has truly helped the ‘growth’ of developing countries over the past 60 years. There have been continuous claims that supporting roads, dams, bridges, and equipment through ODA actually strengthens dependency on advanced countries and hinders ‘sustainable growth’. While ODA has contributed to poverty eradication and emergency relief, opinions differ on whether it has contributed to the macroeconomic growth of developing countries. In the early 2000s, Moyo from Zambia and William Easterly strongly presented ‘aid ineffectiveness’ and ‘aid criticism’ theories.

However, reflecting these arguments, the form of ODA is evolving in various ways. Instead of various in-kind supports, support methods such as ‘private resources’ and ‘blended finance’ have emerged as alternatives to promote actual economic growth. At the ‘Financing for Development Conference’ held in Addis Ababa in 2015, domestic resource mobilization (DRM) was proposed as a solution. This approach focuses on localization by strengthening the tax capacity of recipient countries through blended finance that combines public-private partnerships and expertise, giving developing countries a sense of ownership.

Korea is evaluated as an exceptional model that successfully exercised ownership through ODA loans to achieve economic growth. In the 1960s, Korea received concessional loans from advanced countries, formulated five-year economic development plans, and achieved state-led industrialization. At that time, international organizations such as the World Bank focused on poverty eradication and support for relief goods or consumer goods, but Korea’s government-led industrialization plan drove growth. This is why the ‘Korean-style growth model’ is highly regarded as a benchmark case in developing countries.