Effects of Foreign Aid

Evidence from Thailand

verfasst von: Hiroaki Sakurai

Verlag: Springer Singapore

Buchreihe : New Frontiers in Regional Science: Asian Perspectives

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book focuses on the impact and effectiveness of foreign aid or official development assistance (ODA) from several aspects, as in the exemplary case of Thailand—factors that are important for formulating growth and fiscal policies to use foreign aid efficiently. Specifically, the book is devoted to analyzing the belief among aid practitioners that foreign aid, aimed mainly at wider access to social infrastructure, is one of the important elements for increasing living standards. Thailand has attained economic growth and poverty reduction while it has been receiving foreign aid for more than 50 years, with Japan providing one of the major portions of that aid. However, there is no established theory in the field of economics and related disciplines about whether foreign aid helps developing countries to improve the livelihoods of the poor. According to the analysis advocated in this book, foreign aid to Thailand contributes to economic growth. Moreover, the Thai government generally has governed foreign aid well and maintained sound management of finance primarily by reducing domestic borrowing as an alternative to foreign aid. The book shows that a kind of inter-dependent strategic relation has been established and managed well among aid agencies. These results, introduced by long-term data, are consistent with widely accepted ideas, while the effect of foreign aid itself is still under discussion. This book is intended to answer the needs of aid donors and policymakers as well as researchers and Ph.D. students. In addition, it suggests that other developing countries following similar policies should look to evidence from Thailand to reinforce their own cases.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Foreign Aid, Poverty Reduction, and Economic Growth in Thailand

Abstract

This chapter describes the background knowledge of foreign aid in Thailand over 50 years, including economic growth, poverty reduction, and foreign direct investment from the practitioners’ point of view. The main points are summarized for the following three points. First, it is shown that Thailand experienced nearly 5% growth for this period continuously, and the poverty ratio drastically reduced during the time. Second, the policy stance for both donor countries and the Thai government changed during the late 1970s and the beginning of the 1980s, and foreign aid was mainly donated as aid loans for constructing social infrastructure or social capital. Third, social capital constructed by foreign aid has been used efficiently since the foreign direct investment was enlarged drastically by the yen appreciation after 1985. Overall, these are the main reasons practitioners believe foreign aid has a positive effect on Thailand as a recipient country.

Hiroaki Sakurai

Chapter 2. Literature Review

Abstract

This chapter summarizes previous studies on the effects of foreign aid based on three fields: economic growth, fiscal budget, and the relationship among aid agencies. The lessons from previous studies are summarized as follows. First, finding out the way to economic growth using foreign aid is quite important, since it is clear that economic growth leads to poverty reduction as a robust result. In addition, inviting foreign direct investment is also important because it is easier to promote economic growth, whereas foreign aid itself causes economic growth. Second, maintaining fiscal discipline is important to have an impact from foreign aid to the budget, since many studies show that government consumption increases when foreign aid is increased. Third, the cooperation among aid agencies is important because in-cooperation among aid agencies sometimes causes the concentration of aid in a certain field. Overall, the major opinion is that the governance of recipient countries decides the size of the impact of foreign aid.

Hiroaki Sakurai

Chapter 3. Statistics in Thailand

Abstract

This chapter summarizes Thailand’s statistics from the macroeconomic analysis viewpoint. After the 1997 crisis, although Thailand has been promoting statistics, some data have occasionally been missed, specifically in the long term. This book mainly uses a system of national accounts and indicates the following points. First, stock statistics are not bifurcated province wise. Second, the gross provincial product (GPP) is published only from the production side, not expenditure side. Third, official development assistance (ODA) data are not necessarily divided into provinces or fields.

Hiroaki Sakurai

Chapter 4. Foreign Aid Loans and Economic Growth in Thailand

Abstract

This chapter examines the productivity of governmental aid loans, the main portion of foreign aid in Thailand, using the economic growth model both in whole-country time-series data from 1971 to 2013 and in regional panel data from 1986 to 2013. The effect of foreign aid remains a point of discussion, and we hope to clarify this issue. Thailand is considered a good example of a country using governmental aid loans to develop social capital, which then fosters manufacturing industries. Three main outcomes exist. First, we determine the impact of governmental loans on economic growth in Thailand using whole-country data. Second, the marginal production effect of governmental loans has recently been reduced, although not to zero. Third, the impact of foreign aid is lower than that of public capital in Thailand in the same period. Fourth, the quantitative impact of yen loans from the Japanese government can be determined using subregional data. Overall, foreign aid has an impact on economic growth, although the magnitude is smaller than that of public capital. Moreover, the impact is large at the beginning of the development, whereas it is smaller in the process of economic growth.

Hiroaki Sakurai

Chapter 5. Fiscal Effects of Foreign Aid in Thailand

Abstract

This chapter examines impacts of foreign aid on domestic borrowing, expenditure, and revenue, in Thailand from 1961 to 2014 by using VAR model and Granger causality tests. Our main findings are as follows. First, a negative relationship is found between foreign aid and domestic borrowing, which is considered to have an impact on Thailand’s fiscal budget. Second, a clear relationship is not necessarily evident about the relationship between foreign aid and governmental expenditure. Third, no relationship is seen between governmental revenue and foreign aid. Fourth, it is difficult to acquire evidence of the impact of foreign aid on fiscal budget if limited to the 1960s and the 1970s. Overall, foreign aid to Thailand has certain impact on its fiscal budget through diminishing domestic borrowing although this result is different if the period is limited to the 1960s and the 1970s.

Hiroaki Sakurai

Chapter 6. Relationships Between Aid Agencies

Abstract

This chapter examines the relationships between three primary aid agencies, Japan, the World Bank, and the Asian Development Bank, by scrutinizing the amount of aid they granted to Thailand from 1986 to 2015. The key findings are as follows. First, the aid amounts revealed that the World Bank was more involved after the financial crisis, while Japan was more involved after the big flood in 2011, implying that the World Bank has more interest in financial institutions and Japan has more interest in protecting industrial areas. Second, an OLS of the aid from each agency illustrates the long-term relationship between these three agencies, inferring that Japan looks to act relatively independently, the World Bank and the Asian Development Bank look to act mutually independently, and the Asian Development Bank has the ability to act mutually. Third, after examining their short-term relationships with a VAR model, there was almost no relationship between the three aid agencies except for Japan, which is slightly delayed for the Asian Development Bank.

Hiroaki Sakurai

Chapter 7. Summary and Conclusion

Abstract

This chapter provides a concluding remark for this book. First, a summary of each chapter is presented. Second, public opinion about official development assistance (ODA) in Japan and further research issues are discussed. Third, the results of a recent Japanese survey on impressions about ODA is shown with suggestions about further discussions for future ODA.

Hiroaki Sakurai

Titel: Effects of Foreign Aid
verfasst von: Hiroaki Sakurai
Verlag: Springer Singapore
Electronic ISBN: 978-981-16-2482-7
Print ISBN: 978-981-16-2481-0
DOI: https://doi.org/10.1007/978-981-16-2482-7