24.1 Introduction
Twenty years ago, when I worked for the UK Department for International Development, no one talked about South-South cooperation (SSC). Discussions about Asian donors focussed exclusively on Japan. India was the largest recipient of the UK’s official development assistance (ODA). Infrastructure development took a back seat to governance programmes—the new priority of ODA, as promoted by the Development Assistance Committee (DAC). Fast forward two decades and contemporary development discourse is obsessed with Chinese foreign aid and massive infrastructure schemes. India, Japan, and Korea also feature strongly in the landscape, followed by less-known actors such as Thailand, Indonesia, Malaysia, and Singapore.
This chapter presents current trends in Asian-led development cooperation, focussing on China and India, and explains why and how these trends—despite the controversy and contestation they generate—offer opportunities for new partnerships among diverse actors to achieve the Sustainable Development Goals (SDGs).
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Section 24.2 provides background on Asian development cooperation, highlighting that Asia’s rise and the decline of traditional aid have set the stage for a new era of cooperation. Section 24.3 examines significant trends in Asian development cooperation, specifically: large-scale connectivity and infrastructure schemes, increased multilateralism, and the increasing role of non-governmental organisations (NGOs) and the private sector. Finally, the chapter presents strategies and recommendations for Asian countries to improve their SSC, as well as for traditional donors, and other actors, to collaborate with Asian partners in aid and beyond-aid scenarios.
24.2 Contemporary Disrupters to Development Cooperation: Asia’s Rise and Beyond Aid
There are many shifts and disruptors that shape and continue to shape twenty-first-century development cooperation, or “aid” (Kharas and Rogerson 2017). Asia’s rise is one significant factor. In the last two decades, Asian (and other Southern) countries have increased their global might and influence—economically, politically, and socially—and this is transforming aid as we know it. In 1820, Asian countries produced more than 56 per cent of the world’s output, which was overwhelmingly accounted for by China and India (excluding Japan from the calculation). By 1950, China and India’s collective share of output had fallen to less than 9 per cent. To understand this aberration within the broader scope of history, this course correction began in the twenty-first century, which has been witness to a profound structural shift in the centre of economic gravity. Already, China and India account for at least one-quarter of global output.
Asians are also living longer, achieving higher levels of education, and earning more money. This has been reflected in rising scores in the Human Development Index since 1990: 22 per cent globally and 51 per cent in least-developed countries (United Nations Development Programme [UNDP] 2018). China has had the most remarkable ascent, having pulled nearly 850 million people out of poverty between 1981 and 2013, with the percentage of people living in extreme poverty falling from 88 to 1.85 per cent (Weiping 2018).
Consumption is also rising in Asia. The size of the “global middle class” will increase from 1.8 billion in 2009 to 3.2 billion by 2020 and 4.9 billion by 2030. The bulk of this growth will come from Asia: By 2030 Asia will represent 66 per cent of the global middle-class population and 59 per cent of middle-class consumption, compared to 28 and 23 per cent, respectively, in 2009 (Pezzini 2012). The developing world’s “emerging middle class” is a critical economic, social, and environmental factor because of its potential as an engine of growth, particularly in the largest developing countries, such as China and India.
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Given these global dynamics with the rise of “the South”—and particularly of Asia—the twentieth-century concept of “aid” has shifted as new forms of development partnership and finance have emerged to address global challenges. First, ODA has declined in term of its share of development finance in Asia. Today, development finance is less about aid and more about trade, foreign direct investment, export credits, and other resource flows, including remittances, broadly categorised by the DAC as “non-ODA”. According to the most recent database of the Organisation for Economic Co-operation and Development (OECD)-DAC, Asia received just over $2 billion in ODA and more than $44.5 billion in non-ODA in 2015 (Organisation for Economic Co-operation and Development, n.d.). Much of this is what China and India (but also Indonesia, Thailand, Malaysia, Bangladesh, Mongolia) call South-South cooperation.
SSC predates traditional aid. The year 2015 marked the 60th anniversary of the historic 1955 Asian-African conference, held in Bandung, Indonesia, which laid the foundation for the solidarity in contemporary South-South cooperation. SSC approaches evolved during the twentieth century, as many countries in the region gained independence from former colonizers, struggled to rebuild from post-war situations, and faced acute poverty. Asia-to-Asia cooperation (one form of SSC) aimed to promote solidarity, collective self-reliance, and cooperation. It went far beyond monetary aid, encompassing trade, political and military support, as well as training, education, and cultural exchange.
However, as traditional aid was institutionalised from the 1960s onward, SSC levels fell significantly in the 1980s, as developing countries struggled with debt and inflation during the financial crisis fallout (Mulakala and Waglé 2015). Up until the twenty-first century, traditional aid and SSC rarely crossed paths; few observers or stakeholders compared or contrasted them because they shared so few similarities. SSC reappeared on the radar of most traditional donors in the last 15 years, and in the last 5-plus years, SSC has changed the discourse and practice of development cooperation as a whole. As Asia rises, SSC has increased in prominence as a form of partnership, with Asian countries taking the lead (Mulakala and Waglé 2015).
Today, SSC is big, bold, and SSC investments have predominantly a Chinese face. If we use DAC-like measures to measure the aid-like resources from SSC, Chinese aid would rank about 6th among DAC donors, with annual net disbursement in 2016 totalling $5.8 billion and gross disbursement totalling $6.6 billion (Kitano 2018). The net and gross disbursements of preferential buyer’s credits are estimated to have totalled $8.1 billion and $9.3 billion, respectively, in 2016—much larger totals than the net and gross foreign aid flow totals for the same year (Kitano 2018). In comparison, India announced its foreign aid budget for 2019/20 as 90,693,400,000 Indian rupees, which converts to approximately $1.264 billion (Mitra 2019). Aid-like flows, however, are only one slice of the SSC pie. The big money is in investment, export credits, and non-concessional lending. The struggle to count these resources has led to the wild disparities in trying to count SSC. Lending from the China Development Bank (CDB) and China’s Export-Import (EXIM) Bank dwarfs development finance from the World Bank or Asian Development Bank (ADB). Similarly, India’s lines of credit are much larger than its “aid” totals. Lines of credit from India’s EXIM Bank in 2014/2015 amounted to $40 billion, with 75 per cent going to African projects, mostly in the power and transport sectors.
Asian SSC is not homogeneous in evolution, form, or application. China and Indonesia are both SSC providers, but on a very different scale. South Korea and Japan are members of the OECD-DAC and share characteristics with Northern and Western donors as well as Asian SSC providers. The labels are historically important but presently constrain and limit us from recognising and shaping the evolving discourse.
The 2030 Agenda requires beyond-aid resources, strategies, and partnerships to achieve the SDGs. The role of SSC is critical. Asia’s rise has generated some of these resources, launched new initiatives, and forged new partnerships. The rest of this chapter delves into some of these areas, identifying the opportunities they offer for the 2030 Agenda as well as the controversy and challenges they encounter.
24.3 Contemporary Features of Asian Development Cooperation
This section outlines three contemporary trends in Asian development cooperation, namely Asian investment in infrastructure and connectivity schemes, increased multilateralism, and the expansion of diverse partnerships with civil society and the private sector. I chose these themes because they represent twenty-first-century pivots in Asian development cooperation, provide significant opportunities to address multiple SDGs, and offer new opportunities for multi-stakeholder partnerships. I focus on China and India because they are leaders in the changing discourse and practice of SSC. Their approaches embody both traditional and new principles and practices of SSC. The section also discusses the challenges and contestations surrounding these developing approaches and where opportunities for improvements and collaboration exist.
24.3.1 Big-Ticket Schemes: Growth and Poverty Reduction Through Infrastructure
The principles and modalities of traditional aid have changed. The poverty and governance discourse that characterised aid in the 1990s and early 2000s has been taken over by a resurgence in economic growth priorities (especially inclusive growth) and a re-emphasis on the social and economic infrastructure necessary to stimulate growth and reduce poverty (Mawdsley 2018). Transformational investments have become the major emphasis of Chinese and Indian SSC, as well as of Korean and Japanese aid. These investments target the global infrastructure gap, which ADB in 2017 estimated to be at $459 billion per year for Asia (Asian Development Bank 2018).
The Belt and Road Initiative (BRI) is China’s contribution to the infrastructure gap and global prosperity equation. The BRI is an economic and infrastructure corridor designed by China to promote development, trade, connectivity, policy coordination, financial integration, and people-to-people links. It involves about 65 per cent of the world’s population, one-third of its gross domestic product, and it helps to move about a quarter of all its goods and services. As of March 2019, China has signed 171 cooperation documents with 29 international organisations and 123 countries as part of the BRI (Wenqian 2019). Most BRI investment has gone to South Asia and South-East Asia, strengthening trade and logistic connectivity between China and these regions. Among these projects is the $62 billion China–Pakistan economic corridor, a sprawling web of motorways, power plants, wind farms, factories, and railways that supporters say will spark an “economic revolution” and create up to one million jobs in Pakistan. Other high-profile schemes include the Hambantota port project in Sri Lanka (Oxford Business Group 2018), a high-speed rail link in Indonesia (Shuiyu and Zhong 2017), and an industrial park in Cambodia (“Exports from Chinese-invested industrial zone” 2019). China has signed more than 130 transport pacts with Belt and Road countries. For many countries, the BRI has been a boon, bringing much-needed resources quickly, without excessive conditions (Deloitte 2018).
The BRI is far more than infrastructure. Consistent with the principles of SSC, the BRI is intended to be mutually beneficial for China and its partners, without expressed political conditions (“Opportunities, outcomes” 2018), such as governance reforms, and delivered with speed (Deloitte 2018). As Wade Shepard aptly notes: “At root, developing physical infrastructure internationally is a way for China to establish and cement the long-term political relationships which are truly the beating heart of the BRI” (Shepard 2017). China has complemented the bridges, rails, and roads with soft infrastructure in the form of intergovernmental agreements, trade deals, customs pacts, and aid projects. Agreement and implementation are quick and relatively unencumbered (Deloitte 2018).
The sheer magnitude and scope of the BRI have made it a magnet for controversy and criticism on issues ranging from its financial viability to the economic, environmental, sociocultural, governance, and political impacts on partner countries and regions. Critics outside China claim China is driving the BRI for its own economic gain and accruing other benefits such as: finding more work for Chinese state-owned enterprises, exporting China’s excess industrial capacity, expanding markets for Chinese goods, and boosting internationalisation of the renminbi (Deloitte 2018). The United States has argued that BRI projects are low-quality, self-serving for China, and a debt trap for partner countries (Rajah 2018). Limited adoption and absorption capacity, along with corruption and political constraints in partner countries, have slowed implementation. Unfortunately, China’s no-strings approach to investment has fuelled corruption while allowing governments to burden their countries with unpayable debts. The Asian and international press has touted the BRI as “debt-trap diplomacy” (Lindberg and Lahiri 2018), with Sri Lanka’s $1 billion Hambantota port being the most flaunted example (Limaye 2017). This situation has resulted in considerable anger towards China from citizens of many BRI countries, with some countries, such as Malaysia, initially stepping back from their agreements (Berger 2018), and then renegotiating more favourable terms (Parameswaran 2019).
24.3.2 Other Asian Initiatives
Unsurprisingly, other Asian and regional powers are not thrilled with the geopolitical implications of China literally bulldozing its way across their neighbourhood. In “response”, India and Japan launched the Asia–Africa Growth Corridor (AAGC) in 2017. The main objective of the corridor is to enhance growth and connectivity between Asia and Africa in four areas: development cooperation projects, quality infrastructure and institutional connectivity, enhancing skills, and people-to-people partnerships (Research and Information Systems for Developing Countries 2017). During the 2018 India–Japan Summit, Prime Ministers Narendra Modi and Shinzō Abe identified Sri Lanka, Bangladesh, Myanmar, and Kenya as first-round priority countries for the AAGC (Baruah 2018). India hopes to further secure its toehold in its neighbourhood through two other initiatives. Since 1997, the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)—which includes Bangladesh, India, Myanmar, Nepal, Sri Lanka, Bhutan, and Thailand and is established around regional connectivity and security cooperation—involves around 22 per cent of the world’s population across the seven countries around the Bay of Bengal, with a combined gross domestic product close to $2.7 trillion. BIMSTEC is based on the SSC principles of sovereign equality, territorial integrity, political independence, non-interference in internal affairs, peaceful co-existence, and mutual benefit (“What is BIMSTEC” 2018). Unfortunately, apart from a few summits, the progress of BIMSTEC has suffered from poor coordination and a lack of resources (Subba 2018). The Bangladesh, Bhutan, India, and Nepal (BBIN) initiative provides unhindered road and rail transport across the borders of the four countries. Established in 2015, BBIN is making slow progress after a long ratification process (Subba 2018). Both BIMSTEC and BBIN aim to solidify Indian leadership and economic and strategic influence in the neighbourhood in the face of growing Chinese dominance.1 Thailand and the United States are also setting up a regional infrastructure fund to offset Chinese dominance in the region (Jiangtao and Churchill 2019; Ono 2018). The Thailand fund is designed to support connectivity projects among Thailand, Cambodia, Laos, Myanmar, and Vietnam and reduce the dependence on Chinese resources. President Donald Trump’s $113 million Asian investment programme fund is designed to support his Indo-Pacific strategy and will focus on technology, energy, and infrastructure (Jiangtao and Churchill 2019).
Despite these counter-efforts, the best approach to balancing the political power that infrastructure projects carry in the region may be to join China in the BRI rather than countering it with other initiatives. Long an opponent of the BRI, India, at the end of 2018, looked like it might join hands with China, perhaps realising that “sulking in the sidelines is not an option” (Pahari 2018). Indeed, as a significant power in the region, India could shape the BRI to its own advantage, accessing trade routes through central Asia, stimulating the Indian private sector, and bringing India’s sheer critical mass to balance the singular influence of China (Pahari 2018). Deloitte’s recent analysis (2018) of the BRI assesses it as an ecosystem with expanding opportunities for multi-national corporations to invest and benefit in areas such as manufacturing, trading, and tourism. The United Nations Development Programme’s (UNDP) comprehensive 2017 study of the BRI, in collaboration with the China Centre for International Economic Exchanges, contends that the BRI holds promising potential not only for global infrastructure development but also for global governance and the achievement of the SDGs. The study provides a roadmap for how China and collaborating partners can deliver the 2030 Agenda.
When seen in this optimistic light, the BRI—and accompanying big-ticket, Asian-led SSC initiatives—offer far more than infrastructure to the world. Although on the one hand they represent a significant shift in development emphasis and resources—from governance and social sectors favoured by traditional donors to infrastructure and connectivity priorities demanded by countries from the South—they also provide a framework for bringing these priorities together.
24.3.3 Increasing Multilateralism
A second recent trend in Asian SSC and development cooperation is increasing multilateralism. SSC historically has tended to be bilateral in nature. In contrast to the United States, which has become more nationalist, retreating from participation and support for multilateralism through the United Nations (UN) and other agreements such as the Paris Agreement, Asian countries—China and India in particular—are increasing their multilateral cooperation. There are several elements.
24.3.3.1 Multilateral Finance
Only a few years ago, a least-developed country without the credit capacity to borrow in international capital markets had no option but to go to a global financial institution such as the World Bank or to a regional multilateral bank for large-scale funding. Since the 2000s, China, India, and other Southern-based institutions have emerged as a major source of concessional and commercial development financing in Africa and Asia. Two new Southern-led multilateral banks—the New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB)—have increased the pool of multilateral finance but also changed the game in multilateral global governance. The AIIB has 93 members to date—six countries joined at the end of 2018 (Houston 2018)—and has approved loans worth $6.7 billion to more than 30 energy, transport, and urban projects (Suokas 2019). The NDB approved its third tranche of funding in May 2018. The project scope expanded to include urban development, water supply, and sanitation while keeping sustainable infrastructure development at the heart of its mandate (Vasquez 2018).
Despite these investments, multilateral finance still only makes up about 10 per cent of Asian infrastructure financing (United Nations Economic and Social Commission for Asia and the Pacific [UNESCAP] 2017). The AIIB finances about 1 per cent of the BRI (Deloitte 2018; UNDP 2017). The big money for infrastructure comes from public-sector funding, whether through direct government budgetary funding, ODA, or other concessionary loans at the sovereign level. Many of the loans are financed by the CDB, the EXIM Bank of China, the EXIM Bank of India, or commercial banks from the region (Deloitte 2018; UNDP 2017).
When the AIIB was launched, the critics were vocal about their concerns about governance, Chinese dominance, transparency, environmental and social safeguards, and competition with the World Bank and the ADB. However, this contestation was short lived. The AIIB’s leaders come with extensive experience from other development banks. Both the World Bank and the ADB have co-financed AIIB loans in partner countries. The competition has been healthy, helping to fill the infrastructure gap, driving existing multilateral development banks to streamline their cumbersome operational procedures and processes, and forcing new multilateral development banks to strive to meet the expectations of partner countries regarding compliance as well as social and environmental safeguards (Rana 2018). With 93 members and an increasing voice of non-Chinese member states (Sun 2015), the AIIB has become a vehicle for increased collaboration among previously unlike-minded partners, “healthy competition and functional complementarity” as Rana calls it (Rana 2018). In December 2018, the UN granted permanent observer status to the AIIB (Suokas 2018), putting it on a par with other development organisations in the UN system such as the OECD, the African Development Bank, and the ADB. The NDB is also considering a sustainability framework drafted and presented by civil society members from BRICS countries (Brazil, Russia, India, China, and South Africa) (Vasquez et al. 2017).
24.3.3.2 UN and Other Multilateral Platforms
China and India are also stepping up their engagement with the UN, representationally and financially. China is now the third-largest contributor to the UN’s regular budget, the second-largest contributor to the peacekeeping budget, and has committed more than 2500 personnel to UN peacekeeping operations as of 2018 (Center for Strategic and International Studies 2016). China has repeatedly expressed2 its solidarity with other world leaders in support of multilateralism at the UN. This is in stark contrast to the US position. China has also set up funds to support the UN’s mission, such as contributing $1 billion for the UN Peace and Development Trust Fund, and has committed to increase its contributions to the UN development system by $100 million by the year 2020. China’s contributions, in kind and cash, expand its influence and extend its voice on international development issues. This leverage is only likely to grow in the future. As Washington increasingly turns its back on multilateral platforms for development cooperation, perhaps China will become the main guarantor (Gowan 2018).
India has steadily increased its contributions to the UN and is one of the top contributors to the UN overall (Kinhal 2017). India has been successful in promoting global governance and international cooperation through the UN on issues of climate change and the 2030 Agenda. As Thakker (2018) points out, India was recognised as a drafting author of the climate change agreements and a leader within the Brazil–South Africa–India–China (BASIC) coalition as well as of the G77 during the Conferences of the Parties in Copenhagen and Paris. Significantly, following the United States pulling out of the Paris Agreement, Asian countries, including China, India, and Japan are stepping up. India established the international solar alliance with more than 120 countries and has contributed $30 million to its set-up in Delhi (Neslen 2015). China is expected to reach its reduced emissions targets well before 2030 (Gowen and Denyer 2017). India also sits on the Open Working Group on the SDGs, which is comprised of 30 member states (Thakker 2018). In June 2017, India signed a partnership agreement with the United Nations Office for South-South Cooperation (UNOSSC) to launch the UN Development Partnership Fund for $2 million, plus multi-year contributions of $100 million. There is also an India, Brazil, and South Africa Facility for Poverty and Hunger Alleviation (known as the IBSA Fund, which celebrated its 15th anniversary at the end of 2018) with $35 million in contributions (Akbaruddin 2018). These roles and resources signal India’s commitment to a multilateral agenda for sustainable development, but also a recognition by other member states of the need to bring India’s perspective to the table.
Outside of the UN, China was the chair of the G20 when its members adopted the G20 Action Plan on the 2030 Agenda for Sustainable Development in September 2016 (Risse 2017). The retreat of the United States from multilateralism and international engagements opens the space for China and India to step in, step up, and expand their influence.
24.3.3.3 New and Diverse Partnerships
Historically, nation-states initiated and led most Asian development cooperation and SSC programmes. Asian SSC did not involve civil society until recently (Mulakala 2017). East Asia’s strong development states limited the emergence of domestic civil society and social activism while focussing on industrialisation and growth (Hirata 2002; Lee and Lee 2016; Zhang 2003). This was true in varying degrees for China, Japan, and Korea. Overall, civil society organisation (CSO) engagement in development cooperation remained limited in scale and scope. South Asia saw a somewhat different evolution. India and Bangladesh, for example, have longstanding, vibrant CSO sectors that have contributed to national development for decades. India and Bangladesh have long advocated for partnerships with civil society to address the countries’ welfare and social development needs (Mulakala 2017).
The pivotal condition enabling Asian CSOs to engage (or not) in external development cooperation hinged on state facilitation. Both Japan and Korea are members of the OECD-DAC, which encourages diverse partnerships for ODA. In both countries, the government support for NGO/CSO partnerships contained in its overseas aid was an impetus for growth in the NGO/CSO sector (Hirata 2002; Lee and Lee 2016).
Though partnership with CSOs is a newer concept in China, China has now recognised CSOs as important partners in its expanding SSC and is implementing a facilitative and supportive regulatory and funding framework for CSO engagement abroad (Ministry of Foreign Affairs of the People’s Republic of China 2016). China’s largest and most influential poverty-reduction CSO—the China Foundation for Poverty Alleviation—had carried out projects in 17 countries and regions valued at more than $17 million (China Foundation for Poverty Alleviation 2017), as of the end of 2016.
In 2015, China announced the establishment of the South-South Cooperation Aid Fund, which has a current value of $3 billion (China International Development Cooperation Agency 2018). Chinese CSOs may apply to this fund for their programmes in other countries. These measures demonstrate a facilitative and supportive regulatory and funding framework for Chinese CSO engagement abroad. Indian CSOs (with a few exceptions) have not figured prominently in their country’s official SSC, largely because India has preferred state-to-state relations and has a restrictive regulatory framework for CSOs (Forum for Indian Development Cooperation [FIDC] 2015; Mawdsley and Roychoudhury 2016). The exception is in service delivery. Where the Indian state has enabled CSOs to work outside the country—for example by engaging the Self-Employed Women’s Association in Afghanistan for women’s economic-empowerment programmes—positive impacts have followed (“Women empowerment” 2017). In terms of policy dialogue, India established the Forum for Indian Development Cooperation in 2014 to engage the government, universities, and CSOs on Indian SSC priorities (FIDC 2015). Beyond these state-facilitated partnerships, Indian CSOs, although vibrant and influential domestically, have limited activities outside of India. However, this is bound to change, given the expansion of Indian SSC and India’s prioritisation of international people-to-people partnerships.
Asian private-sector companies and corporations (often state-owned or government-linked) have played a significant role in Asian-led economic cooperation for decades. Public–private partnerships, often facilitated by Asian states, have supported partner countries in developing infrastructure and extracting resources. For example, since 1987, Korea’s Economic Development Cooperation Fund has committed $13.1 billion to 53 countries with 373 projects. Most of these projects aim to develop the transport sector in Asia and are implemented in cooperation with Korean companies (Lee 2017). Similarly, the line of credit is India’s fastest-growing cooperation instrument3 and is used to forge public–private partnerships in partner countries. The value of India’s line of credit exceeded $40.108 billion, reaching 66 countries in 2014–2015 (Saxena 2016). Across South-East Asia, Chinese companies have increased their stake in infrastructure development, particularly in investment, transport, and real estate (Cheok 2017). These corporate efforts have received criticism due to sluggish implementation, preference for hiring their own nationals, lack of community engagement, and collusion with local officials (Guo and Zuan 2017; Kynge et al. 2016; Saxena 2016).
This adverse scenario is developing positively, however. As with the CSO sector, the role of the private sector in Asian-led SSC has evolved. As Asian companies become part of the “development cooperation” equation with partner countries, they increasingly look for ways to improve the social impact of their investments. Business is no longer seen as peripheral to discussions on how to reduce poverty and create positive community impact. Rather, Asian companies have expanded their exploration of responsible investment, corporate social responsibility activities, and shared-value strategies through their foreign direct investment and SSC.
Alongside the massive infrastructure investments, companies founded in Asia, such as AirAsia, Tata Group, CJ Cheil Jedang, Samsung, LG Electronics, and Alibaba, have altered traditional ways of doing business, bringing new technologies and innovation to markets, and creating additional jobs and opportunities that have brought millions out of poverty. Asian government facilitation has helped to promote socially responsible corporate investing. Chinese chambers of commerce and industry associations have developed standards of social responsibility for Chinese engineering contractors, requiring member companies to balance resource development with environmental protection and social development in partner countries (Liang 2016). The Chinese China Textile Information Center is implementing leadership development, health, and safety programmes for women employees in Chinese-invested companies in Pakistan, Bangladesh, Vietnam, Myanmar, and Cambodia (The Asia Foundation 2017). In 2013, India introduced a law requiring companies with an annual profit of 10 billion Indian rupees or more to contribute 2 per cent of their profits annually to corporate social responsibility efforts. This law has the potential to unlock $2.5–$3 billion in funding from around 16,000 eligible companies for social impact projects (Ghuliani 2013). So far, the law applies only in India, but it may expand internationally in the future. Korean food and entertainment conglomerate CJ Cheil Jedang embeds the SDGs into its business practice and measures its success against an SDG compass (CJ Cheil Jedang 2018). In Vietnam, CJ Cheil Jedang partnered with the Korean International Cooperation Agency to develop a shared-value strategy to improve the company’s food manufacturing and distribution activities by enhancing the capabilities of local farmers and developing a sustainable agricultural community in Vietnam (CJ Cheil Jedang 2014). SCG, a Thai conglomerate more than 100 years old focussing on cement-building materials, chemicals, and packaging, has an impressive award-winning comprehensive sustainability strategy and approach that extends to its investments outside Thailand (SCG, n.d.). The increasing participation of Asian CSOs and the private sector adds new contours and possibilities to the landscape of Asian-led development and SSC.
24.4 Advancing Asian SSC: Strategies and Collaborative Opportunities
This section outlines strategies (some already being implemented) for improving the effectiveness4 of Asian SSC to deliver the SDG agenda in the pivotal areas raised in the preceding section, namely sustainable and responsible infrastructure schemes (SDG 9), diverse partnerships with civil society and the private sector, and multilateral engagements (SDG 17).
Develop sustainable and responsible infrastructure: Deloitte’s publication “Embracing the BRI Ecosystem”, like its title, expresses considerable optimism and opportunity for China’s grand initiative. It regards the BRI to be a way to create a more equitable global ecosystem. The report takes the long-horizon (10–15 year) approach to the BRI, stating that, over that period, the BRI will diversify from infrastructure into multiple sectors, including, trade, manufacturing, internet, and tourism. It also states that, in this expanded scope, there are multi-year opportunities for developed and developing nations and multi-national corporations (Deloitte 2018). If we trust the long-term game proposed by Deloitte, the short-term (3–5 year) jitters voiced by critics, sceptics, and partner countries need to be addressed and mitigated.
Pursue multilateral approaches to manage debt: Debt risk is perhaps the most sensationalised concern. The risk is not good for China or its partners. Over the four years of BRI implementation, China has gradually taken the issue of currency and bank exposure more seriously. The China Banking Regulatory Commission is urging greater risk controls over external lending from the CDB and EXIM banks (Hurley et al. 2019). The government has improved scrutiny over deals and is placing more restrictions on state-owned enterprises and companies about where and how they can invest. China’s state council is also holding state-owned enterprises accountable for bad investments (Deloitte 2018). China’s more cautious approach is welcome, necessary, and should provide some reassurances to prospective partner countries. An increase in multilateral financing will also mitigate the debt risk. The Center for Global Development recommends that China can work in partnership with the multilateral development banks (World Bank, ADB, AIIB) to agree on a set of lending standards that will apply to all BRI projects regardless of lender (Hurley et al. 2019). This makes sense if China is committed to sustainable infrastructure, increased multilateralism, and debt sustainability, as articulated in SDG 17. China’s lead in this area could encourage India to follow suit regarding its lines of credit.
Engage communities: The big-ticket connectivity projects (BRI, AAGC) encourage people-to-people links. Their benefits are intended to improve people’s lives by providing roads, electricity, access to markets, telecommunications, and other services. But people and communities are often not consulted before, during, or after these projects (Buertey et al. 2016). This is old news to the World Bank and the ADB, whose portfolios of infrastructure projects created the demand for environmental and social safeguards.
Today the success of Asian partners’ large infrastructure development projects require stakeholder accountability and engagement, particularly with local communities (Guo and Zuan 2017; UNESCAP 2019), including women. This is a pressing issue for the Chinese government, enterprises, and policy specialists, all of whom wish to see Chinese investments achieve higher levels of sustainability and acceptability in partner countries. Chinese enterprises, although accustomed to implementing infrastructure projects, are not familiar with direct community engagement. Infrastructure project implementation in China involves close coordination between enterprises and local government bodies, but not local communities. As such, understanding the demands and needs of local communities and navigating the community engagement process in partner countries is unfamiliar territory for Chinese enterprises. Partner governments also contribute to poor community accountability, often negotiating loans and projects without local stakeholder consultation. Recent studies by The Asia Foundation (2019) in Pakistan and Cambodia reveal that communities around two BRI projects (one bridge in Cambodia and one special economic zone in Pakistan) receive little information about these projects, neither from their local governments nor the implementing companies. They have had their livelihoods affected by the projects (both negatively and positively) and would value stronger ties with the project partners through small community-based infrastructure improvements, employment opportunities, and enhanced communication. Women’s voices and needs were particularly missing, despite the fact that the majority of households around the Cambodian bridge were led by women, with males absent due to migration. Infrastructure is not a gender-neutral space. It is too late to consider women after the bridge is built.
Guo and Zuan (2017) echo these sentiments in their analysis of Chinese responsible investment and indicate how one Chinese palm oil company, Julong Group, is addressing these challenges in an Indonesian plantation by investing in local infrastructure, collaborating with local farmers, and hiring more Indonesian staff. Saxena’s assessment of India’s lines of credit (2016) also recommends that better engagement with local stakeholders at all levels will improve both the speed of implementation and the sustainability of Indian investments in partner countries.
24.4.1 Strengthen Civil Society and Private-Sector Partnerships
Complementary community initiatives will become critical in balancing the social, economic, and political objectives of the BRI, the AAGC, and other regional connectivity programmes. CSO/NGO private-sector partnerships offer beyond-aid answers to sustainability and scale by combining complementary resources and capabilities to address development challenges. The BRI offers an opportunity for closer cooperation between Chinese CSOs and enterprises. Chinese companies lack the skills and experience to engage with communities, yet investment sustainability depends significantly on strengthened community impact. Partnerships with CSOs help in such cases. Perhaps with support from China’s South-South Cooperation Assistance Fund, a new model of Chinese SSC will emerge—one where Chinese businesses, government, CSOs, and partner-country interests coalesce.
However, Asian governments can enable or stifle the ability of their national CSOs and NGOs to engage in international work. Whether through funding, regulations, or institutional mechanisms, Asian states exert significant power and influence over the extent of civil society participation in overseas development. At the same time, civil society participation enhances the impact of Asian SSC and can contribute to the sustainability of the big-ticket schemes. Governments can maximise these partnerships if they (i) offer capacity-building, particularly in project management and implementation, (ii) streamline institutional architecture for clear and dedicated coordination with CSOs/NGOs, (iii) ease rather than tighten the regulatory environment, and (iv) enhance policy dialogue and knowledge-sharing with CSOs on development cooperation strategies. Western and Northern donors have considerable experience to share in these areas, having worked for decades in partnerships with their national NGOs on development cooperation. This rich experience provides an opportunity for practical knowledge-sharing and exchange with Asian countries and their civil societies.
Similarly, we have seen that there are valuable skills and experiences in responsible investment, creating shared value, and aligning business practices with the SDGs in the Asian private sector. At the 2018 Global South-South Development Expo in New York, The Asia Foundation and UNOSSC facilitated a panel on Asian private-sector approaches to addressing the SDGs. Corporate panellists from Korea, China, Thailand, and Sri Lanka remarked that opportunities to share their experiences of responsible investment with others in Asia’s corporate sector—as well as to learn from them—are rare. Knowledge-sharing initiatives can bridge this gap and support more responsible investment across Asia.
24.4.2 Expand Triangular and Multi-nodal Cooperation
Triangular cooperation is making a comeback, largely due to China’s and India’s increasing developmental impacts and influence in partner countries. Resources that China and India bring to the table are dwarfing contributions from traditional donors. Traditional donors have less leverage in partner countries because of their limited resources and the conditions attached to them. Triangular cooperation, previously seen as cumbersome and questionably effective, now provides an avenue for traditional donors to engage, and possibly influence, rising Asian contributors, and to stay relevant in partner countries, where traditional aid is diminishing in value and impact. For example, Australia has found useful common ground and results tackling malaria with China in Papua New Guinea. Broader (beyond project) triangular cooperation is also growing in popularity. The UK’s Department for International Development is investing $15.9 million to facilitate the transfer of agricultural technology to several countries in Africa, with China providing expertise (“DFID, China” 2012). Since 2014, the UK has collaborated with India on the Supporting Indian Trade and Investment for Africa project, which enhances South-South trade and investment cooperation between India and five East African countries (Ethiopia, Kenya, Rwanda, Uganda, and the United Republic of Tanzania), and across several priority sectors: pulses, spices, sunflower oil, coffee, information technology, leather and textiles, and apparel (“UK pledges additional funding” 2018). The United States has triangular cooperation projects with India in 18 partner countries in Asia and Africa (United States Agency for International Development 2019).
More recently, traditional donors have been signing multi-sectoral memorandums of understanding with China and India to better leverage and influence the resources and skills these countries bring to the development cooperation table. The UK recently launched the UK Indian Development Partnership Programme, which will provide up to £18 million during the 2018–2023 period to support India’s contribution to delivering the SDGs in other developing countries and advancing global public goods. The aim is to unlock an additional $5.8 billion of financial resources ($1 billion grant + $4.8 billion concessional loans) per year from India for international development (Department for International Development 2019). For other Asian countries such as Indonesia, Mongolia, Thailand, and Malaysia with fewer resources but skills and knowledge to share, triangular cooperation with traditional donors such as Japan, Australia, or the United States has provided a vehicle for them to contribute to the SSC ecosystem. Mongolia’s modest International Cooperation Fund, established in 2013, shared Mongolia’s experience of democratisation with diverse countries, including Myanmar and Kyrgyzstan, with the help of triangular cooperation. The plans for the fund were supported by multilateral professional advice and expertise support from the International Republican Institute, UNDP, and The Asia Foundation (Jambaldorj and Lindberg 2016), demonstrating that triangular and multi-nodal partnerships offer opportunities for expanding SSC.
Such collaborations, which draw on the strengths and resources of diverse actors (North, South, government, non-government, private sector), require time and resources to organise. At present, these collaborative exchanges are rare, suggesting a greater potential scope for enabling organisations—such as The Asia Foundation, the UN, and others—to build bridges of knowledge and cooperation.
24.4.3 Establish Purposeful and Efficient Institutional Infrastructure
As Asian SSC expands and diversifies, countries have realised they need better institutional arrangements to manage it. The strategies and modalities discussed above will rely on sound institutional support. China, India, and other Asian countries have taken steps to improve their institutional architecture for SSC. India established the Development Partnership Administration within its Ministry of External Affairs in 2012 to oversee India’s cooperation programmes. The administration, which has divisions responsible for lines of credit, capacity-building, and geographic regions, is more of a coordinating agency rather than a policy body. Decisions relating to Indian SSC policy still exist in a vague space between the Ministry of External Affairs and policy think tanks such as the Research and Information System for Developing Countries. In 2019, India, in partnership with the UK, will establish a Global Development Centre, whose mission will be to share Indian development experience and technical expertise with the rest of the world (Research and Information System for Developing Countries 2017). Korea and Thailand have dedicated aid agencies—the Korea International Cooperation Agency, established in 1991, and the Thailand International Cooperation Agency, set up in 2004—that oversee their grants and technical training. Both also have separate agencies that deal with loans and export credits (Kim 2016; Wajjwalku 2011). Indonesia has established an inter-ministerial task force on SSC, as a preliminary step towards creating a single SSC agency, which has been in the making for several years (Muhibat 2016). China established the China International Development Cooperation Agency in 2018. As a vice-ministerial agency—independent of the Ministry of Commerce or the Ministry of Foreign Affairs—it has responsibility for the formulation of foreign aid policies, regulations, and plans; the coordination of foreign aid across ministries; the reform of foreign aid modalities; the examination and approval of foreign aid projects; as well as monitoring and evaluation. The BRI’s management sits elsewhere, line ministries still retain responsibility for project implementation, and triangular cooperation lies with the Department of International Trade and Economic Affairs (Rudyak 2018). More time is needed to see if the recent reform and establishment of the China International Development Cooperation Agency will decrease the fragmentation and bring more transparency to China’s development cooperation.
The value of these institutional efforts lies in their aim to consolidate and improve the quality of development initiatives. The risk lies in these institutions becoming rigid bureaucracies that may stifle the flexible, fast, and situationally responsive nature of SSC that has long made it effective. In this connection, one might note that Canada, Australia, and New Zealand (all DAC members) have all collapsed their once-distinct aid departments within their ministries of foreign affairs and trade, reflecting the closer ties between aid and foreign policy (“Federal budget” 2013; Special Broadcasting Service 2013; Tran 2013), but not necessarily increasing efficiency or impact. Development partners from the North and South, Asia, and the rest should reflect on and share their knowledge and experience of development administration. No one seems to have found the right institutional formula to date.
24.5 Conclusion
The twenty-first century has been called the Asian century. Asian countries, led by China, are improving the prospects for global prosperity and the achievement of the SDGs. The transformational potential of Asian-led development cooperation extends beyond the state and beyond aid. Connectivity schemes such as the BRI and the AAGC, which involve mega-infrastructure investment projects and people-to-people partnerships, loom large on the global development horizon, producing both excitement for the connectivity they promise and fear about their geopolitical implications, financial risk, and potential harmful social and environmental impacts. Multilateral partnerships between government, civil society, and the private sector can improve the quality of Asian development cooperation and avert these challenges. This chapter has highlighted opportunities for strengthening civil society and private-sector partnerships, engaging communities for more sustainable infrastructure, multilateralising debt to avert risk, establishing purposeful and efficient development institutions, and strengthening triangular cooperation. These reforms, policies, and practices will usher in an era of more sustainable and accountable Asian development cooperation.
Notes
1.
SAGAR (Security and Growth for All in the Region) is another maritime initiative, which prioritises peace, stability, and prosperity for the Indian Ocean (“SAGAR programme” 2018).
2.
See UNGA speech of Chinese State Councillor and Foreign Minister Wang Yi addressing the General Debate of the 73rd session of the United Nations General Assembly at UN headquarters in New York, NY, on 28 September 2018.
3.
Lines of credit are one of the modalities of India’s development compact, which includes capacity-building, trade and investment, development finance, grants, and technology (Chaturvedi and Mulakala 2016).
4.
Asian SSC tends not to adopt the OECD-DAC standards of development effectiveness. I refer to effectiveness in terms of increased accountability, transparency, delivery on the SDGs, and strategic partnerships.
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