The building BRICs: Analyzing the role of the BRIC countries in foreign aid and global development

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The acronym BRIC is commonly thrown around in today’s international affairs discourse to describe the world’s largest and fastest emerging economies Brazil, Russia, India, and China. The term was coined in 2001 by Goldman Sachs Chief Economist Jim O’Neill to describe the bloc of emerging-market economies that stand to exceed the G-6 countries in economic power and size by 2040.

As the usage of the acronym expands, so does the global reach and activity of the countries it describes. This is true in the context of foreign aid and international development. According to the most recent OECD data and other official sources, foreign aid expenditure of the BRIC countries increased from about $1.5 billion in 2005 to approximately $3.6 billion in 2009, representing roughly 9 percent to 10 percent of total official foreign aid spending that year. The BRIC countries are just a few in a group of emerging donors who are slowly, but surely altering the foreign aid landscape.

Moreover, based on Devex analysis, despite the significant reductions in GDP growth brought about by the global financial crisis in 2007, BRIC foreign aid spending still increased substantially. This trend seems to reveal that the BRIC countries’ commitment to foreign aid is not tied solely to economic growth and there are clearly other strategic and durable drivers behind these foreign contributions.

Of course, while these figures are helpful to appreciate BRIC foreign aid growth, there are other factors that must be taken into account. Specifically, that these countries do not follow the same foreign aid and development cooperation models as more traditional donors which results in an extremely fuzzy and imprecise distinction between what constitutes aid and what represents trade or investment. The BRICs are also not bound by internationally mandated and accepted administrative, project management, and reporting standards so the scale and nature of their foreign aid activity is not nearly as well-understood as that of the more established donors.

Using foreign aid as a tool to help capitalize on other geo-strategic interests or facilitate engagement and cooperation in other areas is nothing new and there is some evidence that BRICs are doing just that. For example, currently it appears that the BRICs are choosing a more concentrated, closer to home, and region-focused approach to development where programs are more easily controlled and results are more observable and valued.

Even though we are in the very early stages of BRICs involvement in foreign aid and assistance, as the US and Europe grapple with fiscal policy decisions, budget problems, and austerity measures these countries should not be overlooked by the global development community. Below are summaries of the BRIC countries’ aid approaches and activities which help shed light on the scale and nature of their individual and collective involvement in international development.

Brazil

Brazil, a country well-known for confronting its own internal inequities and socio-economic strife, appears to be applying lessons learned in the global arena by focusing on social programs such as agriculture andHIV/AIDS prevention and treatment. The country has gained international recognition as an aid donor through its humanitarian response to the Haiti relief effort, where it conducts a $350 million peace keeping mission.

Brazil has tried to rebuff and dismiss the label of “aid donor,” preferring instead to promote South-South Cooperation and “horizontal relationships.” While the top recipients of Brazil’s foreign assistance have been located in Latin America and the Caribbean, such as Haiti, Paraguay, and Guatemala, the country’s development model has also been effective in Mozambique, Timor-Leste and Guinea Bissau – nations with cultural or linguistic ties.

Embracing aggressive economic expansion and shrugging off the effects of the global economic crisis, Brazil experienced 129 percent foreign aid growth from 2005 to 2009. Officially, the Brazilian Cooperation Agency reported a budget of $362 million in 2009, but there are several estimates placing the country’s foreign aid spending at around $1 billion, surpassing smaller Development Assistance Committee donors such as Finland, Ireland, and Portugal. By some accounts, Brazilian foreign aid spending and assistance amounts to $4 billion a year.

India

India, the country traditionally identified as the world’s largest recipient of foreign aid, is now becoming a consequential donor, picking up the slack where Western development efforts are receding or falling short. In the case of Afghanistan, for example, India is positioning itself to provide significant assistance as U.S.-led forces aim to withdraw from the country in 2014. As the fifth largest aid donor in Afghanistan and coming off a well-publicized meeting between the leaders of the two countries, India is investing in public-private partnerships and providing financing for small and medium enterprises (SMEs) – activities which have won some good will with local communities and elders. While clearly India’s aid efforts have diplomatic undertones vis-à-vis long-time foe Pakistan, India’s pledge in May of $500 million, last to be added to its original $1.5 billion commitment, as well as practical focus on infrastructure development, capacity building, and humanitarian assistance are sending the right messages to the Afghan government. This is likely to translate into considerable business opportunities for Indian firms willing to take on the risk of operating in Afghanistan. India is also assisting the greater South Asian and African regions, including giving to the top recipient nations of Bhutan, Bangladesh, Nepal, Sri Lanka and Myanmar and just announcing a $5 billion aid pledge to African countries.

India is reportedly creating its own foreign aid agency, the India Agency for Partnership in Development (IAPD), which will have a spending envelope of $11.3 billion at its disposal for the next five to seven years. The government says that the agency would increase accountability over India’s expanding foreign aid spending, which is currently operated by a few officials in the Ministry of External Affairs. It would also engage the Indian private sector to participate in the country’s steadily growing development program. According to some sources, the IAPD will be modeled after the U.S. Agency for International Development.

Russia

Unsurprisingly, there is less known about Russia’s aid program. A large portion of Russia’s development assistance is provisioned through conventional mechanisms such as debt relief and the cancellation of debt under loans lent by the former Soviet Union. However, the only country in the G-8 that is a non-DAC member, Russia still receives aid from international and financial institutions and is a major recipient of aid from the European Bank for Reconstruction and Development.

Russia is considered a “re-emerging donor.” When it held the G-8 presidency in 2006, the country was pushed to make development cooperation a priority. This helped the country understand more traditional donor practices and aid models which to this day separate it from the other BRICs. In 2007, the country committed to providing $500 million in ODA annually. In 2009, that number jumped to $785 million, but then fell in 2010 to about $472 million. Russia’s core focus areas are food security and health. Russia has made considerable investments in health care and other areas in developing countries including Nicaragua, Kenya, Congo, Yemen, and Guyana and neighboring states such as Belarus, Tajikistan, and Armenia.

As a permanent member of the UN Security Council, Russia channels much of its development assistance through the United Nations system development agencies. The Organization for Economic Cooperation and Development (OECD) reports that in 2008, Russia contributed $117 million to international organizations, and 83 percent of the total ($97 million) went to agencies such as the Global Fund to FightAIDS, Tuberculosis and Malaria, the World Food Programme, the U.N. Refugee Agency, or UNHCR, and the U.N. Development Program.

China

And then there’s China.

China’s foreign aid reportedly dates back to the 1950s, but the country’s international development capacity was recently highlighted by the humanitarian assistance it provided to Indonesia during the 2004 tsunami. Since that event, the Asia-Pacific region has begun to look to China for relief and rehabilitation during and after natural calamities, shifting the balance of power away from traditional and better known regional emergency assistance providers such as Japan.

China leads the BRICs in both the size and scope of foreign aid and assistance, but the international community remains largely in the dark when it comes to the true scale and nature of Chinese foreign aid. To emphasize this fact, the OECD contends that Chinese development assistance ranged from $1.9 billion to over US$3 billion in 2009 – approximately the same amount provided by the tiny country of Belgium. Factoring in the concessional loans and state-sponsored or subsidized investments through the Export-Import Bank of China at very low commercial rates, New York University’s Wagner School estimates Chinese economic assistance in 2009 stood at about $26.4 billion – about $10 billion more than the total 2010 expenditure of the Asian Development Bank.

>> Special Focus: China’s Foreign Aid Strategy

Indeed, in today’s global economy China appears to be pioneering the unique convergence of ODA and trade/investment and using it to its geo-political advantage. This is no secret by now and there is no indication that China’s development tactics will cease or desist in countries desperate for capital and low-cost support services. Case and point is China’s activity in sub-Saharan Africa where China itself says 45.7 percent of its foreign aid was directed in 2009. Africa has made no mistake that infrastructure is a top priority and approximately 61 percent of Chinese loans went to financing infrastructure and construction such as the building of schools, dams, hospitals, and roads. Considering China’s principle on noninterference, the absence of conditionality on deals between Chinese and less-developed country governments, as well as no obligation to comply with international laws and standards such as the US Foreign Corrupt Practices Act and U.K. Bribery Act, China is in a unique position to support many of the world’s developing countries.

Aileen Cruz contributed to this report.

About the author

  • Troilo pete%2520head

    Pete Troilo

    Former director of global advisory and analysis, Pete managed all Devex research and analysis operations worldwide and monitors key trends in the global development business. Prior to joining Devex, Pete was a political and security risk consultant with a focus on Southeast Asia. He has also advised the U.S. government on foreign policy and led projects for the Asian Development Bank and International Finance Corp. He still consults for Devex on a project basis.