While it would be simplest to look at development aid as merely an agreement between two nations, that's not always the case. Rather, development aid can be given through all sorts of different relationships. The nature of those relationships often shapes who aid is given to, how much is given, in what form the aid is given, the list goes on. This week's article will break down the most common relationships: bilateral and multilateral.
Bilateral aid is given directly from one country to another. For instance, when China helped Jamaica build the Edward Seaga Highway, it fell under that category. Multilateral aid, however, come from either a larger international body. Examples might include UN development aid and loans from global institutions like the World Bank and IMF, as well as those given by regional banks like the Asian and African Development Banks.
It should seem fairly intuitive, but bilateral aid is more likely to be motivated by individual political or economic interests. This includes the desire to have a strong ally in a strategic region, gaining access to a critical natural resource, the list goes on. I focused on bilateral aid in the previous article.
Multilateral aid, on the other hand, requires agreement between many different parties, making it much harder for any single nation's interests to dominate. As you might imagine, it's pretty difficult to get everyone to agree on anything, especially if money is involved. Therefore, it makes sense that about 2/3 of all development aid is bilateral, not multilateral. However, developed countries do still tend to hold more power in institutions like the IMF and World Bank, and there is some controversy in their alleged manipulation of multilateral aid to drive national interests.
That controversy is mostly because of structural adjustment policies, which are the conditions tied to loans and debt relief. Those conditions typically force nations to open themselves up to greater foreign investment. Critics argue this is designed to keep debtors poor, as doing so may enable greater exploitation at the hands of shareholders, not growth. There is definitely merit to that argument since many debtors have needed to take on more than 1 loan. Kenya, for instance, went to the IMF 22 separate times for loans and debt relief, and it's not even among the top 5 IMF debtors.
However, even if multilateral aid often does just create further problems, it's important to recognize that there are still are cases where it has done some good. For instance, following the 1997 Asian Financial Crisis, an IMF bailout helped South Korea stabilize its currency. South Korea even paid off its debt ahead of schedule. A similar thing happened in Brazil, where a development package prevented a sovereign default in 2002. It really is a more complicated issue. In fact, even I don't fully know where I stand yet.
In addition to bilateral and multilateral aid, there are also such things as trilateral and private aid. Trilateral aid involves three parties, often with one acting as the intermediary between the other donor and recipient, or two donors working together. Private aid comes from NGOs, which I may explore in a future article. While there are more than 4 relationships, the rest are pretty uncommon, so there isn't much need to learn about them.