The political economy of development aid as main source of foreign finance for poor African countries: loss of policy space and possible alternatives from East Asia
This paper discusses the political economy of development aid flows to poor countries in Sub-Saharan Africa and the potential role of China to generate opportunities for a recovery of policy space in these countries. We argue that the loss of policy space in many poor SSA countries is associated with donor-recipient relations in aid flows over the past two decades. The influential role of Western donor agencies and the growing marginalisation of SSA countries from international capital flows have left scarce policy space to their governments for more innovative trade, agricultural and industrial policies. The recent New Aid Agenda and the concomitant Western aid harmonization through budget support are likely enhance donors’ influence on policy making and to exacerbate this process despite claims of greater ‘ownership’. Learning from East Asian success stories has been hampered by the unequal bargaining power of SSA governments vis-à-vis their ‘development partners’. More recently, China has started to become an increasingly important player for some SSA countries and Chinese FDI and aid flows are already s significant reality there. Typically these ‘new’ relations may be seen with suspicion by Western ‘development’ partners, but we argue that this (and the cooperation of other Asian governments in a South-South cooperation framework) may be a significant opportunity for some SSA countries to regain part of the policy space lost in the 1980s and 1990s
