South Korea’s Motivations for
Official Development Assistance:
1963-2010
February 14, 2014
Ji Hyun Kim
Graduate School of International Studies
Ewha Womans University
Overview
•
•
•
•
•
•
Introduction
Research Question
Determinants of ODA allocation
Research Methodology
Main Findings
Significance and Contribution of the Study
Introduction
• Why do governments allocate their limited resources to promote
development in other countries?
• Previous studies – mostly focused on traditional donors’
allocation pattern (US-security, Japan-trade, UK-colonial ties etc)
–
–
–
USA: McKinlay and Little (1977)*, Mcgillivray (2003)**, Alesina and Dollar (2000),
Berthelemy and Tichit (2004), and many more
UK: Alesina and Dollar (2000), Alesina and Weder*** (2002)
Japan: Berthelemy and Tichit (2004)
• Need to have a new perspective to understand the motivations of
foreign aid of emerging donors such as South Korea
– Starting foreign aid activities when it was a recipient country
– Easier to be influenced by political economical situation
• Middle Power Perspective
–
–
Studies on non-traditional powers in the international communities
A few quantitative studies on foreign aid allocation
* McKinlay, Robert and Richard Little, 1977. “A Foreign Policy Model of US Bilateral Aid Allocation,” World Politics 30 (1): 58-86.
** McGillivray, Mark, 2003. “Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocation,” United Nations WIDER
Discussion Paper No. 2003/71.
***Alesina, Alberto and Beatrice Weder, 2002. “Do Corrupt Governments Receive Less Foreign Aid?” American Economic Review, 92(4):
1126–1137.
Research Question
•
What is the motivation of South Korea’s ODA?
–
–
–
•
To answer the question, tested a model of South Korea’s ODA policy since
1963 and analyzes determinants of several aspects of foreign aid policy.
–
–
•
Have the motivations changed over time?
Are the determinants of loan and grant allocation different?
Is South Korea’s ODA allocated with different determinants by income level of the
recipients?
Focusing on the changes of motivations in accordance with evolving political and economic
environment in the international and domestic arena.
Following models of Alesina and Dollar (2000)* and Berthelémy and Tichit (2002)**
Studies on South Korea’s ODA allocation
–
–
A few quantitative studies: Kim and Oh (2012)*** and Koo and Kim (2011)****
Both studies did not include “governance in the recipient countries” and “recipient needs”
variables as previous studies
•
–
Simple model  Misleading conclusion
No studies on South Korea’s ODA activities before 1987
*Alesina, Alberto and David Dollar. 2000. “Who Gives Foreign Aid to Whom and Why?” Journal of Economic Growth 5(1): 33-63.
**Berthelémy, Jean-Claude and Ariane Tichit, 2002, Bilateral Donors’ Aid Allocation Decisions: A Three-dimensional Panel Analysis, UNU/WIDER
2002 Discussion Paper No.2002/123.
*** Kim, Eun Mee and Jinhwan Oh, 2012. “Determinants of Foreign Aid: The Case of South Korea,” Journal of East Asian Studies, 12(2): 251-273.
**** Koo, Jeong-Woo and Dae-Wook Kim, 2011, “Globalization and ODA: The Determinants of Korean ODA 1987-2007”, Journal of Korean
Sociology, 4(1): 153-90 (in Korean)
Determinants of ODA Allocation
Framework
Quantitative variables
Political Interests
Domestic Politics
• Realistic viewpoint
• Cold War rivalry  Foreign aid as a tool for
influence, votes in UN
• Former colonial ties/geographical concerns
• Traditional donors (USA, UK, France etc.)
Economic Interests
•
•
•
•
•
Neo-Realist and Liberal viewpoint
Sometimes, mercantilist
Trade and financial interests
Open market and free trade
Japan
(Donors)
• Conservative  self-interest
• Progressive  humanitarian
Humanitarian Needs
• Idealist viewpoint
• Main concerns: economic development
and poverty reduction
• Quality of life, income, population etc.
• Nordic countries
Internationalism
• Multilateral solution
• Peer pressure and international
community
Governance (Recipients)
• Post-Washington consensus
• Democracy, economic policy,
anti-corruption, openness, growth
rate
Middle power aid allocation
Stokke (1989)*: Middle powers’ aid allocation is based on humane internationalism.
Realist internationalist
Radical internationalist
Humane internationalist
Reform internationalist
Liberal internationalist
 Where does South Korea stand for?
* Stokke, Olav, 1989. Western Middle Powers and Global Poverty: The Determinants of the Aid Policies of Canada, Denmark, the Netherlands, Norway and Sweden,
Uppsala, Sweden: The Scandinavian Institute of African Studies.
Research Methodology
•
Archival Research (1963-1987)
–
–
–
•
Data collection started from 1987  to cover longer period of time, a qualitative research
needed for the period of 1963-1987
Examined all the declassified diplomatic documents and internal reports related to Wonjo
Through the archival study, we could collect the data as much as possible and observe the
motivations and goals of ODA activities in the early period.
Quantitative Analysis (1987-2010)
–
Baseline Model
ODAi = a0 + a1Trade+ a2Political Rights + a3Corruption+ a4Life Expectancy + a5Infant
Mortality Rate + a6Growth Rate + a7Population + a8(Population)2 + a9Income
+ a10 (Income) 2 + a11OECD DAC + a12USA + a13JAPAN + a14Distance + μi
–
–
–
Statistical Methods : Tobit Random Effect (left-censoring at 0)
Years: 1987-2010; 1990s/2000s; by governments from Roh Tae Woo to Lee Myung Bak
Income Groups: LDCs, Lower-middle income countries, Upper-middle income countries
Changing Motivations (1963-2010)
•
Starting Technical Assistance in the 1960s
–
–
–
•
Co-planning of South Korea and the U.S. in 1963 as a part of Third Party Training Program of
USAID
Concentrating on countries in Africa (Agricultural training program, medical assistance)
Diplomacy toward neutral countries + Securing “friends”
Political Interests and Vitalization in the 1970s
–
–
Foreign aid competition between North and South Korea
Grants from North and South Korea
Unit: USD 10,000; (Numbers of the recipients)
South Korea
North Korea
1976
90 (11)
317 (22)
1977
110 (14)
435 (22)
1978
135 (19)
510 (25)
1979
182 (24)
350 (15)
Source: Document No. 1200 (1980)
–
•
Unlike other small size donors, cold war competition and strategic interests drove aid allocation
decision
Diversified Expansion of ODA in the 1980s
–
–
–
–
Political interests + economic interests (new markets in the developing countries)
Technology and skill oriented training programs  Policy-oriented training programs
Based on economic growth and well-off national treasury  numerous players appeared
Started concessional loan projects in 1989
Changing Motivations (1963-2010)
2500
2000
1500
1000
500
ODA Disbursement
•
2010
2009
2008
2007
2006
2005
2004
2003
2001
2002
ODA Commitment
Increase of ODA and Turning Point in the 1990s
–
–
–
–
•
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
Korea International Cooperation Agency (KOICA) established in 1991
Loan-leading increase of ODA in the early 1990s
Asia focused (compared to strategic interests on Africa) allocation started in the mid 1990s
Joining OECD in 1997  Changing recognition of the international status
Pursuit of Middle Power and Institutional Improvement in the 2000s
–
–
–
–
Roh Moo Hyun government’s aggressive ODA policies  Policy Framework for ODA (2005), application for
membership at the OECD DAC
Foreign policy discourse started to mention “middle power (Junggyunguk)” diplomacy both in the
government and among policy experts
Lee Myung Bak government’s “Global Korea” included global development as one of four key agenda + legal
framework
Framework Act on International Development Cooperation in 2009, Joining OECD DAC in 2010
Variables
Variables
ODA
Loan, Grant
Export
Political Rights
Corruption
Life Expectancy
Infant Mortality Rate
Population
Income
OECD DAC
USA
JAPAN
DIS
Definition
Real ODA Commitment
(Constant 2000 US$ million)
Real Loan, Grant Commitment
(Constant 2000 US$ million)
Bilateral exports of South Korea
(1 year lagged)
Means of civil liberties and political right
indexes, ranging from 1 (most free) to 7
(less free)
The International Country Risk Guide
(ICRG) rating, ranging from 1.00 to 6
Life Expectancy at birth
Infant Mortality Rate under age 5 (per
1,000)
Total population
Real GDP per capita
(Constant 2000 US$)
Real ODA Commitment
(Constant 2000 US$)
Real ODA Commitment
(Constant 2000 US$)
Real ODA Commitment
(Constant 2000 US$)
Travel distance calculation between
Seoul and capital city of the recipient
country
Source
OECD DAC Statistics
OECD DAC Statistics
Office of Statistics, South Korea
http://www.freedomhouse.org
http://www.prsgroup.com
World Bank’s World Development
Indicators
World Bank’s World Development
Indicators
World Bank’s World Development
Indicators
World Bank’s World Development
Indicators
OECD DAC Statistics
OECD DAC Statistics
OECD DAC Statistics
http://www.mapcrow.info.
Table 5.3 ODA, Loan, and Grant in 1990s and 2000s
ODA
Trade
Political Rights
Corruption
Life Expectancy
Infant Mortality Rate
Growth
Population
Population2
Income
Income2
OECD DAC
USA
JAPAN
Distance
No. of Obs.
Censored
Rho
(1)
5.468**
(2.24)
-0.421
(-1.40)
2.779***
(5.86)
-0.125
(-0.98)
-0.000
(-0.01)
-0.028
(-0.35)
-4.763
(-1.31)
0.146
(1.33)
6.747
(1.41)
-0.640***
(-2.03)
-0.312
(-0.74)
0.031
(0.42)
0.785***
(3.45)
0.0770
(0.07)
822
317
0.1168
Loan
(2)
0.743
(0.42)
-0.539
(-2.44)
1.722***
(5.39)
0.069
0.68)
-0.002
(-0.09)
0.131***
(3.43)
3.015
(0.62)
-0.032
(-0.21)
6.754***
(2.68)
-0.493***
(-3.00)
0.062
(0.33)
0.124**
(2.08)
0.153
(1.57)
2.689**
(2.06)
1212
234
0.6963
(1)
96.710**
(2.14)
1.471
(0.59)
-2.912
(-0.64)
-1.573
(-1.26)
-0.197
(-1.00)
-0.504
(-0.49)
1.446
(0.05)
-0.198
(-0.22)
113.196
(1.46)
-9.102
(-1.59)
-4.507
(-0.91)
1.087
(1.28)
4.242
(1.20)
-16.672**
(-2.07)
822
795
0.0192
Grant
(2)
53.729***
(2.64)
-2.442
(-1.52)
-0.653
(-0.23)
0.440
(1.20)
0.058
(0.47)
0.987**
(2.10)
36.207
(1.31)
-1.141
(-1.43)
97.408***
(2.90)
-7.321***
(-3.19)
3.327
(1.56)
0.571
(0.76)
1.143*
(0.85)
-4.971
(-0.99)
1212
1107
0.2418
(1)
5.095**
(2.12)
-0.415
(-1.41)
2.751***
(5.94)
-0.126
(-1.01)
-0.000
(-0.02)
-0.026
(-0.33)
-4.542
(-1.28)
0.139
(1.30)
6.284
(1.34)
-0.601*
(-1.95)
-0.288
(-0.69)
0.027
(0.37)
0.766***
(3.46)
0.275
(0.25)
822
317
0.1153
(2)
-0.081
(-0.05)
-0.480***
(2.24)
1.743***
(5.68)
0.087
(0.88)
0.001
(0.07)
0.112***
(3.08)
3.108
(0.65)
-0.034
(-0.24)
5.155**
(2.13)
-0.378**
(-2.40)
0.106*
(0.59)
0.128**
(2.24)
0.143
(1.52)
2.641**
(2.08)
1212
235
0.7038
Notes: (1) 1990-1999 (2) 2000-2010. Tobit-Normal distribution and censoring at zero. Values within the parentheses under the estimated
coefficients denote z-values; * significant at 10% level; ** significant at 5% level; *** significant at 1% level; Rho is standard deviation of the
random effect divided by standard deviation of residual. For reason of space constant is not reported.
Table 5.4 ODA Allocation by Governments
Trade
Political Rights
Corruption
Life Expectancy
Infant Mortality Rate
Growth
Population
Population2
Income
Income2
OECD DAC
USA
JAPAN
Distance
No. of Obs.
Censored
Rho
(1)
6.913**
(2.29)
-0.959***
(-2.64)
1.699***
(2.85)
-0.217
(-1.46)
-0.014
(-0.66)
-0.061
(-0.50)
1.081
(0.26)
-0.015
(-0.12)
7.719
(1.27)
-0.576
(-1.39)
0.338
(0.52)
0.103
(1.10)
0.229
(0.79)
-2.507**
(-2.02)
381
152
0.0335
(2)
1.201
(0.49)
0.881***
(2.90)
3.103***
(5.72)
0.086
(0.65)
0.037*
(1.65)
-0.104
(-1.06)
-10.542***
(-3.00)
0.299***
(2.86)
11.399**
(2.41)
-0.943***
(-3.00)
-0.496
(-1.08)
-0.006
(-0.08)
1.219***
(4.49)
1.606
(1.51)
441
165
0.0588
(3)
1.778
(0.66)
1.439***
(4.55)
2.654***
(6.17)
0.351***
(2.56)
0.032
(1.19)
0.118
(1.56)
-6.317*
(-1.51)
0.206*
(1.64)
7.667
(1.49)
-0.767**
(-2.26)
-0.731**
(-2.04)
0.130
(1.51)
0.619***
(0.619)
3.465***
(2.73)
464
132
0.5033
(4)
7.486***
(3.06)
0.173
(0.60)
0.537
(1.00)
0.201*
(1.76)
0.046**
(2.00)
0.053
(1.00)
-1.295
(-0.31)
0.056
(0.45)
13.706***
(3.79)
-1.038***
(-4.39)
-0.187
(-0.73)
-0.097
(-0.74)
0.263*
(1.81)
1.456
(1.32)
475
67
0.7091
(5)
-0.676
(-0.24)
0.173
(0.56)
0.333
(0.49)
0.064
(0.69)
0.000
(0.04)
0.240***
(2.74)
14.277***
(3.54)
-0.386***
(-3.25)
16.967***
(3.48)
-1.159***
(-3.60)
0.050*
(0.11)
-0.217
(-0.81)
0.522**
(2.30)
-0.428*
(-0.45)
273
35
0.4525
(1) Roh Tae Woo: 1988-1992 (2) Kim Young Sam: 1993-1997 (3) Kim Dae Jung: 1998-2002 (4) Roh Moo
Hyun: 2003-2007 (5) Lee Myung Bak: 2008-2010
Notes: Tobit-Normal distribution and censoring at zero. Values within the parentheses under the estimated
coefficients denote z-values; * significant at 10% level; ** significant at 5% level; *** significant at 1% level;
Rho is standard deviation of the random effect divided by standard deviation of residual. For reason of space
constant is not reported.
Table 5.4 Grant Allocation by Governments
Trade
Political Rights
Corruption
Life Expectancy
Infant Mortality Rate
Growth
Population
Population2
Income
Income2
OECD DAC
USA
JAPAN
Distance
No. of Obs.
Censored
Rho
(1)
6.201**
(2.15)
-0.934***
(-2.69)
1.738***
(3.06)
-0.191
(-1.35)
-0.011
(-0.55)
-0.065
(-0.55)
1.018
(0.26)
-0.012
(-0.10)
7.607
(1.31)
0.366
(-1.43)
0.366
(0.59)
0.089
(1.00)
0.212
(0.76)
-2.365**
(-2.01)
381
152
0.0216
(2)
1.158
(0.48)
0.878***
(2.95)
3.101***
(5.67)
0.069
(0.54)
0.035
(1.62)
-0.101
(-1.04)
-10.086***
(-2.94)
0.285***
(2.78)
11.149**
(2.41)
-0.917***
(-2.99)
-0.487
(-1.80)
-0.008
(-0.10)
1.201***
(4.52)
1.873*
(1.80)
441
165
0.0151
(3)
1.352
(0.52)
1.352***
(4.48)
2.595***
(6.25)
0.338***
(2.58)
0.034
(1.30)
0.101
(1.36)
-6.156
(-1.55)
0.203*
(1.69)
7.610
(1.55)
-0.750**
(-2.31)
-0.734**
(-2.12)
0.114
(1.38)
0.594***
(3.30)
3.580***
(2.96)
464
133
0.4886
(4)
6.201***
(2.65)
0.153
(0.54)
0.648
(1.24)
0.179
(1.59)
0.042*
(1.81)
0.033
(0.67)
-1.308
(-0.32)
0.060
(0.49)
12.534***
(3.55)
-0.945***
(-4.10)
-0.192
(-0.79)
-0.021
(-0.17)
0.223*
(1.61)
1.367
(1.25)
475
67
0.7333
(5)
0.044
(0.02)
0.299
(1.04)
0.557
(0.88)
0.039
(0.45)
0.002
(0.12)
0.230***
(2.75)
-13.010*
(3.45)
0.349*
(-3.15)
16.149***
(3.53)
-1.095***
(-3.63)
0.074*
(0.17)
-0.244
(-0.97)
0.519**
(2.40)
-0.185
(-0.21)
273
35
0.4345
(1) Roh Tae Woo: 1988-1992 (2) Kim Young Sam: 1993-1997 (3) Kim Dae Jung: 1998-2002 (4) Roh Moo
Hyun: 2003-2007 (5) Lee Myung Bak: 2008-2010
Notes: Tobit-Normal distribution and censoring at zero. Values within the parentheses under the estimated
coefficients denote z-values; * significant at 10% level; ** significant at 5% level; *** significant at 1% level;
Rho is standard deviation of the random effect divided by standard deviation of residual. For reason of space
constant is not reported.
Table 5.7 Aid Allocation by Income Group
ODA
Trade
Political Rights
Corruption
Life Expectancy
Infant
Rate
Mortality
Growth
Population
Population2
Income
Income2
OECD DAC
USA
JAPAN
Distance
No. of Obs.
Censored
Rho
Group 1
5.349***
(2.97)
-0.659***
(-2.87)
1.970***
(6.12)
-0.139*
(-1.72)
0.033*
(2.56)
0.026
(0.48)
2.815
(0.54)
-0.074
(-0.49)
5.611
(0.58)
-0.636
(-0.79)
0.656*
(1.48)
0.263**
(2.52)
-0.064
(-0.45)
-1.837
(-1.54)
840
187
0.2408
Group 2
4.529*
(1.73)
-0.043
(-0.15)
3.076***
(7.89)
0.452***
(2.85)
-0.099***
(-2.63)
-0.003
(-0.05)
4.627
(0.86)
-0.107
(-0.66)
7.316
(0.34)
-0.488
(-0.35)
0.165
(0.63)
0.112**
(1.98)
0.264
(1.45)
0.963
(0.70)
766
174
0.5391
Loan
Group 3
6.514
(1.05)
1.500***
(2.61)
1.058
(1.28)
0.064
(0.27)
-0.025
(-0.34)
0.132
(1.27)
4.283
(0.52)
-0.075
(-0.30)
118.645***
(3.17)
-6.812***
(-3.26)
-1.062**
(-2.58)
0.109
(1.13)
0.568*
(1.78)
3.653
(1.59)
428
190
0.5289
Group 1
62.909**
(2.56)
-4.453***
(-2.64)
3.206
(1.24)
0.071
(0.12)
-0.057
(-0.58)
0.664
(1.02)
77.883***
(2.69)
-2.353***
(-2.90)
113.277
(1.04)
-9.275
(-1.05)
8.116**
(2.32)
-0.722
(-1.27)
-1.181
(-0.79)
-15.489***
(-3.09)
840
773
0.0235
Group 2
70.719**
(2.49)
0.034
(0.02)
6.760*
(1.71)
1.066
(0.94)
0.273
(1.16)
0.842
(1.44)
10.256
(0.35)
-0.406
(-0.47)
201.213
(0.94)
-14.294
(-1.00)
-1.497
(-0.60)
2.667*
(1.66)
2.622
(1.31)
-2.906
(-0.45)
766
708
0.2390
Grant
Group 3
1.124
(0.02)
8.676
(1.15)
-9.639
(-0.81)
2.717
(0.68)
-0.474
(-0.51)
1.431
(0.63)
11.942
(0.09)
-0.609
(-0.15)
8024.161*
(1.42)
-464.625*
(-1.41)
18.822*
(1.71)
4.473
(1.09)
-0.306
(-0.06)
6.935
(0.34)
428
421
0.0174
Group 1
4.972***
(2.88)
-0.615***
(-2.76)
1.941***
(6.26)
-0.141*
(-1.81)
0.033***
(2.65)
0.022
(0.42)
-1.774
(0.35)
0.045
(-0.31)
5.535
(0.59)
-0.648
(-0.83)
0.696*
(1.64)
0.257**
(2.54)
-0.054
(-0.40)
-1.446
(-1.26)
840
187
0.2389
Group 2
3.583
(1.42)
-0.005
(-0.02)
2.956***
(7.81)
0.409***
(2.66)
-0.086**
(-2.36)
-0.037
(-0.63)
3.912
(0.74)
-0.085
(-0.54)
3.276
(0.16)
-0.213
(-0.16)
0.236
(0.93)
0.111**
(2.03)
0.235
(1.33)
1.049
(0.78)
766
175
0.5449
Group 3
6.625
(1.10)
1.423***
(2.57)
1.310*
(1.62)
0.093
(0.40)
-0.003
(-0.05)
0.134
(1.30)
3.453
(0.44)
-0.051
(-0.21)
114.760***
(3.15)
-6.589***
(-3.23)
-1.077
(-2.67)
0.114
(1.21)
0.581*
(1.85)
3.538
(1.63)
428
190
0.4972
Notes: GNI per capita : Group1 <1005
1006< Group2 <3975
Group3 >3976. Tobit-Normal distribution and
censoring at zero. Values within the parentheses under the estimated coefficients denote z-values; * significant at 10% level; ** significant at
5% level; *** significant at 1% level; Rho is standard deviation of the random effect divided by standard deviation of residual. For reason of
space constant is not reported.
Summary of Findings
•
•
South Korea’s ODA allocation started from the political/Cold War diplomacy motivation and
has changed over time.
Findings indicate South Korea started to act like a ‘middle power’ (reform + liberal) recently.
•
Governance has been important
–
•
Economic interest has been important. However, the recently changed
–
•
Similar to Japan on the influence of USA in Alesina and Dollar (2000). The influence of OECD DAC is added
after 2000 in South Korea.
Humanitarian needs have not been considered.
Different results by governments but not related to political orientation
•
•
•
Growth rate of the recipients are not supported by traditional donors. After 2000, growth is positively significant
for both grant and loan in South Korea.
Other donor’s influence become important especially in grant allocation
–
•
•
Similar to Japan in Berthelemy and Tichit (2004) in 1990s. Trade becomes insignificant
Growth of the recipients becomes important.
–
•
Contrary to traditional donors in Alesina and Dollar (2000) and Berthelemy and Tichit (2004)’ conclusion “donors do not give more aid to less corrupted countries”
Roh Moo Hyun government (economic interest)
Lee Myung Bak government (other donor influence, growth)
Loan and grant have different patterns of allocation.
•
•
•
Governance becomes more important in grant allocation
Loan  larger population + wealthier (potential markets or powers) / Grant  smaller population + wealthier
(effectiveness seeking)
Both loan and grant seek economic interests from LDCs.
Contribution of the Study
• Academic Contribution
– Comprehensive analysis on South Korea’s ODA allocation with archival
research and quantitative test all together.
– Quantitative studies
• Includes most aspects on determinant variables of ODA allocation from
the literature in South Korean case
• Comparison between 1990s and 2000s, loans and grants, different income
groups
– Given its highly fragmented policy and implementation environment in South Korea, it is
important to watch whether they are different as they are said and whether their policy
directions are distinguished or not.
• Contribution for Policy
– ODA allocation pattern still needs to be improved.
• Concentrating volume of ODA to LMIC rather than LCDs is contrary to the
international recommendation despite its increase of grant after 2000.
• ODA allocation pattern to LDCs should be improved (especially loan).