1

AUGUST Doug Craig 2013

INTERNATIONAL AID IS ONE TOOL THAT

HAS BEEN USED TO HELP ALLEVIATE GLOBAL

POVERTY & STIMULATE DEVELOPMENT.

HOWEVER, THERE IS NOT A ONE-SIZE-FITS

ALL APPROACH TO GIVING AID. A CHINESE-

LED, NO-STRINGS-ATTACHED DEVELOPMENT

APPROACH IS NOW EMERGING. THIS FRESH

APPROACH TO AID MAY PROVIDE NEW

OPPORTUNITIES, YET ALSO NEW

CHALLENGES.

Research focus DE VE LO PM ENT A ID : DIFF E RI NG M ODE LS

And what this means for the global poor

Introduction

The use of foreign development aid as a

tool for Western countries to influence

policy and spread neoliberal values in de-

veloping countries is a well-documented

phenomenon. Foreign development aid in

these cases is often granted provided that

the recipient countries implement various

reforms that the donor countries deem im-

portant for development, most commonly

related to democratization. Though per-

haps well-meaning in intention, the condi-

tional nature of this type of aid serves to

restrict the sovereignty of the recipient

countries, and does not respect the agency

of these countries to choose for themselves

which governance models suit them best.

But what happens when aid originates from

non-Western countries? Do the same condi-

tions apply? The emergence of South-

South cooperation suggests the possibility

of alternative approaches to the model of

Western aid. China has been particularly

active in this regard, and as the second

largest economy in the world is steadily

becoming more involved in aid projects in

developing countries. China has consist-

ently emphasized South-South collabora-

tion based on respect for state sovereignty

and the non-interference in the domestic

affairs, including methods of governance,

of other countries.

The research question thus presents itself:

is there a qualitative difference in aid, de-

pending on whether it originates from a

Western or non-Western donor country? It

is hypothesized that Western donors im-

pose higher political conditions on aid to

recipient countries, related to democratic

reforms, than do non-Western donors, and

that this translates into less maneuverability

in ‘development space’ for the aid recipi-

ents. To test this argument, this paper will

consider the case of development aid flow-

ing to Ethiopia from Canada and China.

This recipient country was chosen because

it has a significant democratic deficit, and it

is hypothesized that Western countries,

such as Canada, would therefore have a

greater incentive to attach conditions to aid

related to democratic reforms.

The question of whether an alternative

China-led model of aid poses a competition

to Western aid in the developing world is

beyond the scope of this research paper. In

addition, this paper will not focus on the

motivations of donor countries to give aid,

which may be as diverse as political, eco-

nomic, or historical reasons. Instead, this

paper will seek to understand the possible

qualitative differences of aid originating

from these different donor countries, and to

determine what these differences may mean

for the ‘development space’ of policy-

makers in the recipient countries.

This paper will first consider the current

international aid framework and identify

key concepts; will then examine the existing literature

on both the Western and China-led aid models; will

outline the argument; will present the case study of aid

to Ethiopia; and finally will close with an evaluation of

findings and conclusion.

International Aid Framework, Key Concepts

In order to better understand the context of

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contemporary international aid, it is necessary to

first examine what international aid organizations

exist and how they define foreign aid.

OECD-DAC

The Organization for Economic Coordination and

Development (OECD) is a grouping of countries

which first emerged as the Organization for Euro-

pean Economic Cooperation (OEEC) in 1948 in

order to administer the Marshall Plan; the first

major foreign development assistance program of

its kind (OECD 2013). The Development Assis-

tance Committee (DAC) is a subcommittee of

OECD which is dedicated to administering inter-

national aid. Following the Paris Declaration on

aid effectiveness in 2005, the 34 member coun-

tries of OECD agreed that there should be cooper-

ation and harmonisation of foreign aid among

donors in order to avoid duplication and to in-

crease effectiveness (Söderberg 2010, 110). The

overarching commitment of OECD is to promote

democracy and open market economies abroad

(OECD 2013). Canada is a current member of

OECD through the Canadian International Devel-

opment Agency (CIDA 2013).

OECD defines official development assistance as:

“flows of official financing to developing coun-

tries provided by official agencies which have a

clear development and anti-poverty purpose and

are at least partly concessional in nature” (OECD

2013). Aid conditionality refers to the use of

conditions attached to a loan, debt relief, bilateral

aid, or membership of international organizations,

typically by the international financial institutions,

regional organizations, or donor countries (OECD

2013). Moyo further describes three types of

conditional loans in the Differing Types of Aid

Section. The distinction between official develop-

ment aid and foreign direct investment (FDI) is

thus very clear for OECD members, and it has

been observed that foreign aid responds more

directly to political openness, such as democrati-

zation, while FDI responds more to economic

openness, such as environments that have

trade liberalization and property rights protec-

tion (Alesina and Dollar 2000, 2).

FOCAC

China is not a member of OECD, which is no

surprise, since China’s own domestic political

system is not democratic. In addition, China

has pursued and is still pursuing strong state-

led development in contrast to the open-

market policies advocated by the OECD.

The Forum on China-African Cooperation

(FOCAC) was first launched in October of

2000, during which time forty-four African

countries sent their foreign ministers and eco-

nomic development officers to Beijing. Dur-

ing this initial meeting, Beijing pledged that

China would establish a list of new aid and

development programs in Africa, comprised of

debt relief, training programs, and an invest-

ment fund (Brautigam 2009, 77). The under-

lying goal of the creation of the forum is to

move economic cooperation between Africa

and China forward, with a focus on ‘common

prosperity’. Overall, there have been five

summits to date since the inception of

FOCAC, the most recent taking place in 2012

(FOCAC 2013).

In spite of the creation of FOCAC, several

challenges arise with conceptualizing Chinese

foreign aid. To begin, there is no centralized

foreign aid agency to disburse funds and aid is

often given in an ad hoc manner without coor-

dination or regularization of payments, unlike

the inherent organization and coordination of

OEDC-DAC (Brautigam 2009, 77). In addi-

tion, there are no agreed upon definitions of

aid offered by Chinese policymakers, and thus

the lines between aid and investment become

blurred. The Chinese government does not

release reports on official development aid,

and so estimates vary and Chinese aid is there-

fore difficult to quantify. It can be said, how-

ever, that compared to Western donors, China

commits a relatively small portion of aid as

defined by OECD, which encompasses areas

such as development grants, humanitarian

assistance, social welfare programs, and food

aid (Fischer et al. 2009, 1). Also, China gen-

erally provides little military and security

related aid assistance.

Although few of China’s activities fit the

OEDC definition of official development aid

as described in the previous Section, it can be

said that China’s economic activities in devel-

oping countries are supported by the Chinese

government and provide benefits to recipient

countries that may not otherwise be available.

Indeed, it has been argued that many Chinese-

government economic investments in the de-

veloping world should be considered aid ra-

ther than FDI because they are secured by

official bilateral agreements, do not impose

financial risk on the involved Chinese govern-

ment-owned businesses, and/or do not neces-

sarily result in the Chinese ownership of for-

eign assets (Fischer et al. 2009, 2). In contrast

to the clear OECD conceptualization of for-

eign aid, the Chinese distinction between aid

and FDI is not as clear. The Chinese model of

aid will be further elaborated upon in the

second part of the next Section.

Differing Approaches to Aid

To understand the role that foreign aid and

conditionality play in development, let us turn

to the literature to uncover the different ap-

proaches. This section will first consider the

Western then non-Western models of aid, and

then provide a critique of each model.

In the West, the project of international devel-

opment aid began with the Marshall Plan after

World War II to rebuild Europe and also fol-

lowing the decolonization process of the

1960s. During the 1980s, international finan-

cial institutions such as the IMF used loan

conditions as part of the structural adjustment

programs to force developing countries to

liberalize their markets and adopt free market

policies and programs (Geo-Jaja and Mangum

2001, 33). This period saw the strict condi-

tions as amounting to blackmail on developing

nations who had little choice but to comply,

and who saw relatively little development as a

result of the forced economic reforms (Geo-

Jaja and Mangum 2001, 39). After the failure

of the structural adjustment programs to stim-

ulate development, the focus of market liberal-

isation remained embedded in foreign aid

projects but increasing attention was starting

to be paid to political liberalisation (Sörensen

2010, 1). This Western approach to aid de-

scribed the problem of underdevelopment in

Africa as largely due to ‘poor governance’,

and thus the remedy was to encourage ‘good

governance’, meaning liberal democracy,

through the provision of conditional foreign

aid (Sörensen 2010, 1).

Arthur Goldsmith focuses his analysis on the

effects of aid on political performance. Gold-

smith’s view of development is largely shaped

by the ‘Washington Consensus’, in that de-

mocracies are economically beneficial for

poor countries; thus aid programs should focus

on rewarding democratic reforms in the

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developing countries. Implicit in Goldsmith’s

analysis is the assumption that democratization

leads to development. In addition, Goldsmith

speaks of the ‘inherent value’ of democracy for

these underdeveloped regions, however this may

indicate the presence of a normative bias that he is

inserting into his analysis (Goldsmith 2001, 134).

Goldsmith acknowledge what he describes as

‘moral hazard’, in which the provision of aid can

lead to the opposite effect of what the donors are

intending, and indeed “prolong the life of some

corrupt and incompetent regimes by giving them a

sense of security” (Goldsmith 2001, 126). In

order to counteract this effect, donor countries

attach conditions to aid.

Following the Washington Consensus

approach to development, donors will

often give aid with strings attached in

order to spread certain values such as

civil liberties, democratic principles,

respect for human rights, and to support civil soci-

ety (Copson 2007, 63). Goldsmith views foreign

aid therefore as a tool to induce democratic

change, and so by providing conditional loans

with the intent to reward cooperating regimes, aid

or the denial of aid, becomes a carrot-and-stick

tool of developed countries to influence policy in

the developing world (Goldsmith 2001, 138). A

critique of Goldsmith is that he seems to assume

that it is possible for democratic values to be ex-

ternally given to a developing country in a top-

down approach, through the provision of condi-

tional aid, yet he does not consider whether this

arrangement is politically sustainable in the long

term.

He concludes his analysis by asserting that

“African states have gained more than they have

lost by accepting aid”, and that any deficiency in

governance is not due to the presence of foreign

aid but rather the lack of legitimacy and relative

youth of these countries (Goldsmith 2001, 144).

For Goldsmith, therefore, conditional foreign aid

only contributes positively to the development

of countries in the global South.

In contrast to Goldsmith, while Wade is not

specifically opposed to foreign aid itself, he is

rather critical of the spread of neoliberal val-

ues in the developing world, and asserts that

the rules, or conditions, being written into

multilateral/bilateral agreements, including aid

agreements, actively prevent developing coun-

tries from pursuing policies which

were available to currently developed

countries when they were in the pro-

cess of developing (Wade 2003,

622). These conditions thus act to

restrict the ‘development space’ and

also ‘self-determination space’ available to

recipient countries (Wade 2003, 622). The

presence of politically conditional foreign aid

effectively strips the developing countries of

the ability to choose for themselves which

governance models suit them best, thus limit-

ing their agency and sovereignty in the inter-

national arena. This paper will test whether

the development space available to developing

countries is influenced by the type of aid it

receives, and what type of conditions can in-

fluence this development space.

Chang echoes Wade’s assertion, by observing

that currently developed countries were much

less empirically democratic when

they were in the process of devel-

oping than they are today (Chang

2003). Following this line of rea-

soning, it is therefore hypocritical

of Western, developed countries

today to impose conditions on

foreign aid related to democratic reforms with

the expectation that this will lead to economic

development, when historical evidence shows

that it was not through democratization that

Western countries developed themselves.

Opponents of the Western approach to foreign

aid suggest that the act of giving aid is in fact

counterproductive. Moore frames his argu-

ment in terms of fiscal sociology, and he as-

serts that the sources of state revenue have a

major impact on patterns of state formation,

and that taxation is key to developing account-

able and representative governments (Moore

2004, 298). Moore describes how rentierism

often emerges when the government of an

underdeveloped country has access to un-

earned income, including natural resource

rents like oil and minerals and/or strategic

rents like foreign aid. Moore describes rentier

states as those which live off of unearned in-

come and so the state apparatus is funded with

little effort (Moore 2004, 304). Thus, in situa-

tions where governments rely heavily on un-

earned income such as aid, instead of taxation,

the state apparatus becomes largely autono-

mous from societal demands and the citizens

become powerless in relation to the state.

Thus, Moore advocates for a gradual decline

in foreign aid to developing countries, unlike

Goldsmith, who believes that cutting aid

would be mostly detrimental to recipient coun-

tries.

Moyo takes Moore’s argument fur-

ther, by stating that foreign aid is

the underlying cause of underdevel-

opment. She derides the paternal-

istic, carrot-and-stick approach of

developed countries which use aid as a tool to

reward cooperating regimes and which keeps

Africa in a perpetual child-like state (Moyo

2009, 31). Also, Moyo addresses supporters

of the Western aid model who point to the

Marshall Plan as an aid success story. She

says that the comparison of post-WWII Eu-

rope with contemporary Africa is a mistake.

The procurement of aid to Europe was time-

bound, and stopped altogether after a five-year

period, unlike contemporary African aid

which does not appear to have an end in sight.

Also, aid to Europe never amounted to more

than 3% of any country’s GDP, however today

in Africa aid often accounts for upwards of

15% of GDP in many countries. In this way,

aid is now viewed as a source of permanent

income for African leaders, and therefore does

not incentivize long-term financial planning or

fiscal responsibility (Moyo 2009, 36).

Moyo outlines three types of aid conditionali-

ty. The first type is procurement, in which

recipients must spend the aid on goods/

services from the donor. The second type is

when the donor selects the projects that it

wants to fund. The third type is when the

recipient agrees to policy reforms that the

donor stipulates, in order to receive the aid

package (Moyo 2009, 38). This paper will

consider whether political reforms built into

Western aid packages shrink the policy ma-

neuverability of recipients, and whether the

non-Western model of aid avoids this by

avoiding this type of conditionality. Overall,

Moyo argues that conditions in general are

mostly useless because they are difficult for

the donors to reinforce, yet the aid keeps flow-

ing in spite of this. Whether conditional in

nature or not, she is against all forms of aid

because of the inherent incentive structures,

dependency, corruption, laziness of leaders,

and erosion of trust within recipient countries

that is all an outcome of the aid relationship.

Her prescription is to replace aid with

African states have

gained more than

they have lost by

accepting aid.

Foreign aid is

the underlying

cause of under-

development.

4

investment, and that development is best pursued

through market mechanisms.

To counterbalance the dominant Western neolib-

eral approach to foreign aid, an alternative China-

led approach may be emerging. This has been

framed in terms of South-South cooperation, and

is commonly described as no-strings-attached aid

in which an attitude of non-interference in domes-

tic politics of the recipient countries is emphasized

(Sörensen 2010, 3). In contrast to the Western

approach, China does not use the language of

‘donor’ or ‘recipient’ in terms of aid, but rather

talks about partners in mutual benefit and win-win

collaboration. (Söderberg 2010, 109).

Similar to the West, China's foreign assistance

programs date back to the 1950s, at which time

Beijing used aid as a tool to show support for

African independence movements and as a way to

counter U.S. and Soviet influence in the region

during the Cold War period (Leggett 2005).

Though Goldsmith talks of democratization and

the expected economic benefits as the main rea-

sons for why the West chooses to give aid, he fails

to acknowledge that like China, Western countries

also participated in tying aid to political ideology

in the developing world during the Cold War. In

spite of political posturing during the Cold War,

China gradually experienced a shift in policy ori-

entation beginning in 1978 with the ascension of

Deng Xiaoping to the presidency of the People’s

Republic of China (PRC). This shift represented a

business-first for-

eign policy prefer-

ence, and resulted

in the detangling

of business from

international

politics, which

paralleled China’s

domestic transfor-

mation during the

era of opening and

reform (Gilley

2010, 103). Today, China’s foreign aid is

driven primarily by the need to secure access

to natural resources, and only secondarily for

diplomatic or political reasons (Fischer et al.

2009, 4).

As mentioned previously, quantifying and

classifying Chinese aid is difficult. China has

no standardized criteria for what it considers

aid, unlike the OECD, and it is loosely defined

within the framework of South-South coopera-

tion which includes commercial cooperation.

Regarding development grants, which com-

prise the main form of assistance by OECD

countries, China plays a small role; however,

when state-sponsored or subsidized foreign

investments and concessional loans are includ-

ed, China becomes a major source of foreign

aid (Fischer et al. 2009, 4).

Some observers have applauded Chinese aid

and investment as being able to fill gaps in

unmet development needs, and often promot-

ing projects in areas considered too risky,

unfriendly, and infeasible by other major do-

nors (Fischer et al. 2009, 4). Also, Chinese-

led development assistance is often provided

fairly quickly and easily without the usual

political, economic, social, and environmental

restrictions, safeguards, and procedures that

OECD donors generally impose (Fischer et al.

2009, 4). In addition, Chinese companies

operating in Africa are government-owned and

therefore less concerned with short term prof-

its but are instead interested in establishing a

solid foundation for long term gains (Leggett

2005).

A unique characteristic of Chinese aid is that

most of it is conducted bilaterally, and the

central government specifically avoids multi-

lateral pooling of funds, which occurs with the

OECD-DAC programs (Söderberg 2010, 125).

Söderberg describes that there is a general

Chinese emphasis on various projects geared

towards the promotion of trade and FDI op-

portunities for China. Of these, infrastructural

projects are the most common. Additionally,

China will provide commodities and provi-

sions abroad for sale in the recipient country,

and Chinese doctors and construction workers

are also sent abroad (Söderberg 2010, 125).

This represents the first type of conditionality

outlined by Moyo, procurement, but does not

represent conditional aid which is used to

induce governance reform. Sörensen and

Söderberg therefore both find that conditional

aid is used in order to boost China’s own ex-

ports abroad; however, there is a complete

absence of political conditionality.

In this way, Chinese development assistance

more closely resembles Moyo’s prescription

of pursuing development through market

mechanisms, such as investment. Even the

language the Chinese prefer to use when

speaking of aid, such as doing away with the

‘donor/recipient’ terminology, echoes Moyo’s

disdain for the hierarchical and patronizing

attitude that the West has taken when provid-

ing aid to the developing world.

Goldman would argue that China’s lack of

political conditions contributes negatively to

development, because there is no emphasis on

democratization which he sees as essential to

development. Unlike many Western countries

which bar their domestic companies from

doing business with outlaw regimes, it seems

that Beijing has no problem allowing its com-

panies to deal with many brutal and corrupt

leaders in the developing world (Leggett

2005). China has also been criticized by fail-

ing to promote environmental protection, equi-

table and sustainable development, and

democracy in these countries (Fischer et al.

2009, 4). Indeed, many Western policymakers

have expressed their frustration that China’s

use of unconditional foreign assistance is

undermining Western attempts at influencing

the behavior of aid recipients to respect human

rights, and democratic and open market re-

forms (Fischer et al. 2009, 4). Thus, interna-

tional norms surrounding good governance

may be circumvented via the Chinese model

of aid and the associated rhetoric of business

development and South-South partnerships.

Western Model of Aid Chinese Model of Aid

Donor preference for good governance, market, and political liberalisations of recipient countries.

Donor preference for stable economic environment of aid recipients. No political conditionalities.

Frames aid relationship in terms of donor and re-cipient countries.

Frames aid relationship in terms of South-South cooperation, win-win collaboration, mutual benefits.

Member of OECD and DAC, preference for multi-lateral donor harmonisation.

Non-member of OECD and DAC, preference for bilateral aid agreements.

Official development assistance separate from FDI. Official development assistance mixed with FDI.

Policy orientation open to foreign intervention in domestic governance of other countries.

Policy orientation averse to foreign intervention in domestic governance of other countries.

5

Null Hypothesis: There is no qualitative dif-

ference in aid between democratic or non-

democratic donor countries, and thus there is

no effect of donor government type on the

development space of the recipient countries.

OECD donor countries are intent on expand-

ing neoliberal values in the developing world,

such as the liberalization of markets and gov-

ernments. Non-OECD donor countries do not

share these same values, and thus do not share

the same desire to spread neoliberal values in

the developing world.

Case Study, Ethiopia

Ethiopia is a poor, landlocked country com-

prised of 68 million people. Though it lacks

significant natural resource deposits, it has

strategic regional geopolitical influence

(Leggett 2005). This is because it is the

source of the Blue Nile, and therefore can

influence the huge reserves of water flowing

into Egypt. It is the meeting place of the

largely Muslim northern Africa and the Chris-

tian South. In addition, the headquarters of

both the African Union and the United Nations

Economic Commission for Africa (UNECA)

are located in the capital city of Addis Ababa,

and Ethiopia has been described as the politi-

cal capital of Africa (Canada 2012).

In spite of these advantages, Ethiopia faces

ongoing challenges. Between 2011 and 2012

Ethiopia slid to 173rd place out of 186 coun-

tries listed in the 2013 UN Human Develop-

ment Report, and thus is internationally classi-

fied as a country with very low levels of hu-

man development (UNDP 2013). In addition,

Freedom House rates Ethiopia as ‘not free’,

meaning that “basic political rights are absent,

and basic civil liberties are widely and system-

ically denied” (Freedom House 2007, ii).

Weakness of legal institutions, the lack of a

credible government opposition, and wide-

spread government corruption are also cited as

major challenges.

Canada’s Involvement

Canada first established diplomatic relations

with Ethiopia in 1966 and which remain open

to this day (Canada 2012). Ethiopia has been

a particular focus for Canada’s international

development assistance, and in recent years

Canada has been the third largest donor to

Ethiopia. In 2001, Canada focused on estab-

lishing peace between Eritrea and Ethiopia,

and sent 450 peace keepers to the region, a

form of military aid, as part of the UN ground

force to act as a buffer zone. In 2003 Canada

signed a memorandum of understanding with

Ethiopia to allow Ethiopian exports of textiles

and apparel to have tariff-free access to Cana-

dian markets.

In 2009, Ethiopia was selected by CIDA as a

country of particular focus (CIDA 2013). The

recent emphasis of Canadian official develop-

ment aid in Ethiopia has been largely on hu-

manitarian and developmental assistance, in

which Canada provided $176.6 million CAD

through bilateral and multilateral channels

during 2010-11 for these purposes (Canada

2012). With the drought in 2011, Canada

provided an additional $74.6 million CAD in

emergency humanitarian food assistance plus

$86.5 million CAD in regional aid to be dis-

bursed amongst Ethiopia, Somalia, Kenya, and

Djibouti (Canada 2012).

In 2010, Canada participated in the European

Union Election Observation Mission in Ethio-

pia to monitor the 2010 elections, and Canada

has played an ongoing role in closely monitor-

ing the human rights and governance situation

in Ethiopia (Canada 2012).

Canada’s bilateral development cooperation

program in Ethiopia currently targets action

areas such as food security and agriculture,

children and youth development, and enabling

accountable and effective public institutions

(Canada 2012).

In terms of development assistance, Canada

supports the ongoing capacity-building in

Ethiopia of seven key democratic institutions

through the Democratic Initiatives Programme

(Canada 2012). This is a multi-donor fund of

which Canada is a member. According to

CIDA, the purpose of this program is to

“deepen the democratization process by

strengthening key state institutions including

the National Electoral Board of Ethiopia, the

Ethiopian Human Rights Commission, the

Ethiopian Institute of the Ombudsman, the

Federal Ethics and Anti-Corruption Commis-

sion, the House of Peoples' Representatives

and Regional State Councils, and the House of

Federation” (CIDA 2013). The overall pro-

gram is managed by the United Nations De-

velopment Programme (UNDP) and coordi-

nated with OECD, while the technical assis-

tance component is directly managed by

CIDA (CIDA 2013).

Thus, in addition to humanitarian and military

assistance, Canada currently provides a signif-

icant share of its aid to Ethiopia in the form of

technical assistance with the goal of achieving

As can be seen from the literature, there appears to

be a divergence in the foreign aid approach em-

ployed by Western versus non-Western donor

countries. The key differences between the West-

ern and Chinese models of aid are summarized in

the preceding table.

Let us now consider the main argument of this

paper, and turn to the case study of Ethiopia to

determine if there are indeed qualitative differ-

ences of aid originating from Canada compared to

China in practice, and what this means for

Ethiopian policy-makers.

Argument

Hypothesis 1: A Western donor country will be

more likely to attach conditions on aid to influ-

ence democratic reforms in the recipient country,

thus resulting in a shrinkage of development space

for the recipient country.

Hypothesis 2: A non-Western donor country will

be less likely to attach conditions on aid to influ-

ence democratic reforms in the recipient country,

thus resulting in the expansion of development

space for the recipient country.

6

Chinese pledge of $500 million US would be

provided via various concessional projects in

Ethiopia, and the guarantee that Ethiopia

would also receive unconditional support from

China consisting of 1.5 billion US in invest-

ments in telecommunications and infrastruc-

ture and 1.5 million for short term export

credits (van Dijk 2009, 161).

Van Dijk notes that these are soft

loans coming without conditions,

and says that in spite of these

measures, Ethiopian residents

and expatriates do not really trust

Ethiopian government policies

and therefore are not likely to invest them-

selves. President Zenawi has expressed his

disappointment of the neoliberal market re-

forms, which he describes as hallmarks of

western aid, which failed to generate the kind

of wealth many African nations were expect-

ing and, he claims, instead served to weaken

the state (van Dijk 2009, 162). This is why he

believes African leaders have turned to Chi-

na’s outstretched arms, which are free of con-

ditions. Zenawi describes how “the West

assumes that it can buy good governance in

Africa. Good governance can only come from

inside; it cannot be imposed from outside.

That was always an illusion.” (van Dijk 2009,

162). Van Dijk believes that in spite of

Zenawi’s statement about good governance

emerging from within, the reality

is that Zenawi’s regime remains

oppressive, and his political mod-

el which emulates the Chinese

domestic model does not allow

for any real opposition to his pow-

er.

Indeed, David Shinn, former US ambassador

to Ethiopia notes that China’s stance on hu-

man rights and democracy raises no objections

from the majority of Africa’s elites, since most

African leaders are neither bothered by Chi-

na’s human rights record nor its human rights

policy towards Africa (Copson 2007, 63).

Thus it appears that the Chinese model of aid,

with no-strings-attached, seems to suit African

political elites just fine.

Evaluation

From the case study, some findings can be

drawn.

Canada has exhibited a willingness to provide

both humanitarian and military aid. Current

developmental aid from Canada takes the form

of technical assistance in order to achieve

democratization in Ethiopia; thus Canada ex-

hibits a clear preference for democratic re-

forms in developing countries. An emphasis

on strengthening state institutions and achiev-

ing transparency is apparent. In addition,

there is a preference for multilateral coopera-

tion with intergovernmental organizations like

the UNDP and OECD to manage aid projects

and harmonize resources. The evidence sug-

gests that Canada participates in

the second type of conditional

aid as outlined by Moyo, in

which the donor selects the pro-

ject it wishes to fund. In Cana-

da’s case, projects related to

governance reform remain an

area of focus. Though Canada’s democratiza-

tion projects are ongoing in Ethiopia, the ex-

pected outcome of these projects is likely to

limit government corruption and

neo-patrimonial practices in Ethiopia. In this

way, leaders who lack legitimacy would thus

lose the ability, and maneuverability, to con-

solidate power through these practices. Cana-

da’s governance projects in Ethiopia thus

demonstrate an alignment with the Washing-

ton Consensus, in which there is an attempt to

create legitimacy of leaders through democra-

tization in order to stimulate development.

The weakness of this approach, as noted by

Chang and Moyo, is that there is no evidence

to suggest that democracy leads to develop-

ment, especially democracy which is inserted

into a country externally via conditional aid

projects. In addition, this type of aid serves to

limit the actions of leaders in these countries.

In contrast to Canada, China has provided

very little humanitarian or military aid to

Ethiopia. Instead, there is a preference for

investment and contracting Chinese-owned

businesses to complete projects in Ethiopia.

The Chinese-owned businesses are not pursu-

ing governance reforms in Ethiopia, and the

Chinese approach is instead to buy favors of

the local political elite in order to continue

doing business in the country. In this way, the

goal is to make Ethiopian policymakers happy

so that economic cooperation can continue,

and there is no desire from China to contribute

to the wellbeing of Ethiopian citizens who are

not in power. Thus, the Chinese presence in

Ethiopia can further contribute to bribery and

corruption. There is no interest in fostering

democracy, and aid is mixed with business.

Because of the lack of political conditions on

Chinese aid to Ethiopia, this allows Ethiopian

officials the freedom to act as they wish,

though this may mean the persistence of

bribery and neo-patrimonial practices, such as

the Ministry of Defence using the housing

complex to house its own personnel instead of

the displaced people that it was supposedly

institutional reform and democratization.

China’s Involvement

According to Leggett, few countries in the devel-

oping world have been influenced by China as

much as Ethiopia. Official relations between the

two countries were first established in 1970, yet

remained limited until the mid-1990s (Leggett

2005). She notes that these days, Chinese busi-

nessmen often pay bribes to Ethiopian officials in

order to get things done, and cites the example of

the Chinese government-owned Catic Company

which began operating in Ethiopia in 1993. Offi-

cially, bribery is not acknowledged by the Chinese

government; however, it often occurs

to the benefit of both the Chinese

companies and the recipient govern-

ing elites. Another example is the

Jianxi International Economic and

Technical Cooperation Co., another

state-owned enterprise which was

contracted by the Chinese government

to build a new housing complex in Ethiopia fol-

lowing flooding in 2006 which left several hun-

dred people homeless. Beijing pledged $4 million

US to build the new homes, and it was met with

much fanfare from the Chinese ambassador and

Ethiopian officials. However, a year after con-

struction was complete, none of the homeless

families had moved in. The complex was instead

being used by Ethiopia’s Ministry of Defence to

house its own personnel. In response, an official

from Jianxi International was quoted as saying:

“We don’t really care who uses it […] we were

given a task by the Chinese government, and as

long as Ethiopian officials are happy, our goal is

fulfilled” (Leggett 2005).

In 2006 the Ethiopian Prime Minister Meles

Zenawi returned from the third FOCAC summit in

Beijing praising the Chinese government for their

aid and development promises. These included

the promise that more Ethiopian agricultural prod-

ucts would be allowed into China duty-free, a

“As long as Ethiopian

officials are happy,

our goal is fulfilled.”

CHINESE GOVERNMENT

SPOKESMAN

It appears that the

Chinese model of aid,

with no strings attached,

suits African political

elites just fine.

7

given more or less ‘development space’? Can

they be trusted with it? Who should decide

what systems of governance are best suited for

people in developing countries? These

questions form the basis for additional areas of

inquiry.

built for.

Conclusion

This paper has now covered the international

framework of aid and key concepts, has

considered literature on the two contending mod-

els of aid, has detailed the argument, and has

examined the case study of Canadian and Chinese

aid to Ethiopia. The findings suggest that there is

indeed a qualitative difference in aid between the

Western model and the China-led model. It was

found that the Western aid model, pursued by

OECD members, preferences the expansion of

neoliberal values such as democratization and this

limits the actions of leaders in recipient countries.

Conversely, the China-led model blurs aid with

investment, and does not attach political

conditionalities. This allows for more room for

local policymakers and does not infringe upon

their decision-making process. The hypothesis is

thus supported and the null hypothesis rejected.

This paper has not sought to suggest a normative

preference of one aid model over another, but

simply serves to highlight the differences between

these two approaches. Indeed, a sort of aid

paradox emerges from this study. On one hand,

the Chinese approach respects the agency of

African elites by not attaching political

conditionalities to aid, yet the elites in these cases

may choose to use their agency in counterproduc-

tive ways in order to maintain and consolidate

power, such as resorting to bribery and neo-

patrimony. On the other hand, the Western

approach largely strips African elites of their

agency by focusing aid projects on democratic and

governance reforms, largely to combat corruption

and inefficiency, yet is an approach which Moyo

finds problematic because it treats African leaders

like children who are unable to make their own

decisions and create their own systems of

governance.

Should policymakers in the developing world be

8

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