Arab generosity not keeping up with Arab prosperity

What are oil-rich Arab states doing with their money? A new database called AidData allows for new insights into the aid activities of such “non-traditional” international donors. A recent conference at Oxford featuring papers using AidData has drawn attention in the blogosphere to trends in aid from Arab states. Among the largest non-traditional contributors tracked in the AidData dataset are Arab countries: Kuwait, Saudi Arabia, and the United Arab Emirates. The database provides an interesting glimpse into the flow of money from these oil-rich states and while the numbers don’t capture full picture, they suggest that the national aid organizations of key Arab donors (particularly Kuwait and Saudi Arabia) have become less “generous” during the past decade by not increasing their giving in line with their rapidly growing wealth.

Wealthy Arab states began to provide substantial foreign aid after the 1973 oil embargo and resulting soaring prices generated windfall profits for these countries. AidData offers one of the first detailed looks at how that aid has been disbursed. There is much about Arab aid that we still do not know, though. While the three main bilateral Arab donors report the aid they give through their national aid organizations, they also make unreported transfers. Saudi Arabia gives a particularly large amount of its aid in such an undisclosed manner. Since the figures from AidData come from national aid organizations, any aid given by Arab leaders directly (for instance, during times of crisis like the earthquakes in Haiti and Pakistan) which aren’t included in these organizations’ reports won’t be reported. Some countries (like Kuwait) are more reliable and consistent at reporting their bilateral aid than others. We are encouraged by the UAE’s establishment of a Foreign Aid Coordination Office in 2009, tasked with collecting data on Emirati governmental and non-governmental aid, which should improve UAE’s reporting in the future.

So what does it mean to say that these Arab donors have become less “generous”? Following convention, generosity measures a country’s aid as a percentage of its gross national income (GNI). In 1970, the United Nations called on all states to give a minimum of 0.7 percent of their GNI as official development assistance, and Arab donors generally have compared favorably with the established donors which are members of the OECD’s Development Assistance Committee in terms of their aid generosity. We find that the decline in the generosity of bilateral Arab aid since 2000 is due not to a decline in aid levels (which have remained relatively flat) but to soaring GNI as Arab countries have harvested tremendous profits from oil sales. Simply put, generosity seems to have fallen because Arab donors haven’t increased their aid commensurate with their ascending national wealth. This makes the recent period different from the 1980s, when aid from Arab countries declined along with state revenue, diminished by lower oil prices.

The data from Kuwait (for which records are the most complete) graphically demonstrates this trend:

There is another, intriguing trend. Arab recipients, who receive a majority of the aid contributed by Arab donors, have experienced a surge in contributions from non-Arab donors since the start of the 2003 Iraq war. During the five-year period from 1998-2002, aid to members of the Arab League from non-Arab donors totaled just over $41 billion with an average yearly total of $8.2 billion. In the next five-year period from 2003-2007, aid to members of the Arab League from non-Arab donors increased to $99.3 billion, with an average yearly total of almost $20 billion. As these numbers show, aid from non-Arab donors to Arab states more than doubled after 2003. Meanwhile, Arab aid to Arab recipients totaled $11.3 billion from 1998-2002, and $10 billion from 2003-2007. However, the aid was responsible for 22 percent of aid to Arab recipients during the first period, and 9 percent of aid to Arab recipients in the second — despite rising GNI.

Why has the relative generosity of aid from key Arab donors declined? One answer may be that Arab donors are choosing to give more of their aid through multilateral channels. Indeed, we do find that aid commitments by four multilateral aid organizations that receive most of their aid from Arab donors — the Arab Fund for Economic and Social Development, the Islamic Development Bank, the OPEC Fund for International Development, and the Arab Bank for Economic Development in Africa — have grown steadily since the late 1980s. The choice by Arab donors to give more of their aid through multilateral organizations is an interesting one, given both declining norms of Arab solidarity at the political level and our own finding that Arab bilateral and multilateral donors display similar preferences for allocating aid to infrastructure projects in the transportation, energy, and water sectors. Regardless, while aid commitments by Arab multilaterals have increased, they haven’t gone up enough to compensate for the shortfall in bilateral Arab generosity.

So what have Arab donors done with their increased national wealth, if they haven’t been allocating it to foreign aid? In part, they have spent these funds at home, substantially increasing government expenditures on domestic matters. In Kuwait, for instance, domestic expenditures have grown more rapidly — and began their increase earlier — than GNI. From 2001 to 2007, Kuwaiti government expenditures roughly doubled, and since 1975, these expenditures have grown by about twelve-fold. Possibly concerned with the fate of their regimes during periods of growing opposition, leaders in the oil-rich Gulf countries may have calculated that it is wisest to distribute national wealth at home in order to increase their odds of political survival.

To those concerned with democracy promotion, the fact that Arab generosity hasn’t kept up with Arab prosperity may not be an altogether bad thing. Sarah Bermeo finds support for the proposition that aid from oil-rich donors is less likely to foster democratization in recipient countries than is aid from donors whose wealth does not result primarily from oil. Bermeo argues that donor intent affects whether foreign aid is likely to produce political reform. During the Cold War, the United States and its allies tolerated friendly authoritarian regimes more than they have in the post-Cold War era. As a result, the passing of the Cold War has shepherded an age in which aid is more likely to promote democratization. But Bermeo hypothesizes that oil-rich states are less interested in fostering regime change, and she finds that “oil aid” actually decreases a recipient’s likelihood of transitioning to democracy, while aid from other sources increases that prospect.

Much remains to be learned about Arab foreign aid. The addition of data from other significant Arab donors, such as Qatar and Libya, would help in the effort. Recent work using AidData takes initial steps toward broadening our understanding of global aid flows by highlighting the contributions of non-traditional donors who have been overlooked for too long.

Debra Shushan is an Assistant Professor of government at the College of William and Mary. Christopher Marcoux is a Mellon Postdoctoral Research Associate at the Institute for the Theory and Practice of International Relations at the College of William and Mary.