Valeriia Gorbacheva, GR-Director of the Russian National Committee on BRICS Research; Dr. Alexandra Morozkina, Head of the Structural Reforms Division, Economic Expert Group – special for InfoBRICS

Dynamic and sustainable development of any country in the era of economic globalization reflected, inter alia, in closer integration of commodity and financial markets is bound to depend on economic conditions of both its immediate neighbors and many far away countries. Therefore, the developed nations, particularly members of the Organization for Economic Cooperation and Development, pursue their international development assistance policies proceeding from the assumption that failure to assist underdeveloped countries increases development risks for the entire global economy, undermines stability and security in most regions of the world, and worsens the threat of the spread of terrorism, infectious diseases, unregulated migration, and environmental disasters.

Russia considers sustainable socioeconomic development of countries and peoples as an indispensable element of the modern collective security system. A clearly formulated and targeted socioeconomic component of international initiatives can largely improve projects and programs designed to provide adequate responses to contemporary global challenges and threats.

Despite the evident progress, the international community still faces numerous development challenges:

- Global extreme poverty rose in 2020 for the first time in over 20 years as the disruption of the COVID-19 pandemic compounded the forces of conflict and climate change, which were already slowing poverty reduction progress. About 120 million additional people are living in poverty as a result of the pandemic, with the total expected to rise to about 150 million by the end of 2021.

- Half of the poor are children. Women represent a majority of the poor in most regions and among some age groups. About 70 percent of the global poor aged 15 and over have no schooling or only some basic education.

- More than 40 percent of the global poor live in economies affected by fragility, conflict and violence, and that number is expected to rise to 67 percent in the next decade. Those economies have just 10 percent of the world’s population.

- Life expectancy in such countries is 40 years. They also have an urgent need to combat infectious diseases such as HIV/AIDS, malaria, and TB.

- About 132 million of the global poor live in areas with high flood risk.

Many people who had barely escaped extreme poverty could be forced back into it by the convergence of COVID-19, conflict, and climate change.

The complexity of the international development assistance (IDA) architecture is increasing over time, new actors are appearing, and the role of emerging donors is increasing. Effective interaction between all participants of the IDA process, and major improvements in its effectiveness, are required to achieve Sustainable Development Goals for the period up to 2030.

The effects of the current crisis will almost certainly be felt in most countries through 2030. Under these conditions, the goal of bringing the global absolute poverty rate to less than 3 percent by 2030, which was already at risk before the crisis, is now beyond reach without swift, significant, and substantial policy action.

History shows that urgent and collective action can help us tackle this crisis.

Russian aid

Russia shares the view that the governments of developing countries must shoulder primary responsibility for overcoming poverty and underdevelopment of their nations. However, it is clear that a radical improvement of socioeconomic conditions in these countries will be possible only if the international community takes resolute and concerted action to facilitate their development. Progress in poverty reduction and achieving sustainable economic growth demonstrated by a number of countries shows that international development assistance is crucial for addressing major challenges of the 21st century.

In the mid-2000s Russian official assistance was provided through multilateral channels. The Concept of Russian Federation’s State Policy in the Area of International Development Assistance 2014 approved the development of bilateral aid channels as a priority for multilateral. Projects are also carried out on a trilateral basis involving international organizations. The UN and its structures are involved in the implementation of trilateral projects – UNDP, UNIDO, WHO, UNICEF, WFP, IBRD, etc.

Russia provides external economic assistance to developing countries in financial form (grants, concessional loans) and material form (various goods).

Debt cancellation due to limited resources and the presence of debts of developing countries to Russia remains one of the important areas of the Russian Federation in the field of IDA. The debt cancellation scheme involves the use of debt as a source of financing for development. Russia also assists in the energy sector by developing energy infrastructure in recipient countries. In the field of education, the Russian Program for the Promotion of Education for Development (READ) has been implemented jointly with the World Bank since 2008, aimed at strengthening the role of the Russian Federation as a donor in the field of education. In addition, foreign students study in Russian educational institutions at the expense of the state budget. Recipient countries are also provided with food assistance from Russia and assistance in the field of agriculture.

New donors vs. Traditional donors

The promotion of international development is a dynamic system, and in recent years, changes have been largely attributed to the growing role of so-called new donors. These include developing countries that are not members of the Development Assistance Committee (DAC), such as the Arab States and the BRICS group. At the same time, the name "new donors" is conditional, since all BRICS countries began to provide assistance back in the 60s of the last century.

There is no consensus on the place of "new donors," and BRICS in particular, in the system of promoting international development. On the one hand, their aid levels are still small relative to key traditional donors, so it is too early to talk about any significant changes in the overall architecture of development assistance. This is especially evident when compared with the largest five donors, which include the USA, Great Britain, Germany, Japan, France.

The total amount of aid from traditional donors that are members of the Development Assistance Committee is $131 billion, while the amount of assistance from BRICS countries is $6.6 billion (2015). Thus, it cannot be said that BRICS members could at the moment radically change the existing system of development assistance, due to the relatively small amount of assistance provided.

On the other hand, the rapid increase in the volume of assistance and the increasing influence give reason to believe that in the 10-15-year term they can become significant players in the field. Countries themselves are actively promoting the new concept of South-South aid-partnership, which is positioned as an alternative to the traditional system of assistance resulting from political and economic reforms.

Among BRICS members, China and India are the most active in advancing this concept. Their assistance is largely aimed at stimulating exports by linking projects to the purchase of Chinese and Indian goods and services, as well as the development of transport infrastructure between them and neighboring countries.

Russia and South Africa on the aid strategy are more consistent with the strategies of traditional donors. So, most of Russia's assistance is sent to the EAEU countries (in particular, Kyrgyzstan) and Cuba. South Africa provides assistance aimed mainly at maintaining peace in the region (including in Sub-Saharan Africa).

The specific features of the South-South concept relate to the distribution of BRICS assistance by sector, which is slightly different from the distribution of aid from traditional donors.

Traditional donors operate within the modern paradigm of financing for development, that is, pro-poor and pro-inequality, and work in three ways: empowering the poor, promoting these opportunities, reducing vulnerability and improving the security of the poor. Thus, the main sectors to which development assistance flows are channeled are humanitarian assistance, public administration assistance to improve the efficiency of public authorities and improve the institutional environment.

In BRICS countries, especially in China and India, preference is given to infrastructure projects that can be mutually beneficial to the donor and recipient. In addition, in most cases, the choice of these projects is based solely on economic motives, such as stimulating the export of goods from the donor country to the recipient country. This is in line with the concept of South-South and the principles of non-interference in national policies and mutually beneficial assistance. At the same time, the differences between "new donors" and the traditional ones in the overall sectoral structure of aid are not fundamental, and the social sectors (health, education, humanitarian assistance) in the financing of development by BRICS countries receive quite a lot of attention, as in developed countries.

It should be noted that sectoral priorities differ among the BRICS countries themselves, and not all the five countries are characterized by this kind of aid structure. For example, Brazil and Russia prefer projects in the social sector. China and India mainly finance infrastructure and energy projects. Given that China and India are the largest donors to the group, energy and infrastructure are on the first places in measuring the total share of sectors in BRICS assistance. South Africa prefers to finance humanitarian projects and carries out peacekeeping activities in the countries of the region.

The geographical distribution of aid from "new donors" is relatively similar, given that most of the poorest countries are located in two regions, Asia and Africa. BRICS countries prefer assistance to African countries, with the exception of Russia. So, Brazil provides 65% of assistance to African states, India - 51%, China - 46%, South Africa - 70%.

The most significant difference between aid from Development Assistance Committee countries and "new donors" is the conditionality of aid.

- In the traditional system, the receipt of assistance is due to political and economic reforms, usually aimed at improving institutions, reducing the State budget deficit, privatizing State-owned companies and liberalizing the market.

- The concept of South-South implies non-interference in the domestic policies of the recipient country, so assistance is provided without conditions for certain reforms.

Consequently, with the increase in such support, traditional donors fear that assistance from developing countries will negate their efforts to improve the political and institutional environment of recipient countries. Indeed, since the negotiation of terms is a fairly lengthy process, credit without terms from "new donors" may look more attractive because of the relative speed and ease of receipt.

However, it should be noted that the problem is not so acute for several reasons.

- First, conditions are often not met by recipient countries without any severe sanctions from donor States.

- Secondly, compliance with conditions does not always improve the situation in recipient countries.

- Thirdly, the number of refusals of traditional donors in favour of "new donors" has been greatly exaggerated.

At the same time, the speed of aid negotiations and the absence of long bureaucratic procedures for approving the terms of funding of the project can be a decisive factor for recipient countries and therefore make assistance from "new donors" an addition to the existing system of financing for development.

- Fourth, infrastructure projects that are a priority for "new donors" can also help reduce poverty and inequality in recipient countries through several channels, including, inter alia, productivity gains by reducing transaction costs; increasing the income of the local population by involving them in the construction of facilities; Improved coverage and quality of education as a result of increased school attendance.

Thus, it can be said that aid from "new donors" has the same end-state goals and results as aid from traditional donors - reducing poverty and inequality in the recipient country, but the approaches to solving this problem vary among traditional and "new donors".

It could be concluded that it was not yet a question of creating an alternative system for promoting international development, but rather of complementing the existing system with new opportunities. Recipients do not refuse the assistance of traditional donors, but in some cases the assistance of "new donors," including BRICS countries, is more profitable and timely.

New Development Bank

The New Development Bank (NDB) is seen as a challenger of the international aid architecture dominated by the United States and its allies in Western Europe and Japan.

Slow and insufficient response to the COVID-19 crisis by traditional donors represents an opportunity for emerging powers such as BRICS to play a bigger role in the international development assistance framework. BRICS countries, especially China and Russia, have already shown a readiness to provide leadership on global issues and provide beneficial and well-timed international development aid.

Thus, the NDB has approved the first NDB Emergency Assistance Program in Combating COVID-19 in March, and by now has provided loans to Brazil, China, India and South Africa, totaling US$10 billion.

China and Russia have also taken some bilateral measures aimed at support of other developing countries.

Russia has distributed COVID-19 tests, protective and medical equipment, medicine, medical personnel and directed funds to 46 countries around the world. Apart from bilateral aid, Russia made additional contributions to international organisations such as United Nations Development Programme, Red Cross and World Health Organization.

In May 2020, China announced a US$2 billion aid package for other developing countries to be distributed in 2020-2021, the establishment of a cooperation mechanism of Chinese hospitals with 30 African hospitals, a debt relief programme, and promised to make any vaccine developed by China a global public good.

Obviously, these measures are similar to humanitarian aid actions taken by traditional donors, and to take the leadership, BRICS should present a striking difference to other countries, including scaling up of resources, increasing effectiveness of development assistance and its transparency.

Thus, if traditional donors follow the historical trend and decrease their ODA volumes in the post-crisis period, it will seriously challenge the world’s ability to get on a sustainable development path in the near future. In this case, the BRICS nations, which often position themselves as representatives of emerging countries, have an opportunity to increase their role in global governance, although it depends on their ability to develop an ambitious agenda in development assistance sphere and show an example of effective and beneficial post-crisis development aid.