The document provides an overview of Japan's development cooperation policy and aid provision in Laos. Some key points: - Japan's aid to Laos is guided by a Country Assistance Program which aligns with Laos' development plans and priorities. Key objectives are achieving MDGs, economic growth, and capacity development. - Priority sectors for aid include education, health, rural development, infrastructure, private sector development, and institutional capacity building. - Aid is provided through loans, grants, and technical cooperation managed by JICA Laos office. Infrastructure loans support economic growth while grants and technical cooperation focus on capacity development. - Projects are formulated based on consultations with Lao government and bottom-up approach

2. Contents
NIDC Forum 2
Article Review
15
Current Issues 7
in Development
Cooperation
Dear Readers
Welcome to NIDC Bulletin.
This is the first volume and first issue of NIDC Bulletin. Let us firstly introduce NIDC.
NIDC is the network of scholars, policy makers, practitioners who are interested and
involve in international development cooperation issues focusing on development aid, humanitarian aid,
and food aid. The scope of interests covers 3 aspects including principle, policy, and practice, as
well as 3 dimensions of debates, namely political, economic, and social.
NIDC provides space for those who are interested and involve in international development
cooperation to exchange their knowledge and experiences, learn from each other their success and
failure, collectively invent the new knowledge and method regarding aid process, as well as strengthen
the partnership among all actors.
To achieve the above mentioned goal, NIDC plans to conduct several activities including
research projects, publications, and public seminars or forums. This Bulletin is one type of publications produced by NIDC with the objectives
of knowledge dissemination and promotion of better understanding on development cooperation at both national and regional levels. The Bulletin will be
distributed to actors and stakeholders involved in international development cooperation in Thailand including ministries’ officials, staff of international
organizations and NGOs in Thailand, as well as universities’ professors and students.
This issue of our bulletin consists of three main parts. In the first part, we summarize the key issues discussed by our guest speakers in the first NIDC
forum taken place in March 2013. The main theme for the forum was “Repositioning Thailand: Development Cooperation and Narrowing the Development
Gap in ASEAN”. Related topics were presented by well-known scholars and experienced practitioners in the field of international development cooperation. This
part mainly gives you some information about the roles of Thailand and Japan in the development cooperation to reduce development gaps in ASEAN, with a
particular focus on CLMV (Cambodia, Laos, Myanmar, and Vietnam).
The second part is about the current issue in development cooperation. One of our colleagues has done a review of aid effectiveness literature and
summarizes key findings. The key message in this part is that the macroeconomic inquiry of the effect of foreign aid on economic growth has nothing conclusive.
Macroeconomic study which defines aid effectiveness solely in terms of its ability to generate economic growth has lost its significance. With a process-oriented
definition of aid effectiveness, a micro-level and case-study method is called for.
In the third part, we provide a review of two articles which have been published recently. These two articles discuss the way foreign aid are provided by the
so-called emerging donors, with special focuses on their particular characteristics and how they differ from their counterpart traditional donors. The review mainly
shows how the two articles help deepening our understanding on emerging donors. It also discusses the policy wimplication provided by those two articles.
This first issue of NIDC Bulletin should be considered as part of our first step to build up the network of scholars, policy makers, and practitioners
engaged in international development cooperation. It is expected that, in the future, NIDC Bulletin will somehow help create an atmosphere of cooperation
for better understanding among actors and stakeholders of this field as well as promote the betterment of people’s lives in developing countries, particularly in Asia.
The editorial team
March, 2014
Editorial
NIDC Bulletin

3. NIDC FORUM 2
“Repositioning Thailand:
Development Cooperation and
Narrowing the Development Gap
in ASEAN”
Development Cooperation for
Narrowing Development Gap
in ASEAN
• While ASEAN is moving toward a
community with a deep socio-economic
integration, problems of poverty and inequality
are still persistent in the region. This calls for an
active participation of development actors in
regional development cooperation.
• Regional connectivity and capacity
building can be considered, among other things,
as solutions for poverty and inequality in the
region. These can be done by effectively
development cooperation mechanisms in terms
of loan, grant, and technical cooperation.
• ASEAN connectivity can be seen in
three aspects – physical, institutional, and social
(people-to-people). Physical connectivity can be
achieved by promoting infrastructure
development (e.g. roads, railways, ship
and air transports) that can link every
p a r t o f t h e r e g i o n t o g e t h e r .
However, although physical connectivity
is a necessary condition, it is not
sufficient for a deep regional
integration to be achieved. ASEAN
countries need to adjust their rules,
regulations, and codes of conduct
in such a way that facilitate a free
movement of goods and people across
the region. In other words, ASEAN
needs a set of standardized rules and
regulations with which each member
country complies. This calls for the
institutional connectivity, namely the
member countries must establish ASEAN
standard, and then, each country
adjusts its rules and regulations
according to this regional standards.
Only by a completed physical and
institutional connectivity that the
social connectivity can be attained.
• International development
cooperation is considered as a key
mechanism to promote physical,
institutional, and social connectivity in
ASEAN. Recently it is observed that
there is an increasing role of various
development actors in the economic and
social development of ASEAN. Therefore,
the problem is not much whether
there is a sufficient effort to closing the
development gap in the region, but how we
can use the existing development
cooperation programs effectively.
• The Network of International
Development Cooperation (NIDC) has been
established to promote the effectiveness
and efficiency of development cooperation.
It focuses on building up the body
of knowledge, via research activities, on
(1) institutional arrangement of development
cooperation; (2) effectiveness and efficiency
of development cooperation; and (3)
implementation and management of
development cooperation programs. It will
also disseminate information and knowledge
to the public – Thailand and international –
on a broad and regular basis. Moreover,
NIDC also aims to promote the network
of development actors (e.g. academics,
policy makers, development practitioners)
in the region in order to promote partnership
for development.
1
Details in this section are derived from NIDC’s first international workshop on Repositioning Thailand: Development Cooperation and Narrowing the
Development Gap in ASEAN, March 29, 2013 at Chateau de Bangkok Hotel.
Assoc.Prof.Siriporn Wajjwalku
Faculty of Political Science, Thammasat
University

4. 3 NIDC FORUM
Overview of Thailand’s
Development Cooperation Policy
for Neighboring Countries
• Thailand has recently emerged
as a development partner to share
development experiences and build
strong partnership with its neighboring
countries. The main objectives of
Thailand’s development cooperation are:
(1) to support developing countries’ effort
in reducing poverty; (2) to strengthen the
development cooperation at the regional
(ASEAN) and sub-regional (GMS) levels.
• Thailand’s development
cooperation policy focuses on: (1)
assisting neighboring countries on
economic and social development; (2)
supporting less developed counties to
achieve the MDGs; (3) promoting South-
South Cooperation through bilateral and
multilateral cooperation; (4) strengthening
the partnership for technical cooperation
and human resource development; and
(5) narrowing development gaps
between ASEAN countries.
• Thailand’s development
cooperation is provided through the
South-South Cooperation scheme which
strongly focuses on demand-driven
approach, equal partnership duplication
avoidance, partner countries’ development
the effectiveness of technical cooperation programs as
and strengthen the capacity of human resources
in CLMV countries. So far, Thailand has already set up
the triangular cooperation program with various partners
including Japan, Singapore, France, Germany,
Hungary, and Argentina. The program has been
provided mainly through training and education.
• Thailand International Development
Cooperation Agency (TICA) is now seeking for
broadeningdevelopmentcooperationwithmorepartners.A
strong cooperation with development partners through
joint programs, resource or expertise sharing, and
exchange of personnel is still heeded. This must be
done in order to enhance the effectiveness and
efficiency of development cooperation programs.
JICA’s Cooperation for
ASEAN Integratio
• Southeast Asia is one of the top priority
regions for Japan’s ODA. In fiscal year 2011, there was
about 286,285 million yen of JICA’s ODA provided for
Southeast Asian countries in the form of loan, grant,
and technical cooperation.
• JICA’s cooperation strategy in Southeast Asia
has three main aspects. First, it prioritizes development
assistance based on the development stage of each
country. The key issue here is that ODA must be
provided to reduce poverty and disparity in the
priority and ownership,
and partner countries’
absorptive capacity.
• Until recently,
Thailand’s development cooperation
has focused on eight areas including:
(1) agriculture and rural development;
(2) theory and practice in the sufficiency
economy; (3) development community-
based economics; (4) public health;
(5) natural resource and energy; (6)
science and technology; (7) trade
and industry; (8) tourism promotion; and
(9) education and human resource
development.
• Thailand has a strong focus
on its four neighboring countries, namely
Cambodia, Lao PDR, Myanmar, and
Vietnam (CLMV). The country’s
bilateral technical cooperation
with CLMV emphasizes on four sectors
including agriculture, education, public
health, and human development.
• Recently, triangular program
has also emerged as a new cooperation
modality. This modality aims to increase
Mr.Katsuya Miyoshi
JICA Thailand Office
Mr.Banchong Amornchewin
Thailand International Development
Cooperation Agency (TICA)
NIDC Bulletin Vol.1 Issue 1/2014

5. region. Second, it tries to accelerate growth through
regional approach. The priority issues include: (1)
cross-border infrastructure and urban development;
(2) economic partnership and financial sector
reform; (3) safe and secure society; and (4)
human resource development and networking.
Third, it emphasizes the importance of tackling
global issues such as climate change, food
security, water security, and energy security.
Also, JICA is keen to strengthen the partnership
with emerging donors in the region.
• JICA recognizes the importance of
regional integration and provides supports for the
establishment of the ASEAN community. The
focus of JICA is on the Master Plan on ASEAN
Connectivity. It provides assistance to facilitate
physical, institutional, and people-to-people
connectivity. In terms of physical connectivity,
JICA prioritizes the development of East-West
and Southern economic corridors and development
of maritime ASEAN economic corridor. In terms
of institutional connectivity, priority is given to
promoting international standardization system,
Asia cargo highway, and intellectual property
rights. For people-to-people connectivity, JICA
supports the existing efforts to facilitate the
interactions and exchanges of ideas and knowledge
among people in ASEAN through such
mechanisms as Southeast Asia Engineering
Education Development Network (SEED-Net)
Project, ASEAN University Network (AUN), and
Japan Centers.
NIDC FORUM 4
• Mitigating development gap is critical
in promoting ASEAN Community. JICA
supports the mutual-help effort of ASEAN
countries to mitigate development gap. It
supports the Needs-Resource Matching
model in which resources for development
are circulated from more advanced countries
(ASEAN6) to less developed countries
(CLMV). Japan sees ASEAN6 countries as
dialogue partners and attempts to promote
partnership for the development of CLMV.
• Recently, JICA and TICA have
established Japan-Thailand Partnership
Program (JTPP), which is a form of Triangular
Cooperation aiming to jointly implementing
technical cooperation activities as well as sharing
knowledgeandexperiencesonODAmanagement.
So far, there have been many countries from
CLMV, Asia Pacific and Africa joiningthetraining
courses (under JTPP) in Thailand. This is one of
examples of JICA’s effort to enhance the
partnership for development in ASEAN.
Japan’s Development
Cooperation and Aid
Provision in Lao PDR
Dr.Phakpoom Tippakoon
College of Interdisciplinary Studies,
Thammasat University
the policy level, Japan has the so-called
called Country Assistance Program
(CAP) which is a document that lays down
Japan’s country-specific aid policy for
a period of five years. Principally,
CAP must have two main characteristics:
it has to be produced in accordance with
Japan’s ODA it Charter and Medium-term
ODA Policy, and has to be aligned
with national development plan and
strategy of recipient country. This is to
ensure that Japan’s ODA will respond
to recipient’s needs as well as will be
i m p l e m e n t e d e f f e c t i v e l y a n d
efficiently in a unified and cohevent
manner.
• In terms of management mech-
anism, Japan has set up the so-called
ODA Task Force to overlook the overall
performance and monitor the progress
of development assistance programs in
recipient countries. The ODA Task Force
consists of JICA country office, Japanese
embassy, and relevant Japanese
organizations (e.g. JETRO country office)
operated in the recipient countries. It is
expected that the task force will serve as
a coordination mechanism that ensures
the coherent implementation of ODA
programs according to the CAP. For actual
implementation of ODA programs, JICA
country office is authorized to do the job.
• Japan’s development assistance for
any recipient country is based on its policy and
management mechanisms which aim to ensure
the effectiveness of assistance programs. At
NIDC Bulletin Vol.1 Issue 1/2014

6. 5 NIDC FORUM
• CAP for Lao PDR was introduced in
2006. The CAP contains three major parts: (1)
recent political, economic, and social situation
of Laos; (2) development challenges for Laos;
and (3) Japan’s assistance policies for Laos.
Key development objectives identified in Lao
CAP include: (1) achieving Millennium
Development Goals (MDGs); (2) building
economic growth; and (3) enhancing capacity
development. To achieve the first objective,
Japan has identified three priority areas for
ODA provision including: (1) improving basic
education; (2) improving healthcare services;
(3) developing rural regions and sustainable
use of forest resources. To achieve the
second objective, Japan focuses on: (1)
developing socioeconomic infrastructure and
effectively utilizing existing infrastructure; and
(2) institution building and human resources
development for enhancing the private sector.
And to achieve the third objective, Japan gives
priority to improving administrative capacity
and institution building.
• Currently, JICA Lao Office, as a main
ODA implementing agency, has delivered
development assistance programs the form of
loan, grant, and technical cooperation. Grant and
technical cooperation programs have a broader
focus,mainly on areas such as capacity
development, health care, education,
agriculture and forestry, environment and
n a t u r a l r e s o u r c e s , p r i v a t e s e c t o r
development, and institution building. Loan
ODA has particularly focused on infrastructure
development in order to create a suitable
environment that generates economic
growth.
• It can be said that Japan’s development
assistance in Laos has been carried out in a very
systematic manner. At the project formation level,
JICA Lao Office has formulated the projects
based on the CAP and regular consultation with
the governmental organizations responsible for
receiving assistance programs. This process
is said to be based on the bottom-up approach
where project plans are initiated from Lao
government’s demand. In fact, the consultation
mechanism has been set up and embodied in the
governmental agency that is directly responsible
for receiving assistance.
• At the project implementation level,
JICA Lao Office has mainly utilized external
experts from various sectors (e.g. private, NGOs,
governmental) to ensure the quality and sufficiency
of knowledge and expertise. Throughout the project
implementation period, regular monitoring and
progress reporting system has been set up. The
so-called Joint Coordination Committee (JCC)
serves as a formal monitoring mechanism for
each and every project. JCC is composed of Lao
government staffs (normally, high-ranking
officials), JICA staffs, and Japanese experts from
relatedorganizations.Infact,inmostoftheprojects,
JICA experts have carried out project activities in
a close cooperation with Lao government staffs
who are responsible for project implementation.
• Project evaluation is generally
carried out by external experts. In most
of the projects, evaluation is conducted
three times: (1) six months after the
commencement of the project; (2) the half
way after starting the project; and (3) six
months before the end of the project. This
evaluation practice allows JICA to be able
to monitor closely the performance of the
project. It also provides JICA Lao Office
with good information to be used for
project adjustment and modification.
Another important evaluation is the ex-post
evaluation. It usually takes place in three
to five years after the end of the project
in order to evaluate the sustainability and
long-term impacts of the project.
• Although it is not clear whether all
ofthemechanismsidentifiedaboveareeffective
and efficient for all development projects
implemented, what we can learn from
Japan’s development assistance experience
in Lao PDR should not be ignored. It is
important to consider that for the assistance
programs to be effective, donor’s assistance
plan should meet recipient’s need. The
coordination and monitoring mechanisms
shouldbesetupatvariouslevels(frompolicy
to implementation) and for every project.
Projects should be implemented based
on a close cooperation and partnership
between donor and recipient to ensure the
effectiveness and sustainability.
NIDC Bulletin Vol.1 Issue 1/2014

7. Institutional Arrangement
and Aid Effectiveness:
Japan’s and Thailand’s
Aid Provision in CLMV
• The questions to be addressed in the
currentresearchprojecton“institutionalarrangement
and aid effectiveness: the case study of Japan’s
and Thailand’s aid provision in CLMV” include:
(1) how does the centralized authority and
institution of aid provision contribute to aid
effectiveness?(2)whataremajorobstaclesforaid
effectiveness in terms of capacity and authority of
institution? (3) how does development aid
providedbydifferenttypeofdonor(i.e.Japanand
Thailand) contribute to sustainable development of
developing partners (CLMV countries)? Primary
fieldworks that were carried out in Vietnam and
Myanmar during January-February 2013 reveal
some interesting findings.
• First, JICA’s institutional structure
and its mechanism enhance the ability of JICA
to operate its cooperation assistance programs
abroad. JICA has more than 100 country offices
stiuated in various parts of the word. It also has
15 domestic offices located all around Japan.
These two layers are closely linked through
communication and reporting systems
which allow for continuous and regular
exchange of information and experts to take place. This
structure also facilitates the monitoring and evaluation
operations which are helpful for developing the assistance
plans and strategies in recipient countries. Moreover, this
structure helps to ensure that the overseas operations will be
coherent with Japan’s ODA policy. A large number of
data and information from overseas operations are regularly
senttoJICA’sdomesticofficesandstoredinitsdatabase.This
influence the direction of Japan’s ODA policy
through information and data derived from its
overseas offices. In terms of coordination, JICA
country offices implement their development
projects in a very closed cooperation with the
national counterparts. In many cases, JICA
operations are embodied in governmental
agencies of the recipient countries. Moreover, as
foundfromcasestudiesinMyanmarandVietnam,
liaison offices of the project have been set up in
the project sites to work closely with the local
people. This not only allows JICA country offices
to be able to monitor the operation more closely,
but alsoenhance the relationship between JICA
and local residents.
• TICA’s institutional arrangement is
rather different from JICA’s. From the fieldwork,
it is revealed that TICA’s overseas operation is
still much relying on the Thai embassy for
coordination and management. Lacking
development experts wefficiency of development
assistance programs. Also, as the mechanisms
for effective coordination and streamlined
operations of Thailand’s ODA are not yet in place,
thefragmentationin ODA delivery system can still
be observed.
• It should be mentioned lastly that the
observations noted above are based on primary
fieldworks. The findings so far have not yet been
conclusive. More in-depth study will be conducted
to see whether and how the existing forms of
institutional arrangement (both for Japan’s and
Thailand’s ODA) affect the effectiveness of
(Japan’s and Thailand’s) ODA programs.
NIDC FORUM 6
is helpful for Japanese policy makers to make decisions
based on information and knowledge of the local situations
in the recipient countries. For TICA, its overseas operations are
still nascent and, in fact, are undertaken by diplomatic staffs
rather than international development experts. This may be
an important obstacle in expanding TICA’s overseas
operations and improving the effectiveness of its
development assistance programs abroad.
• Second, the mechanisms have been set in place
to streamline and improve Japan’s ODA policies and
implementations. Important mechanisms include law,
regulations, and strategic framework that shape the direction
of Japan’s ODA and its implementation process. These
include, for example, the law for partial amendment to the
JICA 2006, the law for the partial amendment to the JBIC
2006, and the ODA Charter. The importance of these
mechanisms to Japan’s ODA system cannot be ignored. As
aresult of these laws and strategic framework, Japanese
ODA policy direction has become clearer; itsinstitutional
arrangement has become more steamlined;
and development assistance operations become
more unified and better coordinated.
• Third, it is found from the observation of JICA’s
development projects in Myanmar and Vietnam that JICA
country offices play very important role both in terms of policy
making and coordination. For policy making, JICA can
Assoc.Prof.Siriporn Wajjwalku,
Faculty of Political Science,
Thammasat University
NIDC Bulletin Vol.1 Issue 1/2014

8. Dr.Phakpoom Tippakoon
College of
Interdisciplinary Studies
Thammasat University
7 Current Issues in Development Cooperation
What do we learn from the
literature on aid effectiveness?
NIDC Bulletin Vol.1 Issue 1/2014
There has been a long debate
in the academic community on the issue of
whether aid is effective. The major part of
the literature has long been dominated by a
macroeconomic enquiry of the effect of aid
on economic growth of the recipient countries.
It is believed that aid is effective when it
generatesaconditionthatleadstoeconomic
growth, and later, poverty reduction. The mi-
croeconomic study on aid effectiveness has
emergedrecently.Itisbasedonacasestudy
of specific areas or issues. This kind of study
has become increasingly important, since it
is more capable of identifying the complex
nature of the effects of foreign aid programs.
This essay provides a brief
discussion on the key findings in the
macroeconomic literature that study about
the effect of aid on growth. Then, it calls for
the rethinking about the way to approach aid
effectiveness issue from a case-based or
micro-analysis perspective.
A i d a n d g r o w t h : t h e o r y a n d
e v i d e n c e
The idea that aid leads to growth and
development is not fully conclusive. A large number
of empirical studies have yet, provided contrasting
evidences on the relationship between aid and
growth. Macroeconomic studies on the effect of aid
ongrowthcanbegroupedintothreemaingenerations
(Hansen and Tarp 2000; Doucouliagos and
Paldam2009).Thefirstgenerationofstudyisbased
on the Harrod-Domar and the Two-gap models.
Basically, the Harrod-Domar thesis emphasizes on
the importance of saving and investment in
generating economic growth. Capital accumulation
is the key to economic growth; and aid is crucial
for this process as long as developing
economies still lack the capacity to raise
their own capital. Pro-aid economists, like
Rosenstein-Rodan (1961), generally argue
that the transfer of foreign resources in the
form of aid can lead to an increase in total saving
and investment of the recipient countries. Through
saving and investment, aid is good for growth. The
two-gap model holds that developing economies
are generally characterized by foreign exchange
and saving deficits. It is argued that, at a given
point of time, most developing countries face
either a shortage of domestic savings to meet
investment opportunities or a shortage of foreign
exchange to finance the imports of capital
goods. In such case, foreign aid can play
an important role to fill up the gaps which,
consequently, can increase capital accumulation
and growth (Chenery and Strout 1966).
There has long been an attempt to
prove these relationships (i.e. aid-saving, aid-
investment, and aid-saving-investment),but the
findings are far from being conclusive. White
(1992), among others, have conducted a review
and found the relationship between aid and
savings is generally positive. This is consistent
with Hansen and Tarp (2000), that shows that
positive relationships between aid and savings
as well as aid and investment are found in most
empirical studies reviewed.
However, some scholars have
shownthattheeffectofaidonsavingsandinvestment
is not as predicted the Harrod-Domarandtwo-gap
models.OneofthosescholarsisGriffin(1970),who
examines the effects of foreign capital (including
aid) transfer on recipients’ domestic savings.
His research finds the so-called “crowding-out effect”
of foreign aid, in which aid flows decrease
totalsavingsintherecipientcountriesbythesame
amount. This happens because a significant part
of foreign aid goes to consumption. Similarly, the
later study by Boone (1996) also challenges the
idea that aid leads to savings and investment.

9. Current Issues in Development Cooperation 8
NIDC Bulletin Vol.1 Issue 1/2014
The second generation of study
examines the direct effect of aid on the rate
of economic growth. As similar to the previous
generation, this generation is still much
influenced by the Harrod-Domar model that
analyzes the role of aid on growth based on
the framework of capital accumulation. Many
scholars also base their analysis on the Solow
growthmodel,whichassumesthatthegrowthrate
of technology and capital-output ration are
constant over time. The survey of empirical
literature by Hansen and Tarp (2000) finds
that there are as many as 64 studies analyzing
the direct impact of foreign aid on growth.
Interestingly, they discover that the majority
of studies (38 studies) find positive effects of
aid on growth while only one study finds
negative impacts. Other studies find aid’s
effect on growth to be insignificantly different
from zero. Based on the review, there are
some arguments to draw from. First, the positive
effect of aid on growth is likely to be observed
whenever a positive link between savings
and growth is found. Thus, the causal chain
of “aid-saving-investment-growth” seems to exist.
Second, aid can further growth by relieving the
import constraint caused by foreign exchange
deficit. Third, for the analysis that finds no effect
or negative effect of aid, they are likely to rely
on simple regression model with few degrees
He finds that aid only results in public
consumption, but not savings and
investment.
of freedom or to use total capital inflows
rather than foreign aid.
However, a recent review by
Doucouliagos and Paldam (2009) gives a different
impression. They find that the direct effect of
aid on growth is not as impressive as being
claimed. They collect a large number of
aid-growth regression estimates from 97 papers
and analyze the effects and significance of aid
on growth variables. The results show that
although positive effects of aid on growth are
found in more than 540 estimates, the effects are
generally small and not proved to be practically
and statistically significant. These authors
explain such a weak effect of aid on growth
on the ground of economic theories. First, aid
is fungible and has been subject to a rent transfer
problem. It is a transfer of external rent into
the domestic economy. Thus, although aid
does increase the level of income of recipient
countries, it is paid for by a decrease in the
rate of economic growth. Second, resource
transfer in form of development aid
may lead to the overvaluation of the recipient’s
currency, and hence reduce its international
competitiveness. There are many cases that
aid generates the growth of the public sector,
but indirectly harm other productive sectors.
This is what economists call the Dutch Disease
effect of development aid.
In sum, it is possible to say that
despite a large number of empirical studies so
far, it is still hard to establish a definitely
positive link between aid and economic
growth. The causal chains linking aid to
saving, investment, and growth are not
necessarily positive, or significant, or strong.
The findings of positive effect are rather a
case-by-case basis, depending on the
recipient’s economy. Thus, the relationship
between aid and saving, aid and investment,
and aid and growth are somehow
questionable.
Aid-Saving-Investment-Growth
Relations
T h e l a s t g e n e r a t i o n o f
macroeconomic analysis of aid
effectiveness is different from the first two
generations. It gives less attention to
establishing the casual link between aid
and growth, and focuses more on the
necessary condition by which aid may lead
to growth. Starting with the World Bank’s
(World Bank 1998) and Burnside and
Dollar’s (2000) studies on the conditions
necessary for the effect of aid to be positive
on economic growth of the recipient countries.
These two studies similarly show that aid

10. 9 Current Issues in Development Cooperation
2
On average, about 180 observations have been added to the WDI dataset every year (Doucouliagos and Paldam 2009).
works better in good policies and institutional
environments. This finding gives policy
implication that aid should be directed toward
countries with good records in institutional
soundness (e.g. less corruption, respect for
human/civil rights, and commitment in rule of
law) and policy effectiveness (e.g. low inflation,
low external debt, and trade openness). Later
on, Collier and Dollar (2002) provides empirical
evidence that aid has the maximum effect on
poverty (called poverty-efficient aid allocation),
when it is given to countries with high incidence
of poverty and with a good policy quality. They
also argue that development finance can be
ineffective either in inducing policy reforms or
growth in a bad policy environment.
Again, the evidence to support the
third generation’s claims that aid is good for
growth in a good policy and institutional
environment is still limited and rather weak.
The meta analysis of 232 regressions from
23 papers by Doucouliago and Paldam (2009)
finds that the coefficients of the interaction
term (aid and policy) appear to be insignificant.
Moreover, it seems that the empirical analysis
undertaken by the third generation faces a
serious methodological problem. That is, the
regression models are fragile and sensitive to
changes in the samples. The coefficients of
aid-policy interaction term are not consistent
and robust across various samples. The
implication that can be drawn from this finding
is that the necessary policy and institution
conditions that make aid works for growth are
rather context-specific. In some cases, good
policy and institutions may be necessary to
translate aid into growth, but other cases it
may not. In fact, the regression analysis done
by Hansen and Tarp (2000) reveals that aid is
good for growth regardless of good policy and
institutional environments.
Although it is not without drawbacks,
the contribution of the third generation should
not be ignored. It calls for attention to be paid
on the conditions that make aid works. In fact,
it is hard to deny that the effectiveness of aid
programs is to a large extent affected by
development policies or institutional capacity
of the recipient countries. To take the policy
and institution into the analytical framework of
aid, effectiveness is necessary.
A call for micro-level and case
based analysis of aid effectiveness
As development has multidimensional
aspects, it is generally accepted that foreign
aid programs are usually designed to
achieve multiple objectives of development
(e.g. poverty reduction, resource sustainability,
community empowerment, etc.). Growth may
be important, but it is not the only development
objective to be reached. Therefore, measuring
aid effectiveness in terms of its contribution
to economic growth per se may not be
sufficient. Macroeconomic analysis of aid
effectiveness may be able to capture
the effects of aid on other development
objectives apart from growth (e.g.
poverty reduction or sustainable use of
resource), but it is not able to identify
how aid works at the local or individual
level, which is actually the level where
the impacts take place. Therefore, what
we need to add into the aid effectiveness
literature is the micro-level or case-
based analysis that can identify the
impacts of aid programs at the local
level or impacts on other development
aspects than economic growth.
Micro-level or case-based
analysis has advantages over macro-level
analysis in many respects. First, it is
not bounded by data limitations. Most
o f m a c r o e c o n o m i c s t u d i e s
of aid effectiveness (i.e. measuring
effectiveness in terms of economic
growth) rely on the World Bank’s
World Development Indicators (WDI)
data. Although more data have
been added to the WDI dataset
each year, the quality of data is
still affected by a large number of
missing values, which may affect the

11. Current Issues in Development Cooperation 10
NIDC Bulletin Vol.1 Issue 1/2014
reliability of macro-analysis. Also, as the data
are reported at the national level, it cannot
be used to measure the effects of
foreign aid taking place at the local level.
The questions such as how communities
benefit from foreign aid in terms of
employment, food security, access to
credits, etc. cannot be answered by
using macro-level data.
Second, as the effects of aid are
quite context-specific (for example,
good policy and institutions may be important
for growth in some cases, but not in other
cases), we need to collect a large number
of case studies to understand why and
how aid works in certain places and
doesn’t work in others.
Thirdly, as similar to the point
discussed earlier, it is not fair to say that
aid is not effective if it does not have a
significantly positive effect on growth. This
is because aid programs are more likely to
be attached with multiple objectives.
Many of aid programs may not be
designed to generate economic growth
directly. For instance, a large amount of
foreign aid is given for building schools,
hospitals, local government offices, etc.
These kinds of projects may exert more
impact on human capacity development
than economic growth. Its impact on
growth may be indirect or in a long run.
Finally,inrecentyears,theinternational
development community (particularly traditional
donors and international organizations) has
emphasized the importance of measuring aid
effectiveness at the process level. It is believed
that aid effectiveness is not determined by how
much aid is given, but by how it is given (OECD
2010). This belief is reflected in the Paris
Declaration on Aid Effectiveness. The Paris
Declaration provides us with the guidelines to
measure aid effectiveness which includes five
elements as follows (see OECD 2010):
effectiveness which includes five elements as
follows (see OECD 2010):
• Ownership: developing countries
set their own strategies for development,
improve their institutions and tackle
corruption;
• Alignment: donor countries/
organizations bring their support in line with
these strategies and use, where possible,
local systems;
• Harmonization: donor countries/
organizations co-ordinate their actions,
simplify their procedures and share
information to avoid duplication;
• Managing for Results: developing
and donor countries/organizations at all times
focus on producing (and measuring)
development results;
• Mutual Accountability: donors
and developing countries are mutually
accountable for development results.
To measure aid effectiveness
along with these elements, it is difficult (if
not impossible) to apply macro-analysis,
b e c a u s e d a t a o n a i d - p r o v i d i n g
processes are usually unavailable.
Moreover, there are many instances that
the implementation of aid programs is not
carried out at the national level, but
at the sub-national (or local) level. If this is
the case, we need a more micro-level
(or case-based) study to capture the
effectiveness of aid programs. For
example, regarding the issue of ownership, if
aid programs have to be consistent with
local development plans and strategies, the
aid effectiveness study may have to
focus on such questions as whether
local actors (e.g. local governments,
civil society organizations) play
i m p o r t a n t r o l e s i n d e s i g n i n g ,
implementing, and monitoring aid programs.
This can only be done by a case-based
analysis.
In conclusion, the academic
inquiry of aid effectiveness has long
been dominated by the macroeconomic
analysis of the effects of foreign aid on
economic growth. The implicit assumption

12. 11 Current Issues in Development Cooperation
NIDC Bulletin Vol.1 Issue 1/2014
here is that aid is effective only when it
leads to economic growth. The results so
far are not yet conclusive. It is not well
established that aid is necessarily good
for growth. Although it is still important to
investigate the macroeconomic impacts of
aid (e.g. impacts on saving, investment,
and growth), it can be argued that measuring
aid effectiveness in such fashion may not be
sufficient. As aid programs are usually
attached with multiple objectives and,
in many cases, undertaken at the
sub-national (or local) levels, we need to
capture the complex nature of foreign aid
programs both in terms of its multiple and
area-specific effects. This can be done
by a micro and case-based analysis. To
add more study of this kind into the aid
effectiveness literature, it will enhance
our understanding of whether and how aid
works, which are significant questions
that reflect the effectiveness of foreign aid
programs.
References
Boone, P. (1996) Politics and the
effectiveness of foreign
aid. European Economic
Review 40(2), pp.289-329.
Burnside, C. and Dollar, D. (2000)
Aid, policies, and growth.
American Economic Review
90(4), pp.847-868.
Chenery, H.B and Strout, A.M. (1966)
Foreign assistance and
economic development.
American Economic Review
56(4), pp.966-1006.
Collier, P. and Dollar, D. (2002) Aid
allocation and poverty
r e d u c t i o n . E u r o p e a n
Economic Review 46, pp.
1475–1500.
Doucouliagos, H. Paldam, M. (2009)
T h e a i d e f f e c t i v e n e s s
literature: the sad results of
4 0 y e a r s o f r e s e a r c h .
J o u r n a l o f E c o n o m i c
Surveys 23(3), pp. 433-461.
Griffin, K.B. (1970) Foreign capital,
domestic savings, and
economic development.
B u l l e t i n o f t h e O x f o r d
University Institute of
Economics and Statistics
32(2), pp.99-112.
Hansen, H. and Tarp, F. (2000) Aid
effectiveness disputed.
J o u r n a l o f I n t e r n a t i o n a l
Development 12, pp. 375-398.
OECD (2010) The Working Party
o n A i d E f f e c t i v e n e s s -
Transforming Global Partnerships
for Development . Organization
for Economic Cooperation and
Development (OECD).
R o s e n s t e i n - R o d a n , P . N . ( 1 9 6 1 )
I n t e r n a t i o n a l a i d f o r
underdeveloped countries.
Review of Economics and
Statistics 43(2), pp.107-138.
SETECI and UNDP Ecuador (2013)
Measuring Aid Effectiveness at
the Local Level: Ecuador.
Technical Secretariat for
International Cooperation
(SETECI) and United Nations
Development Programme,
Ecuador (UNDP Ecuador).
World Bank (1998) Assessing Aid: What
Works, What Doesn’t, and
W h y . N e w Y o r k : O x f o r d
University Press.

13. Article Review 12
Rethinking emerging donors’ aid?
A review of Sato et al. (2011) and Dreher et al.(2011)
NIDC Bulletin Vol.1 Issue 1/2014
For many years non-DAC or
emerging donors have been criticized
for seeking their self-centered interests
and consequently being a threat to healthy
and sustainable development of recipient
countries. Whether this is true or not is
hard to give a definite answer. But now
the international aid landscape has a new
element on the issue to debate. Sato et al.
(2011) notice some biases from the
perspective of traditional donors in making
such criticism on emerging donors. These
biases usually derived from: (1) a lack of
information about emerging donors’ aid
strategies, bilateral institutions, and project
implementation; and (2) a lack of analysis
from the recipients’ viewpoint. To reveal a
more complex feature, Sato et al. (2011)
put an effort to analyze (1) commonalities
between emerging and traditional donors;
and (2) diversity among emerging donors.
They do so by examining the operations of
four emerging donors (i.e., China, India,
Tanyaporn Sunthorntham
CollegeofInterdisciplinary
Studies
Thammasat University
South Korea and Thailand) in Cambodia where
aid fragmentation is welcome.
Their study is recommended to readers
who are interested in international cooperation
and foreign aid as their findings add to
our knowledge about emerging donors. Emerging
donors are found to play a role in responding
to recipient’s needs in a particular situation and
in sectors which are neglected by traditional
donors. Aid fragmentation in recipient countries
can be seen positive to countries with strategies
that aim to control over the development
process, which increases donors’ competition in
the aid market. The research points to a
significant shift in the practice of aid policy for
both recipients and donors. The traditional
donors’ future aid policy would need a closer
cooperation as a strategy of providing aid in
order to keep recipients on the desirable
development process. Recipients’ behavioral
patterns show that they do not necessarily limit
themselves to receive aid from any particular
traditional donors. Also, they may not even
follow the donors’ policy advice because the
competition in aid market is very high.
Starting with a review of literature
whichleansagainstnon-DACdonorfromtraditional
donors’ thinking, the authors give several
reasons why there are some biases to
characterizing emerging donors as “distinct”
without analytical insights from the recipients.
Theauthorsturntodataofdonordisbursements
on selected sectors in Cambodia to back up
the selection of Cambodia for studying its
donor fragmentation. The approach used in
this study is interesting since the authors
attempt to capture the institutional arrangement
of bilateral aid between individual donors and
recipients with particular focus on project
identification process in order to identify the
source of diversity. Due to the lack of
documentation on emerging donors’ behavior,
the study mainly relied on interviewing
officials responsible for aid provision and
reception.
The following section is divided into
two parts. The first part discusses the value
underlying aid strategies of the four
emerging donors in Cambodia, and discusses
how projects are identified in the bilateral
institutions of aid assistance. The findings in
the first part show that the common
objectives of emerging donors is to
secure “lucrative markets for their own

14. 13 Article Review
NIDC Bulletin Vol.1 Issue 1/2014
export industries while improving the
investment climate for their private
enterprises, and accelerating regional
economic integration through infrastructure”.
Then, they highlight diversity among the
donors in three aspects: strategy, value
orientation and section allocation policy.
The diversity insights nicely offer readers a
skeptical viewpoint against the notion that
aid, trade, and investment by emerging donors
are inimical to development of the
recipient countries. The second part contrasts
the institutions for identifying aid projects
between the recipient with China and
Thailand. Unlike Thai aid, which personal
connections between government officials
help reduce transaction costs and play an
important role in project identification,
CambodianlineministriesrequestforChinese
aid based on a project-level consultation with
Chinese private companies.In the remaining
sections, Sato et al. (2011) highlights the
rationale for the recipients’ irrational behavior.
Their line of argument comestothesignificant
finding that emerging donors are able to offer
financial support in a highly demanded
sector such as infrastructure whereas
traditional ones are often not responsive to
Cambodia’s particular situations and
only concentrate on some particular sectors
to serve their own agendas. One of the
compelling arguments is the analysis on
the benefit of competition among
donors in recipient countries. They argue for
recipients that “the traditional means of
containing fragmentation has its drawbacks
because the basic problem is not a lack of
coordination, but a lack of competition”. What
we learn from this article is that, in the new
landscape of aid, recipients also attempt to
balance out the influence of both emerging
and traditional donors, in controlling of key
sectors. On the other hand, donors have to
be aware of multiple players that position
themselves in the international politics of aid.
The article nevertheless is inconclusive due
to a lack of enriching data and insights on
Korean, Indian and Thai aids compared with
data on Chinese aid in Cambodia. Readers
can see that the similar set of information
on Korea, India and Thailand is rephrased
and appeared in more than one section in
the article. It seems that the authors study
Chinese aid in particular, but in their paper,
they extend the scope to cover other emerging
donors. One may expect to see more depth
and width on analyzing Asian emerging donors.
In the paper, Sato et al. (2011) emphasizes
that emerging donors are capable of
responding to the needs and aspirations of
the recipients. However, they cannot fully
inform whether emerging donors really care
for recipients’ development when aid projects
are granted. Anyone who is trained in
quantitative studies would ask if their
argument holds for new donors in general.
The paper by Dreher et al. (2011)
can complement the work of Sato et al.
(2011) in that data sets of emerging versus
traditional donors are more completed.
The econometric analysis that Dreher et al.
(2011) employed allows generalization of the
claim they make. Using the data from AidData
Initiative collected during 2002-2008, they
examine 22 DAC donors and 16 emerging or
new donors from the Middle East, Asia,
Eastern and Central Europe, and Latin America.
They employ the Probit and Tobit models to
examine whether there is a significant
difference among traditional and emerging
donors in the allocation of aid across recipient
countries. This study widens our understanding
of new donors, and somehow quantitatively
fills up the gap about the degree of
generalization mentioned above.
They emphasize a lack of evidence
for the selfishness of new donors and argue
that “fears of an erosion of merit-based
aid with the rise of new donors” seem
overblown. They find old and new donors
behave quite similarly. Both old and
new donors use aid as means to promote
their exports to recipient countries and
secure access to resources, but some
of them do not. They both strongly
engage with countries that have disasters.
However, the impact of aid from old
donors is more than twice larger to that
from new donors. Moreover, both

15. Article Review 14
NIDC Bulletin Vol.1 Issue 1/2014
groupsgenerallydisregardthegovernance
issues in recipient countries, as shown
by the lack of differential impact of
corruption on aid allocation by both types
of donors. Dreher et al. (2011)
go further in analyzing different aid
characteristics of and within regional
groups of new donors in several aspects
such as the effect of geographical distance,
recipient needs, poverty orientation, and
level of corruption on aid allocation from
new donors by regional groups. For
instance, new donors, from Asian and
Latin American, favor less corruption,
whereas the ones from Eastern and
Central Europe grant significantly more
aid to more corrupt recipients.
A major significant difference
that the authors show to readers is that,
compared with old donors, the new
donors are less concerned for the
recipients’ needs. This is due to per-capita
GDP, malnutrition, and child mortality as
measures of recipient needs do not play
a significant role in aid allocation of new
donors. Meanwhile, old donors seem to
favor poorer countries more, as compared
to new donors.
The highly merited points
that the paper contributed to the body
of knowledge include: (1) attempting to
prove the benefits and drawbacks of the
new donors with the solid empirical evi-
dence; and 2) conveying the message that
criticisms on emerging/new donors for their
commercial self-interest have little evidence to
support. Interestingly, old donors still cannot
provide better aid than what the new ones do as
believed. The implication for development policy
makers is that, instead of excluding emerging
donors from the landscape of global development
aid, DAC members should consider working with
emerging donors as important partners. Aligning
emerging donors’ aid allocation and selectivity
behaviors with DAC’s development objectives
could be a possible solution.
Nevertheless, a little criticism can be
added here. The technique they used allows us
to see donors as being static. Comparing “DAC”
versus “non-DAC or New” donors give readers a
limited understanding of the dynamics within the
two types of donors as their behaviors evolve
overtime. Any scholars in the field may consider
utilizing more advanced techniques for the further
research on this topic. Furthermore, a lack of
Indian and Chinese aid data, which are important
donors in international aid landscape, somewhat
lessens the degree of validation for their claim.
Although Dreher et al. (2011) has an
obvious challenge, they statistically contest both
the usual criticism by traditional DAC perspectives
and relatively optimistic views such as Sato et al.
(2011). But altogether, these two articles reinforce
and validate the findings of each other, being a
triangulation of the different standpoints and
methodologies employed. They both challenge
the major criticism on emerging donors, and
contend that the two groups of donors do not
have significantly different behaviors from
each other when providing aid. This is perhaps
the reason why emerging donors are also
welcome to the recipient countries.
Reviewed articles:
Sato, J., Shiga, H., Kobayashi, T. & Kondoh,
H. (2011). “Emerging Donors”
from a Recipient Perspective:
An Institutional Analysis of Foreign
Aid in Cambodia. World
Development 39(12), pp.2091-2104.
Dreher, A., Nunnenkamp, P. & Thiele,
R. (2011). Are ‘New’ Donors
Different? Comparing the
Allocation of Bilateral Aid
Between nonDAC and DAC Donor
Countries. World Development
39(11), pp. 1950-1968

16. Board of Editor
Assoc.Prof.Siriporn Wajjwalku
Thammasat University
Dr.Phakpoom Tippakoon
Thammasat University
Miss Nicha Watthanatidpong
Thammasat University
Mr. Charles Kunapermsiri
Thammasat University
Sponsored by The Asia Foundation (Thailand)
Contact Network of International Development
Cooperation Office
6th Floor, Faculty of Political Science,
Thammasat University
2 Prachan, Pranakhon, Bangkok, 10200
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About NIDC Bulletin