Great power competition is permeating the international development sector to an increasing degree, creating challenges for aid-receiving countries which must navigate shifting geopolitical currents. How can recipient countries establish more equal and effective partnerships with donors?
Despite attempts by the international community to come together through global goal-setting since the establishment of the Millennium Development Goals in 2000 and the Sustainable Development Goals (SDGs) in 2015, a common definition of development remains elusive. Few dispute the imperative of eliminating poverty and meeting basic needs, yet the very concept of ‘development’ remains politically contentious. Historically, foreign aid and official development assistance (ODA) have helped countries in the developing world respond to crises and address longer-term economic needs. However, aid and development strategies, in their implementation, often intentionally or unintentionally promote unequal donor–recipient dynamics. At times, they encourage what some critics deem paternalistic or even ‘neocolonial’ relationships. Within donor countries, resistance from populists who consider foreign aid to be a drain on the public finances deters many well-intentioned advocates of ODA. All of this signals a need to re-examine the role of development policies, partners and partnerships to meet the current moment.
What we see today is a confluence of trends that are reshaping the political landscape for ODA and related investments in developing economies. First, China’s rise and an intensification of geopolitical competition have heralded the emergence of an ideological, values-based contest over future development models. Second, the COVID-19 pandemic and the associated public debt crisis have heightened the need for rapid, resource-efficient investments. Third, there is an increasing realization that resource-intensive development models may have run their course, given negative effects that include significant climate change. Fourth, the durability of globalization – and the trade and investment dynamics it implies – can no longer be considered a foregone conclusion. Escalating geopolitical tension risks degenerating into a diplomatic ‘picking of sides’, challenging the model of open markets and free movement that has underpinned trade and investment relationships in recent decades. Developing nations, already in economic difficulty due to the pandemic and other forces, will face increasing political pressure from domestic and international constituencies as they seek to construct the critical partnerships needed to further their development needs.
All of these factors mean that the era in which development is openly acknowledged as a lever for furthering geopolitical aims has fully arrived. The contest to win diplomatic allies and influence ODA partners, in addition to relying on ideology and appeals to values, will very much be about expediency, hard cash and market access. It will also involve development partners – both donors and recipients of aid – jostling to secure long-term economic cooperation and mutual political support. The critical question at this juncture is whether this competition for influence will escalate into something more sinister, foreclosing political options for countries that receive development assistance, or whether it will have a more positive effect in maximizing their long-term strategic manoeuvrability. Either way, the exercise of soft power will increasingly resemble harder power plays.
In this more geopolitically charged climate, the perspectives of recipients get insufficient attention. What are the priorities of such countries? How can and should they navigate the new context to further their own development objectives? Equally, what do donors need to understand better? In this chapter, we will explore these questions first by examining how competing development offerings differ. We will consider the perspectives and priorities of recipient countries, using evidence collected from interviews and research on country responses to current global dynamics. Putting the two sides together, we will present questions for recipient countries to consider in cultivating relations with donors. Lastly, we will suggest guiding principles for managing development relationships in the new geopolitical landscape.
Competition between development offerings – how different are they?
Since the emergence of the COVID-19 pandemic, donor countries have paid renewed attention to the design, effectiveness and affordability of their development assistance strategies. There has been a push to reconsider the merits of existing models and come up with potential alternatives – or, at a minimum, to explore how current approaches might be modified to better meet recipients’ actual development needs while acknowledging the new political constraints. This section compares the approach of China, an emerging and increasingly assertive player, with that of established donors in the West.
For China, the onset of COVID-19 slowed progress on existing Belt and Road Initiative (BRI) projects and delayed new project announcements. The pandemic and related economic challenges also prompted China to forgive debts owed by 17 least developed African countries, a move that reflected the problems many countries have faced in meeting BRI-related repayments. China has yet to indicate that it intends to scale back its BRI vision overall, despite the pause in new projects. Nonetheless, there are signs that the Chinese development assistance model is changing. In 2021, China launched its new Global Development Initiative (GDI), ostensibly designed to complement the BRI by providing a mechanism for realizing progress on the SDGs. The GDI departs from the BRI’s focus on physical transport and trade infrastructure to include priorities such as poverty reduction, food security, green development and digital connectivity.
There are signs that the Chinese development assistance model is changing. In 2021, China launched its new Global Development Initiative, ostensibly designed to complement the Belt and Road Initiative by providing a mechanism for realizing progress on the SDGs.
China is also perhaps learning from its experience with the BRI and quietly retreating from some of the negative aspects of its approach to date – including concerns around the debt sustainability and environmental footprint of BRI projects. Such concerns have been the source of much scrutiny and criticism of China in recent times.
The GDI also represents a contrast with the bilateral approach typical of China’s BRI engagements to date. In a 2022 report by a research institute affiliated with China’s State Council, and in subsequent remarks at the United Nations General Assembly, Chinese officials presented a vision that emphasizes achieving the SDGs through cooperation using multilateral institutions and existing mechanisms, but also with Chinese characteristics such as a ‘development-first principle’ and ‘action-oriented’ approach.
In the West, many G7 countries have upgraded their own development offerings to respond to global challenges and compete with China. Among the new initiatives are the US-led G7 Partnership for Global Infrastructure and Investment (PGII) and the EU’s Global Gateway. While the two initiatives share many priority areas (i.e. climate change, COVID-19 recovery, digital infrastructure, healthcare, gender equality), the US offering emphasizes ‘soft infrastructure’ while the EU’s focuses more on physical infrastructure within the transport sector. In terms of geography, the PGII covers Eastern Europe, Africa, Asia and Latin America, whereas the EU appears to prioritize its ‘near neighbours’, including potential partners in Eastern Europe and Africa.
The financial targets are ambitious. The G7 summit in Germany in June 2022 saw a promise to mobilize $600 billion over five years. Previously, the EU had also promised to mobilize €300 billion over seven years. Delivering on these financial commitments will hinge, among other factors, on the ability of G7 governments to secure investments from financial institutions, private enterprises and development finance institutions at multiples of up to 100 times the public budget funding. Thus, one concern for recipient countries is whether the required scaling up of investments will truly happen given the challenging economic outlook.
Similarities and convergence
Despite their supposed differences, the Chinese and G7 development strategies are similar in many ways. They share priorities that include food security, climate change, COVID-19 recovery and digital infrastructure. Both emphasize green and sustainable growth, and engagement through equitable partnerships. The BRI has mobilized a vast network of state-owned enterprises, development finance institutions and private enterprises to supplement Chinese government funding. The G7’s approach partly mirrors that of the BRI – by relying on recruiting private sector partnerships and funding to achieve ambitious objectives. Meanwhile, the multilateral and aid-based approach of China’s new GDI appears quite similar to UN and Western-style aid programmes in key respects.
Differences in ideology
The main difference between the Chinese and G7 offerings is ideological. Ultimately, each offers a fundamentally competing vision of development assistance.
China has positioned itself as the partner which can best understand recipient-country needs because China itself is a member of the developing world. China appears to seek to influence how international institutions such as the United Nations are structured and governed. It promises a ‘true multilateralism’ that would elevate the priorities of developing countries in international institutions, and ensure that developing countries are no longer the ‘silent majority’.
China’s approach to engagement also clearly differs from that of the West by disparaging economic sanctions and interventionism. With African partners, for instance, China conspicuously seeks to distance itself from the West’s track record by claiming to oppose interference in African countries’ domestic affairs, and to promote respect for sovereignty. It also promises to ‘solve African problems the African way’. China has called for more international cooperation on development, has expressed openness to tri-party agreements on tackling development challenges, and has claimed that it seeks to move beyond geopolitical rivalry in the development sphere. The above-mentioned ‘development-first principle’ in China’s new GDI is particularly salient in the climate change debate: China has expressed support for the idea that developing countries should achieve a certain level of development before being pressured to decarbonize, and that in the meantime developed countries should bear most of the burden of delivering (and funding) the transition to a low-carbon or net zero economy. Meanwhile, the G7 ethos of development focuses on good governance, equal partnerships, transparency and democratic values, while promising to deliver high-quality projects and infrastructure.
Neither the Chinese nor Western objectives are problematic at face value – for example, it is axiomatic that development that respects a recipient country’s sovereignty should be desirable, just as high standards of governance are indisputably beneficial for ensuring that ODA or similar funding is well managed. However, the key question for recipient countries is how much their alignment with one or other development ideology is likely to cost in a wider sense, for example in terms of diplomatic obligations and loss of geopolitical room for manoeuvre. What mechanisms do donors employ to achieve values-related goals, and what are the potential downsides of such mechanisms?
Looking first at the Chinese approach to development assistance, the challenges for recipient-country diplomacy are abundant. While China’s professed respect for sovereignty and the principle of non-interference is welcome for many countries, the reality is that Chinese BRI loans have fuelled corruption, threatening project sustainability and propping up poor governance systems. In addition, China’s engagement with recipient states rarely involves local communities or civil society, whose agendas often differ widely from those of their political leaders. With the advent of the GDI, this dynamic may evolve, since projects undertaken through multilateral partnerships will likely need to conform to more stringent standards around inclusivity, fair distribution of benefits, and respect for local needs and sensitivities.
In their relations with the G7, recipient countries will need to reassure themselves that the promised economic benefits of development projects can be delivered in practice, and that conditionality around governance and democracy will not be used to exert undue diplomatic pressure. While G7 members may be able to hold partners in rich democracies to a set of agreed values, in their dealings with the developing world they may have limited mechanisms for enforcing the same standards without edging into what could be interpreted as neocolonialism (ironically, a similar criticism has been levelled at China’s BRI-related diplomacy). Will potential recipient countries that fail certain ideological tests no longer be eligible for Western aid and investment? Recipient countries should consider whether they are willing to accept the imposition of Western-driven ‘democratic values’ in exchange for development assistance, and whether future projects may be at risk should recipient-country actions not conform to such standards.
This matters because, if recent diplomatic and trade actions are a harbinger of what is to come, it is highly likely that the US and other Western partners will continue to use development tools as levers of hard power. The same applies to the coercive use of aid in combination with trade. In a series of meetings across Africa and Asia in August 2022, senior US diplomats offered aid packages while making barely veiled threats of sanctions against any countries that might continue to trade with Russia or maintain close economic or military ties with China. In 2022, the Biden administration delisted three African countries from the African Growth and Opportunity Act (AGOA) – which supports economic development by allowing duty-free exports to the US – because of human rights and democracy concerns. The US decision further demonstrates that sanctions on development-related trade are part of the portfolio of levers that the US is prepared to wield in response to matters which countries would normally consider their internal affairs.
It remains too early to tell how these ideological differences will play out in developing countries and within the broader international system, or how donor efforts to promote values-based development will translate into action in the context of messy realities on the ground. Recipient countries will play important roles in determining how concepts articulated (or implied) in speeches, proposals and funding pledges, and so on, are ultimately realized. However, given the increasing range of development assistance now available to them, recipient countries are arguably better positioned to pick and choose donors whose priorities align with their own, and to negotiate favourable project terms and ensure optimal project design.
What do recipient countries want, and what must donor countries understand?
Each recipient country’s context and development challenges are unique. This section is not an attempt to capture all individual requirements that need to be addressed in establishing equitable and effective donor–recipient relationships. Rather, as countries face many common challenges, this section collates the principal themes that emerge from our analysis of recipient-country assistance priorities. The analysis is based on interviews with members of government, think-tanks and civil society in recipient countries, as well as on public statements.
First, ‘business as usual’ offerings will no longer be sufficient to meet development needs in the current economic and geopolitical context. In the face of arguably unprecedented challenges, development initiatives must respond to the urgency of action and scale of investment needed to deliver workable solutions on the ground. Assistance packages must address recipient countries’ immediate needs as well as their long-term development objectives, and solutions must respond to a multitude of challenges – development, security, climate, economic – at once.
‘Business as usual’ offerings will no longer be sufficient to meet development needs in the current economic and geopolitical context.
The geopolitical competition between the West and China has prompted each side to publicize the perceived shortcomings of the other’s development approach. Developing countries have been reminded even more acutely of the limitations of existing practices, and of the sometimes exploitative nature of relationships structured mainly for the benefit of donor countries, foreign companies and/or local political elites.
From conversations with recipient-country policymakers, we find that developing countries have established their own plans and visions for development, which they seek to emphasize ahead of those of donors and other funding partners. This increases the pressure on donors to offer partnerships that prioritize local development in recipient countries, rather than visibly serving donor-specific economic or geopolitical ambitions. Among potential recipient countries there is plenty of suspicion of, and little appetite for, arrangements that could be seen as embodying ‘economic colonialism’. If the accusations directed at the BRI are any indication, donors can expect critical scrutiny of where the profits and benefits from proposed investments are likely to flow; equally, they can expect any damaging evidence to be highlighted and instrumentalized by their geopolitical competitors.
Policymakers and members of civil society in recipient countries also continue to have concerns about issues of justice when considering development pathways. This reflects a long history of overseas investment being misdirected, resulting in underdevelopment: for example, there has often been insufficient investment in industrialization or the development of regional trade, and too much investment in unsustainable natural resource exploitation. Climate and decarbonization constitute another contentious area where issues of justice abound: there remains considerable opposition to the prioritization by donors in some rich countries of renewable energy and the transition away from fossil fuels. Despite its fundamental importance to sustainability, the energy transition is challenging for many recipient countries, as the potentially higher upfront capital expenditure involved can sometimes be perceived as conflicting with energy access and energy security imperatives (the dilemma between investing further in fossil fuels to meet immediate energy and development needs and being asked to make a long-term transition to renewables, for instance, is exacerbated by the perception that poor countries are effectively being expected to bear the costs of rich countries’ historical emissions). Donor countries must be sensitive to these issues of justice, and be willing to listen to and respect the needs of recipient-country partners.
Fiscal considerations are also becoming increasingly prominent. Budget constraints associated with the current global economic situation, and with the extraordinary pressures of the COVID-19 pandemic, have left many countries struggling with debt servicing even where creditors have extended repayment periods. Political leaders are being forced to take fiscally contractive approaches, exacerbating underlying development challenges. As a consequence, aid recipient countries are likely to desire development solutions that expand their access to liquidity and offer fiscal flexibility.
Clearly, solutions rooted in national and local contexts are imperative, not least to ensure sustainable implementation and to avoid repeating the failures of aid programmes – however well intentioned – in the past. Both the West and China must be willing to adapt to, and learn from, the circumstances of the countries with which they hope to partner, and must ensure that programming incorporates context-sensitive transfers of skills, expertise and technology in order to create a functional ‘ecosystem’ of development rather than entrenching patron–client relationships of dependency.
Learning from past mistakes also implies a willingness on the part of donors and investors to engage actively with civil society, communities and the local private sector. Failure to do so has notably been a weakness in China’s approach in the past. While China has typically focused its engagement in recipient countries at the level of national political leadership, and has aligned its offerings with national development plans and in consultation with heads of state, it has rarely sought broader buy-in from civil society and local communities; this echoes China’s own top-down approach to domestic development. Civil society, local government and local communities must all be engaged to ensure appropriate attention to the environmental, social and governance (ESG) dimensions of projects. This offers a substantial opportunity to empower local organizations. On any project, measures of accountability should include the criteria of local stakeholders.
It cannot be overemphasized that recipient countries do not want to be pressured into ‘choosing sides’ between great powers, nor do they relish being told what they can or cannot do. When the US secretary of state, Antony Blinken, visited South Africa in August 2022, he promised that the US would not dictate the choices of African countries. Yet this posture is contradicted in practice by the US’s Countering Malign Russian Activities in Africa Act, which pressures countries that remain neutral over Russia’s invasion of Ukraine. In his September visit to Washington DC, President Cyril Ramaphosa of South Africa expressed his concerns about the legislation. He warned of the ‘unintended consequences of punishing the continent for efforts to advance development and growth’, and urged US lawmakers not to ‘punish those who hold independent views when President Biden has sought to engage African countries on the basis of respect for their independence and sovereignty’. To win the battle for influence, development partners will need to assert their agendas more subtly, and tailor proposals to the development and humanitarian needs of recipient countries. Respecting recipient-country agency will help donor governments win support in the long run. Though some donor countries have developed this sensitivity, the US’s methods still appear to miss the mark – and could appear tone-deaf in the current context. If the US hopes to bring more countries into the sphere of those amenable to its promotion of democracy, good governance and respect for human rights, it will need to approach the subject in a less confrontational or moralizing manner, and with a long-term horizon. Acknowledgment of its own failings on such issues is also critical before it ‘preaches’ values to other countries.
It cannot be overemphasized that recipient countries do not want to be pressured into ‘choosing sides’ between great powers, nor do they relish being told what they can or cannot do.
While the G7 plays up the benefits of strong governance and democratic values, there remains a fine line between insisting on accountability and provoking accusations of interference or undue conditionality. Equally, while recipient countries appreciate China’s professed respect for their ‘sovereignty’, both sides in any development partnership will need to reflect on what the concept of sovereignty means in practice.
Questions to consider when evaluating development offerings
In the evolving competition for foreign policy influence through international aid, there are opportunities for recipient countries to tap into external resources that are potentially catalytic for their development. But they must also astutely navigate the geopolitical challenges around such opportunities, to ensure that their priorities are not ignored and to avoid unwittingly becoming the instruments of great power competition. And of course, they must take these necessary precautions without – as far as is possible – delaying important immediate action on economic stabilization and development.
In light of these dilemmas, we offer a checklist of questions for recipient countries to consider when evaluating prospective partnerships and strategic pathways in the contemporary development environment. The checklist is divided into two categories: geopolitical considerations and project considerations:
- What are the geopolitical ambitions of the donor, and what kind of political conditions may be attached to this project?
- What are the recipient’s diplomatic priorities, and how could aligning with the external partner support these priorities or threaten their accomplishment?
- What other partners and institutions can strengthen the recipient country’s negotiating position or leverage?
- Is there a potential ‘third way’? Are there options to combine resources from competing partners in a collaborative project?
- How does the offering align with domestic and regional priorities?
- Who benefits most from the project, and who bears the costs?
- Does the proposal meet international standards in terms of quality, environmental impact, social impact and monitoring?
- What were the favourable and unfavourable outcomes of other projects involving this partner (bearing in mind the experiences of other recipient countries)?
With these questions in mind, recipient countries can carefully consider the medium- and long-term impacts of development partnerships, and learn from one another’s experiences to negotiate favourable and equitable terms for their projects.
Conclusion: A new approach for a new era of development
Development is inescapably being affected by escalating geopolitical competition, but it remains unclear whether the consequences will be positive or negative. How recipient countries adapt to changes in the development landscape will be a major factor in determining whether aid relationships are ultimately equitable and effective rather than exploitative.
Will development in recipient countries benefit from increased attention and resource mobilization, even if the ultimate intention behind donor engagement is to advance geopolitical interests? Or will recipient countries be caught in the middle of great power competition, with their priorities compromised or distorted and projects held hostage to donor agendas?
What is clear is that recipient countries must proactively develop coherent responses to shifting geopolitical dynamics, and must not overlook this moment as an opportunity to elevate their development agendas and priorities. Recipient countries must engage with clear-eyed awareness and consider all the relevant risks and opportunities.
A new era of development requires a new approach. In crafting such an approach, recipient countries have various tools and levers at their disposal. Using these, countries can learn from past mistakes, push development partners to improve their offerings and practices, and more effectively ‘build back better’ despite geopolitical uncertainty. Below we outline a few guiding principles for developing-country governments considering aid or development partnerships:
- Recipient countries should engage with all willing development partners and aim to preserve their right to partner with any country, regardless of its political alliances, and not accept development assistance that closes off other options or relationships. This will help countries to resist political pressure from a single partner.
- Recipient countries should use transparency as a tool for securing their interests. Maintaining transparency about the involvement and interests of domestic and international stakeholders, regional alliances and donor-country commitments can encourage partners to strengthen their development offers and practices. Public scrutiny also makes it difficult for partners to hide malign intent.
- Recipient countries should recognize and fully exploit their negotiating power. Being a pawn in a geopolitical game brings challenges, but recipient countries can also turn the situation to their advantage by being aware of the criticality of their cooperation in the wider geopolitical ambitions of their prospective partners. Strategically keeping their options open can allow recipient countries to insist on specific requirements or contractual provisions, on the understanding that they can walk away or choose other donors should the terms be inequitable. No longer should unequal donor–recipient dynamics prevail – recipient countries have something (their cooperation) which donors want, and should use this to their full advantage in negotiations.
- Recipient countries must not lose sight of their own development needs and agendas. Prospective partners will likely offer other incentives in seeking to influence investment priorities, but recipient countries must be the main guardians of their own development trajectories.
- Recipient countries should anticipate risks, build resilience and avoid dependency. Their leaders need to be fully aware that any development offers and trade deals negotiated today may be vulnerable to future events, such as changes in economic, political or geopolitical conditions. Recipient countries need to be prepared for such contingencies: designing resilience into local economies and industries, avoiding patterns of overreliance on any one partner or programme, and working with allies to limit any unwanted leverage that external partners may seek to apply. While considering these factors adds complexity to long-term development planning, it is also useful thinking that will help prevent the dependency that has been a feature of some aid relationships in the past.
As the geopolitical dimension of development takes on a more confrontational nature, there is perhaps room for cautious optimism that developing countries can find a path forward in this new landscape – one that could allow their development needs and priorities to be better addressed. The intensification of geopolitical competition comes at a time when many developing countries now realize the flaws in, and negative consequences of, the donor approaches of Western governments/agencies and Chinese entities respectively. Recognition of the shortcomings of established development assistance models – notwithstanding their many benefits as well – can incentivize recipient countries to both raise their own standards and demand more of their partners. Perhaps within this competition lies an opportunity for recipient countries to push donors to learn from each others’ mistakes and upgrade their approaches.