73004 July 2012 – Number 69 X1` ARAB DONORS’ EARLY RESPONSE TO THE ARAB SPRING Mustapha Rouis1 Development Assistance Committee (DAC), increased from 2.8 percent in the three years before Introduction: The World Bank’s 2010 study, Arab the crisis to 4.0 percent during the three-year crisis Development Assistance: Four Decades of Cooperation, period, an increase of 44 percent. Total ODA from and the subsequent note, Arab Donors Respond the three Gulf Countries, which accounts for the Favorably to the Global Financial Crisis (Rouis 2011), lion’s share of assistance from non-DAC countries,2 showed that the three Gulf countries—Kuwait, also increased during the crisis period to 64 percent Saudi Arabia, and the United Arab Emirates from about 59 percent. Combined net ODA (UAE)—have provided generous aid financing over disbursement from these three countries peaked in the years. This paper, which extends the analysis to 2008, when the global financial crisis was at its 2010 for Arab overseas development assistance worst, at US$ 6.5 billion and remained high (ODA) and to 2011 for the assistance provided by thereafter at around US$ 4.2 billion (Figure 1). In real the Arab regional financial institutions, confirms terms (2010 prices), total ODA from the three that this generosity continues in the wake of the countries increased by 55 percent during the crisis global economic crisis and the events of the Arab period (2008–2010), as compared to the three-year Spring movement. The paper shows that Arab period preceding the crisis. Saudi Arabia registered assistance has been responsive in addressing critical the highest increase and continued to be the most development and humanitarian needs in developing significant contributor, averaging 78 percent of total countries. There are preliminary indications that disbursement during the crisis period, followed by Arab donors and financial institutions have made the UAE (17 percent), and Kuwait (5 percent). some adjustments in response to the needs of the Arab countries going through the unprecedented Total ODA from the three countries also increased political transition sparked by the Arab Spring. significantly as a share of gross national income during 2008–2010, averaging (weighted) 0.56 percent Gulf Countries Increased Financial Support during compared to 0.47 percent during the previous three the Global Crisis: At the height of the global years. This level is higher than the OECD-DAC financial crisis and afterwards (2008–2010), ODA average of 0.31 percent, and in the case of Saudi from Kuwait and Saudi Arabia increased Arabia (0.87 percent) much higher than the United significantly in both relative and absolute terms. Aid Nations target of 0.7 percent. The bulk of assistance from the UAE fell, largely as a result of the from these three Gulf countries is provided on a exceptional increase in 2007 (see below). The bilateral basis (94 percent), channeled largely combined share of aid from these three countries in through their respective governments and provided total ODA, as reported by the Organization for in the form of grants (85 percent). The grant element Economic Development and Co-operation (OECD) increased slightly during the crisis period, while bilateral assistance declined somewhat in favor of 1 Mustafa Rouis, Consultant, Office of the Chief Economist, multilateral support. Middle East and North Africa Region, The World Bank. This MENA K&L Quick Note was cleared by Caroline Freund, Chief 2 Economist, Middle East and North Arica Region, The World There are 21 non-DAC countries reporting to OECD-DAC on a Bank. voluntary basis. Apart from Russia, the other BRIC countries do not report to DAC. These significant increases in aid took place against the same period. UAE’s ODA reached its peak in the backdrop of a global financial crisis to which the 2007 at US$ 2.4 billion, a figure six times higher than three Gulf countries themselves were not immune. previously reported and, significantly, higher than The full impact of the crisis was felt in 2009, with a that for Saudi Arabia in the same year. The revised one-year lag. Economic growth in all three countries figures show a similar increase in the ratio of ODA decelerated in 2008–2010 as compared to 2005–2007. to gross national income, placing UAE above the Their fiscal and current account balances shrank. DAC average throughout the ten-year period, with Crude oil prices dropped by over one-third in real the exception of 2010. terms in 2009. World commodity (including cereals) prices reached their peak in 2008. Cereal prices are It is possible to examine the allocation of UAE of particular relevance to the Middle East and North development assistance in more detail, as the UAE Africa region, and to the Gulf countries in particular, became in 2010 the first country outside the OECD- as the region accounts for half of total world cereal DAC to provide detailed aid flow information. In imports. In 2010 and more clearly in 2011, the 2009–2010, the UAE contributed over US$ 1.0 billion macroeconomic situation of all three countries in gross ODA on average per year. Of this improved significantly due in large part to favorable assistance, 86 percent was in the form of grants or oil prices. in-kind aid (such as food aid) and 14 percent in concessional loans. This aid was sourced from the Figure 1. Total Net ODA Disbursements of Kuwait, government (61 percent), the ADFD (21 percent), Saudi Arabia and UAE and foundations and charities (18 percent). Over 8000 1.20 thirty agencies in the UAE are involved in providing overseas assistance, and the list is growing. The 1.00 6000 OCFA is currently working, in close collaboration 0.80 with DAC, to expand the database by: (a) expanding 4000 0.60 it beyond grants and loans to include investment 0.40 and equity; and (b) disaggregating multilateral and 2000 bilateral data into meaningful activities such as 0.20 budget support, investment projects, and training. 0 0.00 From a regional perspective, 70 percent of the UAE’s gross ODA disbursements in 2009–2010 were Arab ODA (US$mil) Arab ODA/GNI (%) directed to Asia and 14 percent to Africa. The DAC ODA/GNI (%) Middle East and North Africa region received 48 percent of the UAE’s total aid flows. Around 64 percent of UAE’s aid was provided to poor countries The United Arab Emirates Boosted Development (defined as International Development Association Assistance: The UAE’s Office for Coordination of (IDA) recipients). Some 10 percent of the UAE’s aid Foreign Aid (OCFA), which tracks and documents was provided to countries in Sub-Saharan Africa the financial assistance provided by the country, has and 20 percent to Highly Indebted Poor Countries issued its second annual report covering the year (HIPC). Five recipient countries (Yemen, Pakistan, 2010. This report substantially revises the UAE’s Afghanistan, West Bank and Gaza, and Sudan, in ODA figures for the period stretching back to 2000, descending order of volume of assistance) accounted and the OCFA is in the process of stretching this for 68 percent of the UAE’s assistance during 2009– adjustment back to cover the period since 1971. 2010. These adjustments are based on the fact that, prior to 2009, DAC-ODA figures for the UAE included only In terms of sector allocations, economic sectors aid provided by the Abu Dhabi Fund for accounted for 22 percent of the UAE’s aid, followed Development (ADFD), which according to the by commodity aid and general programs (20 OCFA represents on average about 25 percent of the percent), humanitarian assistance (17 percent), UAE’s total ODA. Recent ODA data reported for education and health (14 percent), government and UAE by DAC for the last ten years (2001–2010) are civil society (12 percent), water (5 percent), and three times higher than last year’s reported data for others (10 percent). July 2012 · Number 69 · 2 In establishing the OCFA in 2008, the UAE took an Aid from Arab Regional Financial Institutions important first step toward more effective Continues to Expand: As part of the overall increase development assistance. The OCFA envisions in total bilateral assistance from the Gulf Countries, helping the UAE’s donor organizations to build regional development finance institutions also stronger capacity for monitoring and evaluating the increased their assistance during and after the global results of their assistance. Two reporting agencies— financial crisis4 (Figures 2 and 3). Dubai Care and the Khalifa Foundation—have already put monitoring and evaluation systems in Figure 2. Commitments of Regional Arab Financial place. The OCFA also plans to play a growing role in Institutions international aid effectiveness forums. The UAE (US$ millions, constant 2010 prices) participated in the Fourth High Level Forum on Aid 40000 Effectiveness held in Busan, in the Republic of South 35000 Korea, in November 2011. At that forum a decision 30000 2011 was made to shift the emphasis from aid 25000 effectiveness to development effectiveness. The 2010 20000 success of the OCFA could be emulated by other 15000 2009 countries in the region. Qatar and Saudi Arabia 10000 seem to be moving in this direction by strengthening 2008 5000 their own aid agencies. 0 Cum 2007 IsDB OFID AMF AFESD BADEA ADFD SFD KFAED Qatar Strengthens its Institutional Framework for Financial Assistance: Qatar’s financial assistance comes under the responsibility of the Ministry of Foreign Affairs (International Development Figure 3. Commitments of Regional Arab Financial Department), in close collaboration with the Institutions (US$ billions) Ministry of Economy and Finance (International 7.0 Economic and Financial Cooperation Department). 6.0 The assistance, amounting to about US$ 480 million 5.0 in disbursements per year on average over the most 4.0 recent years (2006–2008),3 is provided largely for 3.0 investment projects in the form of either grants or 2.0 highly concessional loans. The government share of this assistance was about 83 percent, with the rest 1.0 provided by nongovernmental organizations, 0.0 1990-94 2000-04 2008-10 largely for humanitarian assistance. The government will soon publish a more comprehensive report on nominal real its financial assistance, similar to the annual report published by the UAE’s OCFA. This report will provide detailed information and analysis of Qatar’s According to data provided by the Coordination foreign aid up to 2011. There are indications that the Secretariat of the Arab National and Regional government of Qatar may be moving toward the Developmental Institutions, the total commitments establishment of a full-fledged aid coordination of the eight Arab financial institutions5 increased agency, though this is at an early stage of consideration. 4 It should be pointed out that there is a double count between this section and the first one, as outflows from the three national funds (Abu Dhabi Fund, the Kuwait Fund and the Saudi Fund) are included in the figures that the UAE, Kuwait, and Saudi Arabia respectively report to the DAC. These entities are the 3 It is not clear from the information available whether this primary bilateral aid agencies of the countries in question. 5 amount refers to gross or net disbursements. It is also not clear These include the ADFD, Kuwait Fund for Arab Economic whether the full amount can be classified as ODA per DAC’s Development, Saudi Fund for Development, Arab Fund for definition. Qatar stopped reporting on a voluntary basis to Economic and Social Development, Arab Monetary Fund, Arab OECD-DAC in 1990. Bank for Economic Development in Africa, OPEC Fund for July 2012 · Number 69 · 3 substantially over the period 2008–2011 compared to countries since their uprising.6 Most GCC members the pre-crisis period (2005–2007). This increase (namely Kuwait, Qatar, Saudi Arabia, and the UAE) amounted to over one-third in real terms. Total have committed themselves as part of the Deauville commitments rose from (in nominal terms) US$ 4.6 partnership to support Arab partner countries. billion in 2007 to reach an all-time high of US$ 7.5 Furthermore, Jordan and Morocco were invited to billion in 2010, followed by US$ 6.3 billion in 2011. join the GCC. The bulk of assistance provided during 2008–2011 came from three international and regional The overall volume of assistance provided to Arab institutions: the Islamic Development Bank (IsDB, 36 Spring countries by Arab financial institutions in percent), the Arab Fund for Economic and Social 2011 was 18 percent below the average of the Development (20 percent), and the OPEC Fund for previous two years. With the exception of Tunisia, International Development (11 percent). Among where commitment levels increased by 1.5 times national funds, the Kuwait Fund for Arab Economic (albeit from a low level), and Libya, where there has Development contributed the most (11 percent). been no history of support given its wealth, the level of commitment either remained about the same (as Arab financial institutions expanded their support to in Egypt and Yemen) or dropped sharply (as in poorer developing countries. IDA recipient Jordan and Morocco). This should not be interpreted countries saw their share of Arab financial as a lack of support to these countries but rather as a institution aid flows increase by 9 percentage points reflection of the unusually high commitments made between 2005–2007 and 2008–2011, reaching 47 in the previous year (2010). In most cases, the bulk of percent of total commitments. Similarly, HIPC support was provided by regional institutions, countries’ share increased by 3 percentage points notably the IsDB and the Arab Fund for Economic and reached 25 percent of total commitments. This and Social Development. increase in aid to poor countries came largely as a result of a drop in the share of aid provided to Arab Conclusion: Arab donor countries and financial countries. During the global crisis (2008–2010), institutions have responded favorably and promptly support from Arab financial institutions continued during the global economic and financial crisis. to primarily target infrastructure sectors such as Their increased assistance to countries affected by transport and energy. In 2011, relatively more the Arab Spring has yet to materialize beyond the resources went to water and social sectors, a trend stage of pledges and commitments. that began in the early years of the last decade. Contact MNA K&L: Arab Donors’ Response to the Arab Spring Laura Tuck, Director, Strategy and Operations. Continues to Evolve: It is too early to assess the aid MENA Region, The World Bank. response of Arab donor countries and financial Regional Quick Notes Team: institutions to the countries affected by the Arab Omer Karasapan, and Roby Fields Spring (Egypt, Jordan, Libya, Morocco, Tunisia, and Tel #: (202) 473 8177 Yemen). Because the Arab bilateral donors do not provide detailed information about their assistance, The MNA Quick Notes are intended to summarize it is difficult to estimate whether their aid lessons learned from MNA and other Bank Knowledge relationships with these countries have changed. and Learning activities. The Notes do not necessarily However, there are indications of increased support reflect the views of the World Bank, its board or its to Egypt (primarily by Saudi Arabia), Jordan (by member countries. GCC), Tunisia (by Qatar), and Yemen (by Saudi Arabia). In addition, some GCC countries provided humanitarian assistance to Tunisia and Yemen to help address the situation of refugees and internally 6 displaced people. A total of over US$13 billion has This consists of pledges/commitments for Egypt made by UAE been pledged so far by Arab Gulf donors to these (US$3.0 b) and Saudi Arabia (US$1.5 b); for Jordan by 4 GCC countries in equal contribution (US$5.0 b); for Libya by UAE (US$58 m); for Tunisia by Qatar (US$500 m); and for Yemen by International Development (OFID), and Islamic Development Saudi Arabia (US$3.25 b) and UAE (AED 500 m). Bank (IsDB). July 2012 · Number 69 · 4