February 2018 – Number 163 Z` ______________________________________________________________________________ Arab Aid on the Rise 2011-2016 Mustapha Rouis and Olga Shomakhmadova1 during the crisis, before dropping back to the pre-crisis level. Arab donors continue to be responsive to the needs of developing countries. Gulf countries, notably Kuwait, Saudi Arabia, and the United Arab Emirates; and Arab financial institutions have increased their financial assistance overtime, during the global financial crisis and in the aftermath of the Arab Spring for Arab countries in transition2. Gulf countries are the biggest non-DAC aid contributors Since the global financial crisis (2008–2010), official development assistance (ODA) from the main GCC countries has continued to grow in both absolute and relative terms (Figure 1.) The combined share of aid from Kuwait, Saudi Combined net ODA from Kuwait, Saudi Arabia Arabia, and the UAE increased from 2.8 percent and UAE, almost doubled (on a yearly average) of total aid from DAC countries in the four years during the global financial crisis and doubled before the global crisis to 4.0 percent during the again during the aftermath of the Arab Spring. It crisis (2008-2010) and 7.5 percent following the reached a record high in 2014 at US$ 19 billion. Arab Spring (2011-15). Similarly, the share of Saudi Arabia increased aid by the greatest total ODA from the three Gulf Countries in non- amount and continues to lead among the three DAC countries, increased on average from 69 countries. Its aid accounts for 65 percent of total percent prior to the global crisis to 73 percent aid of the three GCC countries combined during the period 2011-15, followed by the UAE (33 percent), and Kuwait (2 percent). Total ODA 1 Mustapha Rouis, Consultant, Offfice of the Chief Economist, Middle East and North Africa Region, The World from the three countries also increased Bank. Olga Shomakhmadova, Consultant, former UNDP significantly as a share of gross national income, staff. This MENA K&L Quick Note was cleared by Rabah yielding a weighted average of 0.80 percent Arezki, Chief Economist, Middle East and North Arica Region, The World Bank. during 2011–2015, as compared to 0.55 percent during the previous three years. This proportion 2 Caution is needed in interpreting the data because of definitional and coverage problem, as well as overlap. GCC is higher than the DAC average of 0.30 percent, ODA data are underestimated for some countries. Kuwait and the United Nations target of 0.7 percent. reports only on its fund activities, while Qatar stopped reporting to DAC for a long time. Also, there is an overlap Most aid from the three Gulf countries is between ODA and Arab financial institutions data since bilateral, channeled through their respective national funds are covered in both. Further complication is governments, and provided in the form of due to the fact that ODA covers disbursement while fanatical institutions cover commitment of total financial grants (around 90 percent). assistance. Details on net ODA disbursements by recipient assistance (on annual basis) following the global countries are available only for Saudi Arabia economic crisis (2008-2010), and then increased and the UAE. In both cases, over 80 percent of it by 70 percent since the Arab unrest (2011- total aid during 2011-15 was given to five 2014). countries, all Arab countries but one (Pakistan). Egypt received the lion share, followed by The United Arab Emirates became in 2010 the first Jordan. non-DAC country to provide detailed aid flow information, and in 2014 it became a DAC The sharp increase in aid from the Gulf participant. Since 2009, the UAE has published countries during 2011-2015 coincided with high annually a comprehensive and detailed report level of oil prices which went from $79/barrel in about its foreign assistance. The UAE financial 2010 to $106/barrel in 2014Q2. The dramatic fall assistance picked up significantly in 2013, in oil prices since the second half of 2014 does reaching a high level of nearly US$9 billion in not seem to translate into less aid from GCC 2015. Nearly three-fifths of this assistance in countries in 2016 as suggested by the available recent years was in the form of grants and in- data for Kuwait and UAE. kind aid, and the remainder in concessional loans. The Arab countries in transition (ACT) Type of financial assistance and recipient account for over three-fifths of total UAE’s countries foreign assistance during the period 2013-2016. The three Gulf countries discussed above report The dramatic increase since 2013 was due to the data to OECD-DAC in aggregate terms, which exceptional assistance to Egypt. does not allow for analysis of recipient countries Qatar foreign assistance has increased and sectors. However, the UAE, Saudi Arabia substantially after the Arab Spring. It went from and Qatar do publish, to a varying degree, an average of US$267 million in annual detailed information on their financial disbursements over the period 2004-2010 to assistance. US$1.7 billion during 2011-2015. Qatar Saudi Arabia has published in May 2016 its first assistance was exceptionally large in 2013, detailed report on its development and largely in support of Egypt, and, to some extent, humanitarian assistance. According to this Tunisia. report, the bulk of assistance during 2005-14 was Strong support from Arab national and for development purpose (93.5 percent) and the regional financial institutions3 rest for humanitarian. Nearly 80 percent of total assistance was in the form of grants, the rest National and regional development financial largely in concessional loans. Financial institutions expanded their assistance during the assistance is generally delivered bilaterally, with global financial crisis and the Arab transition no conditionality attached. (Figure 2), particularly since 2013. Total commitments of the eight Arab financial Saudi Arabia increased its financial assistance institutions more than doubled (on an annual threefold in 2014, reaching $14.4 billion. Several basis) over the period 2011–2016, compared to factors account for the jump, namely the period 2008–2010. It rose from US$ 7.4 humanitarian needs (including assistance to Arab countries in transition, notably Egypt, and 3 Strictly speaking, IsDB and OFID are not exclusively Arab- Iraq.) Saudi Arabia had more than doubled its financed institutions, but Arab countries provide the largest share of their funding. 2 billion in 2010 to reach an all-time high of US$ allocation from Asian and Arab countries to 20 billion in 2016. African and poor countries (IDA recipients) until 2015, then a reversal in 2016. Third, within Table 2. Commitments of national and regional the Arab group, countries in transition have Arab financial institutions (US$ millions) witnessed an increase in their allocations, 80000 especially since 2013. Finally, while 70000 infrastructure (notably energy sector) continues 60000 to be the dominant sector, more resources went 50000 to agriculture and social sectors (education, 40000 health and housing)—a trend that began in the 30000 20000 early years of the last decade. 10000 Differentiated support to Arab countries in 0 BADEA ADFD AMF OFID SFD KFAED AFESD IsDB transition Cum 2007 2008-10 2011-16 The GCC countries and Arab national and regional financial institutions have provided The bulk of assistance during 2011–2016 was significant financial assistance to five of the provided by the Islamic Development Bank countries going through political transition as a (56.5 percent), followed by the Arab Fund for result of the Arab Spring, specifically Egypt, Economic and Social Development (10.2 Jordan, Morocco, Tunisia, and Yemen. GCC percent), the Saudi Fund for Development (9.7 countries (namely Kuwait, Qatar, Saudi Arabia, percent), and the OPEC Fund for International and the UAE) and major regional financial Development (7.9 percent.) The contribution of institutions have committed themselves to each of the remaining institutions ranges support Arab partner countries as part of the between 2 and 6 percent. Deauville partnership. Overall, financial assistance remains Total GCC financial aid to Egypt amounted to concentrated in a few recipient countries. The over US$30 billion during July 2013 to December top 5 recipient countries account for nearly 40 2016. In the case of Jordan and Morocco, four percent of total assistance over the past 20 years, GCC donors (Kuwait, Qatar, Saudi Arabia and and the top 10 accounts for 55-60 percent. In UAE) pledged in 2011 a special aid package 2011-15 the top 10 consists of seven Arab totaling US$5 billion for each for investment countries plus Bangladesh, Pakistan and Turkey. projects to be disbursed over a 5-year period. In In 2016, the opposite held, with 3 Arab countries the case of Tunisia, GCC countries pledged (Egypt, Oman and Morocco) and seven non- around half of the total amount raised by Arab countries (including Serbia and Tunisia during its 2016 investment conference Turkmenistan.) (US$8 billion). Prior to this, Tunisia got minimal support from Arab countries, with the exception A closer look at the level, source and of Qatar. Finally, Yemen had received prior to beneficiaries of aid allocation during the past ten the 2015 political conflict a total of $7.1 billion in years shows a changing pattern. First, The IsDB disbursements during 2012-14 from bilateral and has become the major player, with contribution international donors. The contribution of GCC accounting for 57 percent of the total. Second, countries amounted to $4.7 billion, of which $2.2 there has been a steady shift in resource 3 billion from Saudi Arabia in the form of oil Saudi Arabia and UAE account for the bulk, and products. their combined aid has sharply increased in support of Arab countries in transition, Arab national and regional financial institutions. particularly Egypt. During 2011-16, Arab Countries in transition accounted for nearly 30 percent of total The same pattern can be observed regarding the assistance provided by Arab financial volume and allocation of financial assistance institutions, with Egypt accounting for over half provided by national funds and regional of that amount. The annual average of financial financial institutions. Total commitments of assistance provided to these countries during Arab financial institutions more than doubled 2011-16 was 68 percent higher than the average since the Arab Spring compared to the period during the global economic and financial crisis, before that. The bulk of assistance went to which in turn was nearly 70 percent higher than Egypt, particularly since 2013. the average prior to the crisis. With the sharp decline in oil prices, it is not clear There are wide country variations. The financial whether this level of support from GCC support for Egypt increased slightly in 2013, but countries and regional financial institutions can tripled in 2014 and remained high thereafter, continue. The good news is that regional while the support for Tunisia increased mainly financial intrusions have built the capacity (both in 2012-13, and for Jordan increased by almost equity and ability to access the capital market) to one-third. On the other hand, the financial be less dependent on oil revenue transfers. assistance for Syria has stopped since 2012 and for Yemen dropped significantly over the past Contact MNA K&L: two years, both as a result of the ongoing Samia Msadek, Director, Strategy and conflict. In the case of Morocco, the financial Operations. support remains almost unchanged on average. MENA Region, The World Bank. In most cases, the bulk of assistance was Regional Quick Notes Team: Omer Karasapan, & provided by regional institutions, notably the Mark Volk - Tel #: (202) 473 8177 IsDB (39 percent), and the Arab Fund for The MNA Quick Notes are intended to summarize Economic and Social Development (22 percent). lessons learned from MNA and other Bank While national funds provided assistance to all Knowledge and Learning activities. The Notes do not countries in transition with the exception of necessarily reflect the views of the World Bank, its Libya and Syria, the bulk went to Egypt (case of board or its member countries. the Saudi Fund and the Kuwait Fund) and Jordan (case of the Abu Dhabi Fund.) Conclusion Official development assistance (ODA) from Kuwait, Saudi Arabia and the UAE has grown over the years both in absolute and relative terms, with its share in DAC ODA more than doubling over the past ten years and its share in non-DAC ODA accounting for over 70 percent. 4