World’s 17th-largest donor struggling with shortage of funds and personnel


South Korea is struggling to meet its commitments to an increased overseas assistance as its financial stability is threatened by ever-growing welfare outlays and shriveling tax revenues.

The country has touted its astonishing transformation from a major aid recipient to the world’s 17th largest donor in a few decades. In 2010, it joined the Organization for Economic Cooperation and Development’s Development Assistance Committee, a club of the world’s major patrons of poor countries.

But experts say that its development agenda faces hurdles due to its small-scale funding relative to the number of planned projects, lack of specialized workforce, conflicting goals of about 30 domestic aid agencies and their short-sighted strategies focusing on loans rather than grants.

“While Korean NGOs and other related sectors have secured some level of professionalism in development and relief activities, the government has not kept up with them because it keeps rotating staff from one position to another under its personnel policy,” Han Bi-ya, a celebrated travel writer and relief worker, told reporters last week.

“Though the Foreign Ministry did a good job sending emergency relief during previous disasters such as the earthquakes and tsunami in Japan last year, it simply followed its manual rather than acting with its own long-term strategies.”

Seoul’s official development assistance totaled around $1.32 billion last year, consisting of grants and low-interest loans. That reflects a more than 12.5 percent jump from 2010 and six-fold growth from 2000, according to the OECD.

The record sum, however, represents a meager 0.12 percent of gross national income, falling short of its 0.13 percent target and far lower than the 0.35 percent rich-world average.

Loans have spiked from $132 million in 2007 to more than $412 million in 2011, now making up more than 30 percent of the country’s entire ODA. Meanwhile, grants shrunk nearly 2.8 percent on-year to $558 million last year.

In contrast, the bulk of donor countries led by those in Europe maintain a grants-only policy.

Some Foreign Ministry officials chiefly blame the decelerating aid disbursal on the Finance Ministry’s unwillingness for a larger allocation amid economic doldrums and surging demand for social benefits.

The debt crisis in Europe, coupled with listless business sentiment across the globe, has taken their toll on foreign aid in many countries.

Contributions by wealthy nations fell a collective 2.7 percent last year and Korea was one of only seven among the 23 OECD members to beef up funds, the Paris-based agency said in April.

Asia’s fourth-largest economy is also forecast to slow down this year and the next, pummeling tax revenues and its aim to pare down the debt-to-GDP ratio to 31.3 percent in 2013 from 33.3 percent this year.

Under the plan, the government plans to sell off its shares in state-run enterprises, tighten management of public-sector assets and restructure social overhead capital investments that were augmented in the wake of the 2007-8 global financial meltdown. It is also expected to adjust the list of tax-free items and step up its crackdown on rampant tax evasion.

The Foreign Ministry is seeking to gradually raise the ODA-to-GNI ratio to 0.25 percent by 2015, a goal now considered by many to be unrealistic.

“The fall of ODA is a source of great concern, coming at a time when developing countries have been hit by the knock-on effect of the crisis and need it most,” Angel Gurria, the OECD’s secretary general, said in the April report.

“Aid is only a fraction of total flows to low-income countries, but these hard economic times also mean lower investment and lower exports. I commend the countries that are keeping their commitments in spite of tough fiscal consolidation plans. They show that the crisis should not be used as an excuse to reduce development co-operation contributions.”

To maintain equilibrium between the two crucial national objectives, Seoul should better harness its development experience and choose areas of concentration given limited resources, said Lee Seung-joo, an international politics professor at Chung Ang University in Seoul.

His recommendation is in line with the view of the OECD DAC, which is scheduled to issue the results of its peer review of the progress in the country’s s development aid in December.

“Korea’s ODA targets too many recipients while lacking a sustainable and consistent strategy for each beneficiary,” Lee said in a recent report published by the East Asia Institute.

“The government needs to establish detailed principles and standards to better implement its development aid policy in light of its relatively small scale. The principles and directions of the policy focus should also be connected to Korea’s overall diplomacy goal.”

By Shin Hyon-hee (heeshin@heraldcorp.com)