Arab Foreign Aid: Disbursement Patterns, Aid Policies and Motives

This report examines Arab aid flows and aid policies, and contrasts them with the broad picture of Western practice in these areas. The lack of analysis of Arab aid in the literature is unfortunate since

(1) Arab countries have been major donors of foreign aid in general,
(2) targeted strategic aid can be a powerful weapon of influence, especially for pursuing Arab donors' own foreign policies, commercial interests or religious motives, and
(3) it seems that Arab aid is different from Western aid in that it is used to promote Islam and build Arab solidarity.

One aim of this report is to assess whether Arab and Western aid are set to work in opposite directions, or whether they can complement each other.

One feature of aid from the three major Arab donors, Saudi Arabia, Kuwait and the U.A.E., is that they give most of it (around 85 %) bilaterally, mostly in the form of loans, with a large share (about 50 % of national and multilateral Arab aid) going to Arab countries. This is not to say that the Arab multilaterals are not major financiers of development projects. On the contrary, Arab multilaterals have been built up over the years in such a manner that they are more important than the bilateral national aid agencies of the Arab countries. However, most of the Arab bilateral aid is channelled through their Ministries of Finance and is not open to public scrutiny; hence, the Ministry of Finance in each of the Arab donor countries seems to be the most important aid institution in the Arab region.

Anther feature is that while Arab aid has been very generous, it has also been very volatile - due both to the volatility of Arab countries' revenue from their oil and gas exports and to their strategic use of aid to support their foreign policies. On the latter issue, much aid has gone to build and maintain allies in the Arab world and to reward supporters during military conflicts (Iran-Iraq war, the 1991 Iraqi invasion of Kuwait). This is the same motive for giving aid as is found for much Western aid.

Other motives important to Arab donors seems to be to support their own commercial interests; similarly, Western donors have a long history of pursuing tied aid and giving more aid to countries that are major importers of that donor country's goods. Finally, Arab aid seems to go partly to Islamic countries, and coupled with the large flow of non-official aid into promoting Islam, it seems as though such religious aims are important to Arab donors.

Arab donors have not participated in the aid policy debate that has been so important to Western donors. This probably reflects the Arab view that recipient countries should be allowed to choose their own development path and not be obstructed by "imperialist" ideas from donor countries. The Arab donors thus have a long history of policy dialogue with recipient countries that Western countries can learn from if they are in fact interested in building partnerships with recipient countries.