The Motives of Aid Donors – an Empirical Study of Taiwan and Australia’s Bilateral Aid Allocation in Solomon Islands

Ming Chuan University

International Business and Trade Program

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Title:

The Motives of Aid Donors – An Empirical Study of Taiwan and Australia’s Bilateral Aid Allocation in Solomon Islands

Name:         Fredrick Maina        01490175

                                Aotoa Temamila        01660322

                                Julie Zheng                01570464

                                Kaleki Deiye                01490166

Supervisor:         Dr. Lynne Lee

Date:                 December 30, 2015

Thesis submitted in partial fulfilment of the requirement of Bachelor of Business Administration

Chapter 1-Introduction

1.1-Background

The motive of donor nations for managing foreign aid and its allocation has unfolded over time. Over the past 100 years, foreign aid structures that began with European colonialism have become tied to shifting economic and political interests, as well as growing humanitarian movement (Phillips, 2013). This process began mainly after World War I when developed countries saw that less developed countries were in dire need of development assistance. Therefore, developed nations started giving aid to these countries by providing capital and the technological know-how needed. Since then, there has been a shift of focus of aid donors from the original developmental aspects to politically-influenced ones. Angus Deaton argued in his book-The Great Escape: Health, Wealth, and the Origins of Inequality (2015) - that aid does not work; rather it can accelerate corruption and keep bad leaders in power. However, many prominent scholars viewed his work on aid puzzling and deemed inconclusive because of the different uses and impacts aid has on different recipient countries (Radelet, 2015). Although extensive quantitative research has been conducted in how aid is given and if aid works, little has been done to understand the motives behind donor countries; thus, how they motivate aid allocation using qualitative research. Some scholars, have however, attempted to explore aid motives from many perspectives of empirical quantitative research.

In earlier research, Dudley and Montmarquette (1976) identified three donor motives. Firstly, donors expect recipient nations to express gratitude in the form of support for donors’ interests, perhaps in the sphere of international politics. Secondly, recipients may trade more with donors, furthering the donors’ economic interests. Finally, donors may care that their aid helps residents of recipient nations enjoy a better standard of living.

Andersson (2009) developed a motive scheme for Sweden’s aid allocation that categorized six motives. 1) Humanitarian- when Sweden is expressing compassion about victims of war and poverty and talks about poverty reduction this is understood as humanitarian motives; 2) strategic- opening new embassies and bonding with the cooperation countries have been interpreted under the strategic motive, as the global threat of terrorism; 3) economic- when Sweden is talking about trade, and promoting Swedish business and export to the cooperation countries, this is interpreted as an economic motive; 4) ideology- this motive has been interpreted when Sweden talks about common politics and values or that they want to help a country in need of more democratic authority. Furthermore, human rights adherence is understood as an ideology motive; 5) identity- when Sweden expresses that they are of importance for the cooperation county or Sweden’s reputation in the international arena, it expresses the identity motive; and 6) environment- this motive has been interpreted when Sweden talks about helping poor nations gaining a sustainable environmental policy. Furthermore, helping out when natural disasters caused by environmental changes occur. She was able to gain a deeper understanding of Sweden’s aid allocation behaviour. Forsudd (2009), too, found little differences in motives when he compared three very similar countries (Denmark, Sweden and Norway), but could not determine why and what implications that might trigger these differences.