Arab ODA flows through many bilateral and multil-ateral channels; the OPEC fund is just one of them. In the oil boom years of the 1970s and early 1980s the Arab nations, including OPEC members, were known as particularly generous donors, but even in recent years they have outstripped most OECD countries in terms of the amount of aid they disburse as a percentage of GNP. Considering that all Arab donor states have economies far less developed than those of rich Western nations, and that their major resource, oil, is a diminishing one, this is a true sacrifice.
The aid is given willingly precisely because Arab countries see themselves as an integral of the South and feel a sense of kinship with their fellow developing countries.
The origins of Arab development assistance go back to programmes initiated by the State of Kuwait and the Kingdom of Saudi Arabia in the mid-1950s to assist the development efforts of their poverty-stricken neighbours. Both countries subsequently set up their own bilateral aid institutions, the Kuwait and Saudi funds.
A number of multilateral institutions swiftly followed. In 1971 the Arab Fund for Economic and Social Development (known as the Arab Fund) was founded, followed closely in 1973 by the Arab Bank for Economic Development in Africa (BADEA). The Islamic Development Bank (IsDB) was launched two years later in Jeddah, Saudi Arabia. In January 1976 the OPEC Special Fund, later named the OPEC Fund for International Development, was created.
With the volume and reach of Arab aid increasing apace, in the mid-1970s Arab donor states decided to pool resources and co-ordinate activities to make their development assistance even more relevant and effective. One of the ways they did this was to set up the Co-ordination Group of Arab National and Regional Development Institutions.
In many respects Arab aid institutions are similar to their Western counterparts and share the same goals, but they have some distinguishing features that set them apart.
On a practical level, institutions such as the IsDB have pioneered innovative approaches such as Shariah-compliant financial practices. Another characteristic of Arab aid is that it is generally not tied, unlike much of that given by Western donors. Tying aid usually makes it less valuable to the recipient as it cannot buy the goods and services required at the best price.
Another important point about the attitude of Arab donors to ODA is that they are not prescriptive; they do not indulge greatly in theorising about what aid should be used on and how it should be disbursed. The impetus comes very much from recipient countries and organisations, and the aid institutions see their function as a partnership rather than a top-down role in which they make all the decisions. This attitude is explained by the fact that Arab aid represents assistance from one group of developing countries to another, and they are fully aware that the complexities of the recipient countries are such that the people of those countries are the best experts on how, where and when the development assistance should be spent.
ASIA: The Arab aid institutions have been a familiar part of the development landscape of Asia for a long time. By the end of 2002, cumulative aid to Asia had topped $36 billion, reflecting population and poverty levels as well as the Arab world's closeness to Asia and other affinities with the region. Asia, for instance, is home to most of the world's Muslims. In total, 36 Asian and Pacific countries have received assistance from the Co-ordination Group. From a sectoral point of view, energy has attracted the lion's share of support at around 36%, followed by industry and mining at 19%, and transport and telecommunications at 17%. The remainder is divided mainly among the social sectors.
In 2002, commitments made by the Group to Asia totalled $660 million and supported a diverse range of projects. In general Arab aid in this area has focused on providing basic needs - the foundations for development.
In the future, Arab aid is likely to remain focused on the poorer Asian countries while still having a broad geographic spread. Arab donors have always prided themselves on their flexible approach and willingness to respond to current conditions, so there may be an increased focus on Central Asia, reflecting the need of many countries in the region for ongoing support.
Arab aid institutions are also acutely aware of the need to play a part in catalysing private sector development. The private sector facilities of the IsDB, the OPEC Fund and the Arab Fund are all active in Asia. Private sector initiatives so far have ranged from financial services, manufacturing and infrastructure to trading and tourism. This involvement in the Asian private sector is likely to have a number of beneficial knock-on effects. In general, the presence of Arab institutions in the private sector may bring in directly, or encourage indirectly, Arab investors to these markets. Specific skills present in the Arab region, in energy and other sectors, may also be developed. Arab institutions may also play a role in opening up the private sector by introducing financial instruments and specialised agencies in line with Muslim customs, thus assisting the wider process of project financing and financial development.
LATIN AMERICAN AND CARIBBEAN (LAC): Arab bilateral and multilateral donor agencies established links with the LAC region over three decades ago. The main providers of assistance to Latin America and the Caribbean have been three institutions: the Kuwait and Saudi funds and the OPEC fund. Together, they have channeled assistance totalling some $1 billion to the region, benefiting around 89 million people. The OPEC fund has particularly strong links with the LAC region by virtue of Venezuela being one of its member countries. Together, Venezuela and the OPEC fund have worked to bring increased resources to South and Central America from the Arab world, more than quadrupling flows over the past decade or so.
In relative terms, the level of assistance to Latin America and the Caribbean as a percentage of total Arab aid has been small. As is typical of Arab financing, however, the bulk has concentrated on the poorest countries of the region, notably Bolivia, Guyana, Haiti, Honduras and Nicaragua. Here, the per capita distribution of Arab aid stands at $17, an amount equal to that received by similar, low-income countries in Asia.
In general, the sectoral distribution of Arab aid in the LAC region has concentrated on physical infrastructure projects, telecommunications, energy, industry, agriculture and livestock, and mining. Initiatives focusing on sanitation, rural development, water supply, health and education are also an important area.
The OPEC Fund is also active in the private sector in the region, having extended lines of credit for small and medium-sized enterprise development.
AFRICA: The continent of Africa has long enjoyed a close affiliation with the Arab world. The geographical proximity of the two regions has nurtured strong trade, cultural and social links, but there is also a natural empathy based on their common status as developing regions sharing common challenges. These bonds of brotherhood have shaped a special relationship between Africa and the Arab donors. By December 31, 2002, the continent had received Arab aid amounting to almost $38 billion. This is close to half of the total aid channeled through the Arab development institutions. It is a consistent flow that has increased steadily year by year - in fact by an annual average of about 11 percent over the five years from 1998 to 2003. Additional resources worth around $3 billion in debt relief stand to be delivered through the HIPC mechanism.
In the early years, the sectoral distribution of Arab aid to Africa showed a heavy emphasis on large-scale infrastructure projects, reflecting the priorities of the beneficiary countries at the time.
More recently, though, there has been a shift in focus towards smaller-scale, community-oriented projects within the context of government poverty reduction programmes.
The Arab donors' focus on Africa comes as no surprise given the enormity of the difficulties confronting the continent, which is home to most of the world's least developed countries.
Despite the apparent bleakness of its present situation, hopes for a better future are rising across the African continent in the wake of NEPAD, the New Partnership for Africa's Development. For Africans, NEPAD represents an opportunity to relaunch and refocus development efforts. More than that, it represents an increased commitment to shaping their own future in partnership with the international community. NEPAD identifies certain priority areas for action that are consistent with the continent's development agenda. These include, among others, governance, infrastructure, agriculture, education and health, the environment, and, information technology.
A number of Arab donor countries are also key members of the NEPAD initiative and are therefore, both development partners and direct participants in the framework. In other words, they have a vested interest in making it work. Members institutions of the Co-ordination Group have put on record their approval of NEPAD and are looking at ways to re-align their lending policies and operational strategies to best support the initiative.
EASTERN EUROPE: In recent years, Arab aid has also developed a small but meaningful presence in Eastern Europe, where assistance has gone primarily to countries in transition, notably Albania and Bosnia and Herzegovina. As of year end 2002, development financing channeled to the region through the Co-ordination Group amounted to just over $500 million. Courtesy The OPEC Fund