What is International Financial Aid

What is International Financial Aid

 International economic aid refers to the grants and preferential loans provided by the relevant national economic organizations to developing countries. It is an integral part of long-term international capital flows . The typical international economic aid in the early postwar period was the Marshall Plan implemented by the United States from 1947 to 1950 to aid the recovery of Europe. Since the 1950s, international economic and financial organizations have turned to providing international economic assistance to numerous developing countries. In the early 1970s, the UN General Assembly had agreed that the proportion of aid should reach 1% of the gross national product of each country, of which official development assistance should reach 0.7%. But in practice, developed countries, including the United States, have not met this requirement. On the contrary, since the 1980s, this proportion has declined.

 International economic aid was formed after World War II and gradually became an internationally recognized policy. Mainly divided into two categories: official and unofficial. In official aid, international organizations, regional institutions, or a certain country have international economic aid projects; unofficial mainly refers to low-interest loans provided by private commercial banks to underdeveloped areas. The assisted countries are mainly concentrated in developing countries, and international economic assistance has become an important issue in the international community’s handling of North-South relations.

Forms of International Financial Aid

1. Official development assistance

 This is the main form of international economic aid, which is divided into two categories: bilateral aid and multilateral aid.

2. Other official funds

 Other official funds refer to export credits subsidized by government support and joint loans issued jointly by international financial organizations and commercial banks.

3. Private funds

 Private funds mainly refer to export credits supported by unofficial export credit insurance agencies, as well as donations and grants sponsored by non-profit organizations and individual foundations.

International Financial Aid Agency

1. Institutions that provide official development assistance.

 1) Specialized agencies established by the government, such as the US Department of State’s Agency for International Development (USAID) has a Private Enterprise Bureau, and the Canadian International Development Agency (CIDA) has an Industrial Cooperation Division.

 2) Specialized official aid foundations, such as the Belgian Foundation for Development Cooperation (FCD), the Swedish Foundation for Industrial Cooperation with Developing Countries (SWEDFUND), the Danish Fund for the Promotion of Industrialization in Developing Countries (1FC), and the Finnish Industrial Development Cooperation Foundation (FINNFUND), French Aid and Cooperation Foundation (FAC), etc.

 3) Official investment and development companies or institutions that also have aid functions, such as the German Investment Finance Corporation for Developing Countries (DEF), is the main government agency for the implementation of the “Small and Medium-Sized Enterprise Loans to Developing Countries” ” aid program, and overseas private investment in the United States Finance Corporation (OPIC) and Private Direct Investment Treasury; United Kingdom’s Commonwealth Development Cooperation Corporation (CDC); France’s Central Treasury for Economic Cooperation (CCCE) and Foreign Industrial Development Credit (DIE); Japan’s Export-Import Bank, Overseas Economic Cooperation Fund ( OECD) and Japan International Cooperation Agency (JICA).

 4)Multilateral aid agencies are mainly international economic and international financial organizations, such as theWorld Bank Group, the Asian Development Bank, the United Nations Fund for Agricultural Development, the European Development Fund of the European Union, and the Arab Economic and Social Development Fund.

2. An international agency that negotiates aid issues.

 Mainly refers to the United Nations Conference on Trade and Development (its member countries are close to the IMF, etc.), the Development Assistance Committee of the OECD, etc. The latter is composed of 18 executive committee members (UK, US, France, Germany, Italy, Netherlands, Belgium, Denmark, Norway, Austria, Finland, Sweden, Australia, New Zealand, Japan, Canada, Ireland) and the European Commission.

 Cause

 There are many forms of international economic aid, and there are many reasons for it. After the end of the Cold War, the market economy system was established on a global scale, and the status of ideological issues in international politics declined. At the same time, economic issues and related The status of global issues in international affairs began to be highlighted, and the competition among countries for comprehensive national strength with economic strength as the core became more and more intense. Against this background, the wave of economic globalization is unstoppable, and the world is gradually entering the era of “economic globalization”. Economic globalization has brought people “convenience”, “benefits” and “prosperity”.However, with the outbreak of the Asian financial crisis, many people attribute the reason to the weakening or even loss of national sovereignty under economic globalization and believe that national security is being impacted by economic globalization.

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By Cary Grant

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