Korea needs to expand grants in overseas aid
By Song In-yup
Korea became a member of Development Assistance Committee (DAC) of the Organization of Economic Cooperation and Development (OECD) on Nov. 25 in 2009.
It means Korea is an advanced donor country. President Lee Myung-bak has made a commitment to international society that Korea will increase its Overseas Development Assistance (ODA) to 0.25 percent of Gross National Income (GNI) by 2015, more than double the 0.11 percent in 2011 but still lower than the DAC average of 0.35 percent and the UN-recommended 0.7 percent.
In line with his commitment, Korea plans to increase the ODA to $3.2 billion in three years from $0.9 billion.
Everybody agrees that Korea should expand ODA for underdeveloped countries so that they can eradicate poverty. ODA is not just the loss of national wealth. In fact, ODA is Korea’s a middle and long-term investment. Expanding ODA will help Korea raise its voice within international society and broaden its diplomatic horizon.
Of course, an expanded ODA projects Korea’s image as an advanced country which is willing to share its growth and development experience with the poor countries. The ODA also helps Korean companies make inroads into the world market.
As the 13
th
largest economy in the world, Korea has to hike ODA in the future. Korea has to increase grants, rather than loans in its ODA.
Grants are helpful for eradicating poverty in the global village. And grants are the international trend within ODA world. Nobody denies that grants should be increased in order to achieve the UN's Millennium Development Goals (MDGs) such as health and education.
The Ministry of Strategy and Finance is cautious about increasing grants in Korea’s ODA due to budget constraint. It also believes loans, rather than grants, will ensure a sustainable growth.
But I challenge the ministry’s view. Korea should hike grants rather than loans.
Donors are unable to collect much of its loans to poor countries and are ultimately forced to write off many of its loans. Once Korea relies heavily on loans in the ODA program, it will be unable to collect the loans and end up getting a bad image from recipient nations.
Therefore, assisting developing countries through grants is desirable from the beginning, as well as fostering an amicable relationship between Korea and the recipient countries.
Korea’s loan term is repayment in 15 years with a 20-year grace period with 0.1 percent in interest rates.
I want to advise the government to convert all of its ODA loans into grants as soon as possible. Korea also needs to stop charging interest on its loans even though it is unable to convert loans into grants. The 0.1 percent interest rate is not actual profit. It only complicates the calculation and gives Korea a bad image.
All the developing countries are eager to learn and follow what Korea has achieved over the past generation. We deserve to feel proud of this. We are asked to fulfill our responsibility and role pertinent to our economic scale. We should do so as a world citizen living in a global village in this 21st century. Korea’s development experience has now become a precious asset Koreans should be proud of.
It is Korea’s responsibility and mission to share it with the developing and poor countries. Korea must not forget how much assistance this country received from countries such as the United States, Germany and other countries plus the UN.
The writer is the general project manager at KOICA Philippines Water Project. Contact him at bulloiysongg@hanmail.net.