The Visegrad Group’s development assistance to Eastern Partnership countries

By Balázs Gyimesi | 2 October 2016

To quote this document: Balázs Gyimesi, “The Visegrad Group’s development assistance to Eastern Partnership countries”, Nouvelle Europe [en ligne], Sunday 2 October 2016, http://www.nouvelle-europe.eu/node/1953, displayed on 13 December 2017

The Visegrad countries’ total Official Development Assistance flows have increased impressively between 2007 and 2014, the main recipients of which are those Eastern Partnership states which directly border the EU, especially Ukraine. The Visegrad Group’s joint aid programme focusing on the EaP countries - the “Visegrad 4 Eastern Partnership” - funds specific projects related to the development of civil society in the EaP states. A strengthening of the common Visegrad framework for the coordination of development assistance efforts would be possible in order to channel development assistance in a more efficient and integrated manner.

Research on economic development has been exploring a myriad of correlations between fundamental factors contributing to the “wealth of nations” and the reasons for differences between the socio-economic situations of countries. An important dimension of that debate is the question of the effects of development policies on the economic performance of recipient countries. This article will not focus on the effects of the V4’s economic support on growth and development in the Eastern Partnership (EaP) countries, but instead attempt an assessment of the political dimension of aid flows and the organization of the development policies of the Visegrad countries. Do these four Central-European states use common channels to co-ordinate their efforts to support the economic development of the EaP countries or do they rather rely on individual initiatives? Are there any recurrent patterns or clear priorities to be found? These are the questions at the core of this article.  

Development policies in theory

Development policies come in different shapes and sizes: two widely used tools are development assistance (or development aid) and foreign-direct investment (FDI). Official development assistance (ODA) is, according to the definition of the OECD flows which are “provided by official agencies, including state and local governments, or by their executive agencies” and “is administered with the promotion of the economic development and welfare of developing countries as its main objective; and is concessional in character” (OECD 2016). Foreign Direct Investment (FDI) exists in several forms, namely greenfield investments, extension of capital and financial restructuring (OECD 2008). 

According to Stephen Kosack and Jennifer Tobin’s article, “Funding Self-Sustaining Development: The Role of Aid, FDI and Government in Economic Success” (2006), these two policies affect development differently, and therefore should not be seen as substitutes. Kosack and Tobin argued that while aid contributes both to economic growth and human development, FDI has little effect on economic growth. Alfaro, Chanda, et. al. stress in their article “FDI and economic growth: the role of local financial markets” (2003) that while FDI alone generally has an ambiguous effect on economic growth, its effect depends on the development of the financial markets in the recipient country. Borensztein, Gregorio and Lee, on the other hand, highlight in their article (1998) the importance of a minimum threshold of human capital that has to be available in the recipient county in order for FDI to have a positive effect on economic growth. The OECD emphasizes the FDI’s role in creating “direct, stable and long-lasting links between economies”, however the Organisation also underlines the importance of a good policy environment for the efficiency of FDI, which can serve as an important vehicle for local development (OECD 2008).

However, there is no consensus on the effects of development aid on economic growth aid either. Rajan and Subramanian (2008) contradicted the conclusion of Kosack and Tobin’s article, noting that they only found little robust evidence of any relationship between aid flows and economic growth. Consequently, there is no consensus on the effects of either of the two tools of development aid, however we can note that the two policy instruments are distinctly different. The present article will only scrutinise the Visegrad countries’ programmes regarding official development assistance, which is a specific form of development aid.  

The Eastern Partnership countries as recipients of Official Development Aid

The following section analyses the V4’s Oifficial Development Aid (ODA) to the Eastern Partnership countries from the recipients’ side, with calculations based on the methodology of Zsuzsanna Végh’s study on “Visegrad Development Aid in the Eastern Partnership region” from 2014, in which Végh, a researcher at the Central European University in Budapest, scrutinised the development of Official Development Assistance payments between 2007 and 2011 (Végh 2014). The databased used for the calculations is the OECD.Stat database.  

The Visegrad states, along with the other former countries of the Eastern Bloc, benefited from development aid in the years after the fall of Communism, in order to help their transition from planned to free market economies. However, the Central European states, which have since become Member States of the European Union, are no recipients of development aid anymore, instead providing their own aid to others such as the Eastern Partnership countries. On a global scale, Ukraine is the country which received the most development aid among the EaP countries in 2014 (1.404 Billion USD), the second was Georgia (562.7 million USD), followed by Moldova (517.4 million USD), Armenia (265.3 million USD), Azerbaijan (215.8 million USD) and Belarus (119.6 million USD) (World Bank 2016).

The trends in the Visegrad countries’ development assistance to the EaP countries do not reflect the global ranking of these countries in the World Bank’s global statistics on ODA. Whereas Ukraine is the most important recipient on both the global level and the level of the assistance by V4 states, the second and third largest recipients and Belarus and Moldova. This is radically opposed to the global ranking, where Belarus is receiving the least amount of ODA among the EaP countries. The Caucasus countries – with the exception of Georgia – receive significantly less ODA from the V4 states than the other EaP countries. This demonstrates the V4’s particular interests (or lack thereof) in the region – for it is clear that the EU’s direct Eastern neighbours are more of a priority for the V4 countries. The ODA flows towards Ukraine have been constantly increasing since 2009, the rate of this growth has accelerated since 2012, reaching over 30 million USD in 2014 (OECD 2016a). Besides the strong growth of ODA to Ukraine, the development of ODA to Georgia is another remarkable issue. The ODA payments have increased drastically in 2008, the year of the Russo-Georgian War. However, the level of ODA gradually decreased over the following years until it stabilised around the pre-2008 level in 2012. This demonstrates that the increase in ODA to Georgia was solely a temporary reaction to the war in 2008 and did not lead to a substantial change on the Visegrad states’ priorities concerning development assistance in the EaP countries. 

Solidarity, Democracy, Development – the V4 countries’ official development assistance to Eastern Partnership countries

In the following section, the structures of aid programmes and disbursements will be presented, with a special focus on the most important donor from the Visegrad Group – Poland. The Visegrad countries have established the group’s own cooperation programme with the Eastern Partnership, the “Visegrad 4 Eastern Partnership Programme” (also known as “V4EaP”) in 2011. Nevertheless, these countries are still pursuing bilateral and other, non-V4 multilateral ODA programmes. 

The following graph illustrates the Visegrad countries’ total ODA to Eastern Partnership countries. Poland, the largest of the four economies, is also the most important donor of official development assistance. The second most important donor is the Czech Republic, followed by Slovakia and Hungary. Between 2007 and 2014 the total ODA of the four states has increased from around 40 Mio. USD to over 70 Mio. USD. The Czech Republic doubled its ODAs, whereas Slovakia and Hungary stayed at approximately the same level. 

The “Visegrad 4 Eastern Partnership Programme” was initiated in 2011 and launched in 2012 by the governments of the V4 states. The programme’s aim is to “facilitate the unique know-how of the Visegrad countries with social and economic transformation, democratization and regional cooperation particularly through the development of civil society and support of cooperation among local governments, universities and individual citizens” in the Eastern Partnership countries. 

The V4EaP is funded through the International Visegrad Fund, the general grant scheme of the V4. The annual budget of the V4EaP amounts to 1.46 million EUR, which is far below the total ODA of around 70 million EUR that EaP countries received from the Visegrad states. The largest recipient of grants from the “Visegrad 4 Eastern Partnership Programme” is Ukraine, which received 3.8 million EUR between 2004 and 2016, amounting to a tenth of the ODA that the country received from V4 states in 2014 alone. The budget of the International Visegrad Fund has been increased by an additional annual contribution of the V4 states of EUR 250.000 per country in 2012 in order to finance the V4EaP programme. However, the V4EaP programme funds specific projects and is focused among others on the development of civil society, which are supposed to encourage EaP countries to accelerate reforms which bring them closer to the European Union.

In order to fully assess and comprehend the Visegrad countries commitment to development aid in the Eastern Partnership states, it is crucial to analyse the institutional settings of the provision of development assistance. Poland has an institutionalized aid programme, which is managed by “Polish aid”, an organization standing under the supervision of the Department of Development Cooperation of the Polish Ministry of Foreign Affairs. Among the priority countries of Polish aid are four Eastern Partnership countries: Belarus, Ukraine, Moldova and Georgia. On an operational level, the Department focuses on EaP countries in two of its units, the “Unit for Development Cooperation with Belarus, Countries of South Caucasus and Central Asia” and the “Unit for Development Cooperation with Ukraine and Moldova”. Ukraine is an especially important partner of Poland. Mr. Szczerski, foreign policy adviser of the Polish President, assured in November 2015 that there will be “big steps in terms of Polish aid to support the macroeconomic stability of Ukraine in the coming future” (Foy 2015). 

Conclusion

The Visegrad countries’ total ODA flows have increased impressively between 2007 and 2014, from ca. 40 million USD to 70 million USD. The main recipients of these aid flows are those EaP states which directly border the EU, especially Ukraine, which is the largest of the six Eastern Partnership economies. The V4’s priorities stayed stable over the scrutinised period, with the exception of a rise in ODA to Georgia during the Russo-Georgian War. Despite the common priorities, the Visegrad Group’s joint aid programme focusing on the EaP countries was only introduced in 2011. The funding accorded to the coordination of development assistance efforts between the four Central European states within the Visegrad Group’s V4EaP prorgamme is only a fraction of the total ODA flowing from V4 countries to the Eastern Partnership states. However, it has to be noted that the “Visegrad 4 Eastern Partnership” focuses on specific projects related to the development of civil society in the EaP states. A strengthening of the common Visegrad framework for the coordination of development assistance efforts would be possible in order to channel development assistance in a more efficient and integrated manner, fostering the cooperation not only with the EaP countries, but also among the members of the Visegrad group. 

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