The aid recipients have suffered from bargaining power inequality under traditional donor-recipient relationship. This article explores how an aid recipient could overcome their position through leveraging the role of emerging donors, or non-traditional providers. This article illustrates the two stages of transformation in the traditional donor-recipient relationship, through the standard theories of rational choice and an in-depth case study.
One of the recipients’ objectives is to maximize the amount of financial inflows. Financial flows, in particular aid, is assured as far as the recipient conforms to the prevailing development norm, which is usually expressed by the OECD-DAC members as a set of aid conditionality, economic and political. The recipient has the two courses of action: to conform or not conform to the norm. If a recipient does not conform, as a matter of principle, aid could be suspended and other financial flows, such as foreign direct investment (FDI), would not be available under the economic sanction. However, the recipient can secure financial flows from the emerging donors, who tend to be indifferent to the norm.
Once the financial flows from the emerging donors is secured, the next task for a recipient is to improve their position, more precisely to increase financial inflows, introducing the traditional donors’ flows. One realistic solution is mutual concession; the recipient agrees a part of the norm, and the traditional donors resume a part of financial flows, maintaining its own principle as far as possible. This could be attained if the traditional donors regard the recipient’s market and/or natural resources attractive. The traditional donors might be concerned about the emerging donor’s monopolistic position in the recipient market/resources, and look for their shares. The aid recipient and the traditional donors could explore mutual concessions; both sides can improve their position by partial acceptance of the other’s principle.
This was exactly what occurred in Myanmar where China has played a pivotal role. The in-depth case study of Myanmar illustrates how a recipient could overcome the bargaining power asymmetry through leveraging the emerging donors. It is desirable that other developing countries draw hints from the Myanmar’s experience and enhance their bargaining power in the asymmetric donor-recipient relationship.
Keywords: donor recipient relationship, course of action, outcome, leverage, emerging donors