OPEC and International Aid: An Appraisal

OPEC AND INTERNATIONAL AID: AN APPRAISAL Hossein G. Askari In the aftermath of the oil price increase of 1973-74 and the ensuing external payments deficits of the nonoil developing countries, the international community placed great pressure on OPEC to expand the volume and distribution of its international aid. In many forums, including the annual meetings of the International Monetary Fund and the World Bank, as well as in the popular press, the OPEC countries became the scapegoat for the disrupted progress of the nonoil developing countries, although many factors—including a worldwide recession and a decline in commodity prices—contributed to the growing impediments to international development.1 OPEC, however, was in no position to respond quickly to the demands of the international community for an increase in OPEC participation in international development. In 1973 and 1974 most OPEC countries faced economic and institutional difficulties of their own. OPEC was not, and is not even today, a homogeneous group of economically fortunate countries. Its membership comprises a wide spectrum of countries, from the rich (Kuwait, Libya, Saudi Arabia, and the U.A.E.) to the less fortunate among developing countries (Indonesia and Nigeria). These countries are not uniformly capable of sustaining extensive international development programs. 1 . For a discussion of the impact of these factors on the deficits of nonoil developing countries, see Hossein Askari and John Thomas, Oil, OECD and the Third World: A Vicious Triangle (Austin: University of Texas, 1978). Hossein G. Askari is president of Askari, Jalal and Sheshunoff International. From 1978 to 1981 he was advisor on international economic and financial matters to the minister of finance and national economy of Saudi Arabia, and advisor to the executive director of the International Monetary Fund; prior to this he was Professor of International Business at the University of Texas at Austin. He is the author of numerous books and articles, and his latest book, entitled Taxation and Tax Policies in the Middle East, is to be published in 1982 by Butterworth Publishers, England. 133 134 SAIS REVIEW In addition, the wealthiest as well as the less fortunate of the OPEC countries clearly were developing nations in that they did not possess a competitive and developed industrial and agricultural sector. OPEC nations, with the possible exception of Kuwait, had very little infrastructure, minimal health and educational facilities, and no economic base outside of oil. Thus, the wealthier OPEC nations, while experiencing high current levels of GNP per capita, needed imported technology, machinery, and management to begin their own development process. The poorer members of OPEC needed all of these essential inputs to development in addition to capital inflows, making their development needs identical to those of other developing countries. Economic assistance or aid to nonoil developing countries was, however, seen by OPEC countries to be a necessity within the international and regional geopolitical environment. OPEC has always identified itself with other developing countries in order to avoid economic and political isolation: OPEC countries participate in both the "Group of 9" and "Group of 77" caucuses of developing countries within the World Bank, IMF, and UNCTAD. Development aid was seen as a logical tool to secure OPEC's place in common with other developing nations. Thus, particularly for the wealthier members of OPEC, aid was seen as a political necessity, especially in the volatile setting of the Middle East and North Africa. In response to these pressures and because of its own strong financial position , OPEC's aid increased from $1.3 billion in 19732 to more than $6.99 billion in 1980.3 These absolute figures, although impressive by themselves, are not an adequate indication of OPEC's aid performance. A more accurate appraisal of the volume of OPEC's aid contribution since 1973 can be obtained only by first examining currently accepted criteria for evaluating aid-performance in general, and then measuring OPEC's aid against those standards and comparing OPEC performance with that of the OECD nations , taking into account anomalies of the OPEC domestic economies. This analysis, combined with a discussion of the developments of channels for OPEC aid since 1973 and its fundamental objectives, suggests the patterns and problems of OPEC aid contribution...