South Korea is the 16th-largest donor country, spending US$2.2 billion on net official development assistance (ODA) in 2016 (in current prices). This corresponds to 0.16% of its gross national income (GNI).
South Korea has increased its ODA steadily since becoming a member of the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) in 2010. The government plans to further increase ODA to 0.2% of GNI by 2020.
- The ‘Strategic Plan for International Development Cooperation for 2016-2020’ outlines the current strategic priorities of South Korea’s development policy and indicative volumes of ODA. Among other things, it specifies that the country will continue to channel around 40% of its ODA in the form of loans.
- After the presidential impeachment in 2017, South Korea restructured its government and abolished its four flagship development initiatives. However, the committed funding will be allocated to other ODA programs with a similar focus, e.g., funding for the ‘Better Life for Girls’ flagship initiative (US$200 million) will be used for maternal and child health programs.
- According to the ‘2018 Annual Implementation Plan for Development Cooperation’, funding is expected to focus on five sectors: industrialization; water, sanitation, and hygiene (WASH); health; education; hunger; and agriculture.
- South Korea is expected to increase its ODA in years to come, and a large part of the anticipated additional funds have yet to be allocated. This provides opportunities to engage with the South Korean government and shape future funding allocations.
- In December 2016, the South Korean Parliament impeached President Park Geun-hye following a corruption scandal. The impeachment was upheld by the Constitutional Court in March 2017. Subsequently, South Koreans elected Moon Jae-in as president on May 9, 2017. The administration’s overall priorities for development are expected to be largely in line with the ‘Strategic Plan for International Development Cooperation for 2016-2020’.
the big six
- How much ODA does South Korea provide?
South Korea is a small yet growing donor; government plans to increase ODA to 0.2% of GNI by 2020
The Republic of Korea (hereafter referred to as South Korea) was the 16th-largest donor country in 2016. It spent US$2.2 billion in net official development assistance (ODA) in 2016 (in 2016 prices). This corresponds to 0.16% of South Korea’s gross national income (GNI).
In 2018, the total ODA budget is set to increase further to KRW3.0 trillion (US$2.6 billion), or 0.17% of GNI.
South Korea was an ODA recipient until 1995 and became a member of the OECD Development Assistance Committee (DAC) in 2010. Since then, it has increased its ODA volume steadily. ODA rose by 18% between 2015 and 2016. South Korea’s ODA/GNI share is projected to remain at 0.16% of GNI in 2017 (US$2.3 billion, or South Korea Won [KRW] 2.7 trillion). In 2018, the total ODA budget is set to increase further to KRW3.0 trillion (US$2.6 billion), or 0.17% of GNI. The government’s 2015 ‘Strategic Plan for International Development Cooperation for 2016-2020’ foresees that ODA will increase gradually to 0.2% by 2020.
- What are South Korea’s strategic priorities for development?
Promoting rural development remains a key priority
The Framework Act on International Development Cooperation, published in 2010 and amended in 2014, outlines the overarching principles of South Korean development cooperation and clarifies the responsibilities of different actors. The Framework Act sets out six basic ideas for development: poverty reduction, human rights, gender equality, sustainable development and humanitarianism, economic cooperation, and peace and prosperity in the international community. The ‘Strategic Plan for International Development Cooperation for 2016-2020’, published in 2015, translates the framework into concrete strategic priorities for medium-term development policy and indicative volumes of ODA.
Compared to other donor countries, loans account for a high share of South Korea’s ODA portfolio (39%; OECD Development Assistance Committee (DAC) member average: 9%). Loans are preferred as they limit the burden of ODA on public spending and are thought to incentivize fiscal discipline in the recipient country. A key priority of South Korea’s development policy is to promote inclusive and sustainable rural development based on the New Village Movement (‘Saemaul Undong ODA’). The New Village Movement was a community-based approach that South Korea applied in the 1970s to raise the standard of living in rural parts of the country. As the Movement is associated with President Park Chung-hee, the father of impeached President Park Geun-hye, it is expected that the new administration will scrutinize existing projects and set a stronger focus on transparency and effectiveness of implementation. Nevertheless, rural development will likely remain a priority of South Korean ODA, and ‘Saemeul Undong’ will likely remain a key program for implementation.
Additionally, the Strategic Plan prioritizes the increase of development assistance to economic infrastructure and environmental policy issues, alignment with the Sustainable Development Goals (SDGs), funding girls’ health and education, and agricultural development. Within the five-year Strategic Plan, South Korea’s development cooperation is guided by an annual document that outlines specific priorities, the International Development Cooperation Action Plan. The 2018 International Development Cooperation Action Plan, published in December 2017, outlines five sector priorities for 2018: industrialization; education; health; water, sanitation, and hygiene (WASH); and hunger and agriculture.
In 2017, during a presidential impeachment process and subsequent change in government, South Korea abolished its four flagship development initiatives. The initiatives had been launched in 2016 and accompanied the country’s Strategic Plan 2016-2020: The ‘Better Life for Girls’ initiative supported projects on girls’ health and education (US$200 million). The ‘Science, Technology and Innovation for Better Life’ initiative aimed to promote science capacity, research and development, and entrepreneurship (US$200 million). The ‘Safe Life for all’ initiative focused on combatting infectious diseases (US$100 million). Lastly, the ‘Better Education for Africa’s Rise’ initiative aimed to foster industrial and technical manpower (another US$100 million). The committed funding will be used to fund government programs with a similar focus, e.g. the pledge for the ‘Better Life for Girls’ initiative will be mainly allocated to maternal and child health projects.
South Korea’s key development priorities for 2016 to 2020:
- Increased ODA: Gradually increase total ODA to 0.2% of GNI by 2020 (2016: 0.16%)
- Focus on bilateral ODA: Maintain ratio of bilateral/multilateral ODA of 70:30 (2016: 70:30)
- Keep grant/loan ratio: Maintain ratio of ODA provided as grants vs. loans at 60:40 (2016: 61:39).
In addition to its thematic initiatives, the government has become more active in global debates on development over the past years. This was exemplified by South Korea’s hosting of the Fourth High Level Forum on Aid Effectiveness in Busan in 2011, as well as a range of high-level, post-Busan meetings.
South Korea has increased its infrastructure investments in sub-Saharan Africa, with 27% of infrastructure ODA going to the region in 2016.
Infrastructure is a focus area of bilateral cooperation
Supporting hard infrastructure through loans is a key area of bilateral ODA investments. In 2016, the government allocated 20% of its bilateral ODA to infrastructure projects. The majority of this funding was in the form of loans to Asian countries (60%). South Korea has increased its infrastructure investments in sub-Saharan Africa, with 27% of infrastructure ODA going to the region in 2016, up from 10% in 2015.
Other key areas of bilateral cooperation include education (15% of bilateral ODA in 2016); health and population (13%); agriculture, including rural development (8%); and water and sanitation (7%).
- Who are the main actors in South Korean development cooperation?
Ministry of Foreign Affairs and Ministry of Strategy and Finance steer policy; KOICA and the Korea Eximbank implement
The president leads the South Korean government and sets broad strategic guidelines for development cooperation. The president’s directions are honored by ministries and agencies, including on ODA volumes and thematic priorities. In December 2016, the South Korean Parliament impeached President Park Geun-hye, following a corruption scandal. The impeachment was upheld by the Constitutional Court in March 2017. Subsequently, South Koreans elected Moon Jae-in (Democratic Party) as president in May 2017. Moon appointed Lee Nak-yeon as Prime Minister shortly after his inauguration. Within the Prime Minister’s office, Park Jin-ho is Director-General of the ODA Bureau. Under the overall policy and decision-making authority of the president, two ministries guide the definition of development policy: the Ministry of Foreign Affairs (MOFA) and the Ministry of Strategy and Finance (MOSF).
SOUTH KOREA'S DEVELOPMENT COOPERATION SYSTEM
- The MOFA, currently headed by Kang Kyung-wha, sets policies and priorities for bilateral grants and multilateral ODA channeled through the UN and other multilateral instruments, such as the Global Fund to Fight AIDS, Tuberculosis and Malaria (Global Fund). Bilateral grants are implemented by the Korea International Cooperation Agency (KOICA), which is supervised by the MOFA (see below). Within MOFA, a Director-General (currently Jeon Jin-kyu) is responsible for the development cooperation bureau. In its annual work plan, MOFA seeks to strengthen the partnership with domestic, regional, and international stakeholders and to broaden its agenda, increase the total ODA and humanitarian assistance budget, enhance synergies between development and foreign affairs, support the capacity of NGOs and other small-scale partners, and enhance accountability, effectiveness, and transparency of ODA.
- The MOSF, currently led by Kim Dong-yeon, sets policies for ODA loans and manages contributions to multilateral development banks. It also supervises South Korea’s Economic Development Cooperation Fund (EDCF), which finances bilateral loans, and the Export-Import Bank of Korea (Korea Eximbank) that implements them (see below). In addition, the MOSF sets the national budget, and its Budget Office can also veto MOFA grants and loans that do not meet project-approval criteria. Within MOSF, a Director-General (currently Yook Tae-sik) is responsible for the development finance bureau.
Major ODA-related policies are decided by the Committee for International Development Cooperation (CIDC).
Government officials are not legally permitted to be affiliated with a political party. For this reason, ministers who have been previously affiliated with a party must leave the party when they come into government office.
Major ODA-related policies are decided by the Committee for International Development Cooperation (CIDC). The CIDC is composed of 25 members and includes the prime minister (who chairs the CIDC), 14 cabinet members, the president of KOICA, the chairman of the Korea Eximbank, and seven experts.
The CIDC was established in 2006 and has since adopted major policies including the ‘Strategic Plan for International Development Cooperation for 2016-2020’ and annual ODA implementation plans. The CIDC meets approximately three times a year. The Sub-Committee for Evaluation – composed of the directors-general of MOFA and MOSF, executives from KOICA and Korea Eximbank, as well as nine representatives from academia and civil society – meets usually before each CIDC meeting. The sub-committee reviews the alignment of South Korea’s ODA spending with the Sustainable Development Goals (SDGs) agenda and gives advice to CIDC.
KOICA is a key player in the implementation of development policy. KOICA was founded in 1991, and is responsible for providing bilateral grant aid and technical cooperation. Over the past 20 years, almost half of total ODA spending (46%) and three-quarters of all grants (75%) were provided by KOICA through country offices in 28 partner countries. KOICA elected its first female president, Mi-kyung Lee, in November 2017. It is expected that KOICA’s strategic priorities will be largely in line with its strategy for 2017 to 2021 and the wider Strategic Plan for International Development Cooperation (2016 to 2020).
The EDCF was established in 1987, with the purpose of promoting economic cooperation between South Korea and partner countries through loans. The direction of EDCF operations and policy-making responsibilities rest with the MOSF. The Korea Eximbank (Eximbank) manages and implements EDCF loans. The Eximbank was established in 1976 to support South Korea’s economic development through strengthened exports, imports, and overseas investments projects. Its goals include the promotion of economic cooperation with developing countries, development of South Korea’s strategic industries, and unification with North Korea,
The parliament (National Assembly of the Republic of Korea) can influence the direction of South Korea’s development policy and budget. The National Assembly votes on, amends as necessary, and ultimately approves the budget bill presented by the government. Within the National Assembly, the Foreign Affairs and Unification Committee is responsible for development cooperation and can change overall ODA spending amounts and specific allocations through its Sub-committee on Budget. The parliament also provides the legal basis for South Korea’s ODA policies, for example by approving the Framework Act on International Development Cooperation in 2010.
South Korean civil society organizations (CSOs) are involved in policy-making, yet they have raised concerns in recent years that the government has only consulted them in ad-hoc and selective ways. Nonetheless, six CSO delegates are members of the CIDC and are thus involved in setting priorities. CSOs play a minor role in implementing South Korea’s ODA. In 2016, only 2% of South Korea’s bilateral ODA was channeled through CSOs, well below the average of member countries of the OECD’s Development Assistance Committee (16%).
- How is the South Korean ODA budget structured?
MOFA and MOSF manage three-quarters of ODA budget; the budget is largely prescriptive
The majority (74%) of South Korean ODA is provided by the Ministry of Strategy and Finance (MOSF, US$1.1 billion, 40% of total ODA in 2018) and the Ministry of Foreign Affairs (MOFA, US$882 million, 34%). The remaining 26% is spread across 41 other ministries and agencies.
South Korea’s overall ODA budget includes breakdowns by sector, region, ministry, and implementing agency. It also sets out how much funding is allocated to bilateral and multilateral channels within each ministry’s budget. In addition, the annual budget lists concrete activities to be funded from each ministry’s budget. This leads to very limited ministerial discretion over their respective budgets once each has been approved by the parliament.
Most of MOSF’s ODA budget is delivered bilaterally (90%), almost exclusively as loans through the Economic Development Cooperation Fund (EDCF). Only a small amount (US$44 million, 4% of MOSF’s bilateral ODA) is delivered as grant funding. The rest (US$303 million) comes in the form of assessed and voluntary contributions to multilateral organizations and international financial institutions.
Most of MOSF’s ODA budget is delivered bilaterally (90%), almost exclusively as loans administered by the Economic Development Cooperation Fund (EDCF).
The ODA-related budget of MOFA comprises two major funding lines, for bilateral grants and multilateral organizations. Bilateral grants account for 90% of MOFA’s ODA, broken down into projects/programs, technical assistance (channeled through KOICA), and funding delivered through public-private partnerships. MOFA’s multilateral ODA comprises assessed contributions to international organizations and voluntary contributions to international organizations.
Korea's ODA budget 2018
Ministry of Strategy and Finance 1,056 1,226 Bilateral 954 1,107 Economic Development Cooperation Fund loans 912 1,058 Grants (including Committee for International Development Cooperation spending) 42 49 Multilateral (assessed and voluntary contributions incl. Global Agriculture and Food Security Program) 102 119 Ministry of Foreign Affairs 882 1,023 Bilateral grants 791 918 Project and programs 397 461 Technical assistance 149 173 Other spending 19 22 Public-private partnerships 54 63 Admin costs 4 5 Multilateral (assessed and voluntary contributions incl. Gavi and UNITAID and part of funding for the Global Fund) 91 106 Other ministries 351 408 Ministry of Health (incl. part of funding for the Global Fund) 44 51 Ministry of Agriculture (incl. Food and Agriculture Organization, International Fund for Agricultural Development) 65 75 Other contributions (parts of ODA to international financial institutions and concessional funds) 338 392 Total ODA spending 2,627 3,048
- What are important decision-making opportunities in South Korea’s annual budget process?
Overall ODA levels are set by the Ministry of Strategy and Finance between January and April; specific allocations are made between July and October
Ministry of Strategy and Finance (MOSF) draws up budget guidelines including spending limits for each ministry
- Ministries submit medium-term finance plans: Until the end of January, each ministry submits a medium-term spending plan to the Ministry of Strategy and Finance (MOSF). On this basis, the MOSF draws up budget guidelines including spending limits for each ministry.
- Ministries develop budgets: Between May and June, ministries develop their budgets for the coming year, based on the limits set by the MOSF. At this stage, relevant ministries, particularly the Ministry of Foreign Affairs (MOFA), develop proposals for sectoral and geographic allocations of ODA. Key stakeholders are the directors-generals of the ministries, as they submit the ministerial budgets for review in June.
- The CIDC debates budget allocations: Between July and September, ministries that have a role in dispersing ODA negotiate their sectoral and geographic allocations. This process is led by the Committee for International Development Cooperation (CIDC). It includes expert consultations followed by a review by the cabinet.
- The government submits its draft budget: By the beginning of September, the government submits its draft budget to the Parliament (National Assembly) for debate, amendments, and approval. Once the budget has been submitted, committees within the National Assembly review the draft budget in detail. The Foreign Affairs and Unification Committee is responsible for the ODA budget. Following the review, the Special Committee on Budget and Accounts conducts an overall review of the budget draft.
- Parliament approves the budget: In December, the National Assembly votes on the ODA budget in a plenary session.
- How is South Korea’s ODA spent?
Focus is on bilateral ODA; new multilateral ODA strategy highlights aim to enhance effectiveness
South Korea provides most of its ODA in the form of bilateral funding. In 2016, the South Korean government channeled US$1.6 billion bilaterally, well above the average of the OECD Development Assistance Committee (DAC) members (62%). The government plans to keep the share of ODA spent bilaterally at about 70% for the period 2016 to 2020. Core contributions to multilaterals increased by 57% between 2015 and 2016 (to US$698 million in 2016).
Loans accounted for 39% of South Korea’s bilateral ODA in 2016, more than four times the DAC average of 9%. South Korea’s emphasis on loans can be explained by the Ministry of Strategy and Finance’s (MOSF) strong preference for promoting fiscal discipline in recipient countries and by the positive experience South Korea itself had with this instrument as an ODA recipient. The Ministry of Foreign Affairs, on the other hand, is in favor of disbursing ODA as grants to prevent higher levels of debt in partner countries. Nonetheless, the government plans to maintain a stable, high share of loans.
South Korea channels the majority of its bilateral grants and loans through its own implementing agencies (84% in 2016), mainly the Korea International Cooperation Agency (KOICA) and Korea Eximbank. It also seeks to diversify its activities by promoting public-private partnerships such as the Global Corporate Social Responsibility Program, which promotes the involvement of the South Korean private sector in development cooperation. Despite this goal, the share of funding channeled through public implementing agencies increased by four percentage points between 2015 and 2016.
South Korea’s multilateral ODA is based on three principles: 1) creating synergies with bilateral funding, 2) enhancing effectiveness and ensuring sustainable development of partner countries, and 3) enhancing mutual cooperation among stakeholders.
Key recipients of South Korea’s core contributions to multilateral organizations in 2016 were regional development banks (52%), the World Bank Group (27%), and United Nations (UN) agencies (17%; including 5% to the UN Office for Project Services (UNOPS), 2% to the World Health Organization (WHO), and 2% to the Food and Agricultural Organization (FAO)). In addition, the country channeled US$203 million, or 9% of its total ODA in 2016, through multilateral organizations for programs earmarked for specific thematic priorities or regions (this is reported as bilateral ODA, see figure above).
South Korea is also progressively ‘untying’ its funding, which means that ODA no longer must be spent on goods produced in South Korea or services provided by South Korean companies. The Strategic Plan 2016-2020 states that South Korea will increase the share of ‘untied’ ODA to 55% of concessional loans and 95% of grants by 2020; until 2006, 98% of South Korean ODA was ‘tied’.
Who are South Korea’s ODA recipients?
South Korea’s bilateral ODA is concentrated on Asia
South Korea’s bilateral assistance has a clear focus on Asia and on its Southeast Asian neighbors in particular. Funding to Asia made up 48% of bilateral ODA between 2014 and 2016. The largest recipient over this time was Vietnam, which received around 13% of bilateral ODA, predominantly as loans.
South Korea has 24 priority countries for ODA. Eleven of them are in the Asia-Pacific region, seven in sub-Saharan Africa, four in Latin America, and two in Central Asia (see box). The focus on Asia was reaffirmed by the 2018 International Cooperation Action Plan, which allocates 37% of bilateral ODA to the Asia-Pacific region, 18% to sub-Saharan Africa, and 12% to the Middle East and Central Asia. South Korea’s priority countries are mostly neighboring countries, many of which are lower middle-income countries (LMICs). LMICs received more than a third (35%) of South Korea’s bilateral ODA in 2016, well above the average of OECD Development Assistance Committee (DAC) members (19%). With 37%, South Korea’s funding to low-income countries (LICs) is also far above the OECD average (25%).
South Korea’s priority countries:
- Asia: Bangladesh, Cambodia, Indonesia, Laos, Mongolia, Myanmar, Nepal, Pakistan, Philippines, Sri Lanka, Vietnam
- Africa: Ethiopia, Ghana, Mozambique, Rwanda, Senegal, Tanzania, Uganda
- Middle East/Central Asia: Azerbaijan, Uzbekistan
- Latin America: Bolivia, Colombia, Paraguay, Peru.
How is bilateral funding programmed?
Committee for International Development Cooperation sets priorities; country partnership strategies outline country-level priorities
Bilateral ODA priorities are articulated by the government in the Strategic Plan for International Development Cooperation for 2016 to 2020. The Committee for International Development Cooperation (CIDC) concluded its review of the list of priority countries in early 2016. Programming of bilateral funding for priority countries is set through Country Partnership Strategies (CPS). CPSs cover periods of three to five years, to match recipient countries’ national planning cycles; the strategies set out two to three priority sectors. Within ODA management, the Ministry of Foreign Affairs (MOFA) controls grants and technical cooperation, and the Ministry of Strategy and Finance (MOSF) is responsible for loans to partner countries. This process is coordinated by the CIDC. In its 2018 Peer Review, the OECD found that CIDC involvement in priority setting has supported strengthened quality assurance and results management in South Korea’s development cooperation.
Programming of bilateral funding for priority countries is set through Country Partnership Strategies (CPS).
Priority sectors at the country level can be influenced through engagement with desk officers during the update of the CPS (every three to five years). In December 2016, new CPSs were announced for Cambodia, Ethiopia, Ghana, Laos, Mongolia, Mozambique, Myanmar, Nepal, Pakistan, Peru, Philippines, Senegal, Sri Lanka, Tanzania, and Vietnam.
Based on a CPS, South Korean policy-makers develop concrete project proposals for the following year; a minimum of two consultations are undertaken with each priority country. This process is coordinated by inter-agency committees led by MOFA and MOSF, as well as the CIDC. The development of proposals takes place between July and September. However, once proposals are developed, the MOSF can still veto any grant or loan; this has happened repeatedly in the past.
How will South Korea's ODA develop?
- South Korea has increased its ODA steadily since joining OECD DAC, and the government plans to continue this growth and strengthen commitment to international cooperation.
- ODA is expected to reach 0.2% of South Korea’s GNI by 2020, an increase from 0.16% in 2016. South Korea aims to reach an ODA level of 0.3% GNI to GDP by 2030.
What will South Korea’s ODA focus on?
- In 2017, South Korea abolished its four flagship initiatives in the context of the presidential impeachment and the change in government. The initiatives were launched in 2016 and accompanied the country’s Strategic Plan 2016-2020: The committed funding will be allocated to other government programs with a similar focus.
- Overall, South Korea will likely continue to focus its bilateral investments on supporting transport and energy infrastructure projects in Asia, a vast share of which is in the form of loans. Eleven of the 24 priority countries are in Asia. The 2018 Action Plan calls for greater synergies between loans and grants, enhancing performance and international partnerships, and increasing investments in its strategic priority sectors, including humanitarian assistance.
- As ‘Saemeul Undong’ (the New Village Movement promoting rural development) is associated with President Park Chung-hee, the father of impeached President Park Geun-hye, it is expected that the new administration will scrutinize existing projects and set a stronger focus on transparency and effectiveness of implementation. Nevertheless, rural development will likely remain a priority of South Korean ODA, and ‘Saemeul Undong’ will likely remain a key program for implementation.
What are key opportunities for shaping South Korea’s development policy?
- ODA is expected to continue to increase in the coming years. As much of the additional funding has yet to be strictly allocated to specific projects, there will be opportunities to engage with the South Korean government on allocation.
- The impeachment of President Park Geun-hye in 2017 led to a change in political leadership. South Korean voters elected Moon Jae-in as president on May 9, 2017. Although current development policies are largely in line with already existing long-term strategies, this provides an opportunity to engage with the new government and other stakeholders to shape the direction of South Korea’s development policy moving forward.