South Korea is the 16th-largest donor country, spending US$2.0 billion on net official development assistance (ODA) in 2016 (in 2016 prices). This corresponds to 0.14% 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 Organization for Economic Cooperation and Development (OECD) in 2010. The government plans to gradually 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.
- In 2016, South Korea launched several flagship initiatives that accompany its Strategic Plan 2016-2020. The ‘Better Life for Girls’ initiative supports projects that promote girls’ health and education (US$200 million); the ‘Science, Technology and Innovation for Better Life’ initiative aims to promote science capacity, research and development, and entrepreneurship (US$200 million); the ‘Safe Life for all’ initiative focuses on combatting infectious diseases (US$100 million); and the ‘Better Education for Africa’s Rise’ initiative aims to foster industrial and technical manpower (another US$100 million).
Though South Korea is expected to increase its ODA in years to come, a large part of the anticipated additional funds has not yet been 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. This may affect the strategic priorities of South Korea's development policy.
the big six
- How much ODA does South Korea provide?
South Korea is a small yet growing donor; ODA set to increase 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$2.0 billion (in 2016 prices; US$2.1 billion in 2014 prices). This corresponds to 0.14% of South Korea’s gross national income (GNI). South Korea was an ODA recipient until 1995, and became a member of the OECD’s Development Assistance Committee (DAC) in 2010. Since then, it has increased its ODA volume steadily. ODA rose by 3% between 2015 and 2016. South Korea’s ODA/GNI share is projected to increase to 0.16% of GNI in 2017 (US$2.5 billion or South Korea Won [KRW] 2.7 trillion). In November 2015, the South Korean government published a Strategic Plan for International Development Cooperation for 2016 to 2020, which foresees that ODA will increase gradually to 0.2% by 2020.
- What are South Korea’s strategic priorities for development?
Promoting rural development is a key priority
The Framework Act on International Development Cooperation, published in 2010, outlines the overarching principles of South Korean development cooperation, and clarifies the responsibilities of different actors. The Framework Act sets out five guiding principles for development: poverty reduction, human rights, gender equality, sustainable development and peace and prosperity in the international community. The ‘Strategic Plan for International Development Cooperation for 2016-2020’, published in 2015, outlines current strategic priorities for development policy and indicative volumes of ODA. Among other things, it specifies that South Korea will continue to channel around 40% of its ODA in the form of loans. Compared to other donor countries, loans account for a high share of South Korea’s ODA portfolio (OECD Development Assistance Committee (DAC) member average: 10%). 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’). The New Village Movement was a community-based approach that South Korea applied in the 1970s to raise the standard of living in rural in South Korea. Additionally, the current plan prioritizes the increase of aid to economic infrastructure and environmental policy issues, the alignment of aid with the SDGs, and the focus of funding on girls’ health and education as well as agricultural development.
The government has launched four flagship initiatives in support of reaching the Sustainable Development Goals (SDGs) under the overarching theme of ‘Better Life for All’. The ‘Better Life for Girls’ initiative supports projects that promote girls’ education and health. The ‘Science, Technology and Innovation for Better Life’ initiative aims to promote science capacity, research and development R&D, and entrepreneurship. Both initiatives are funded with US$200 million for the five-year period. Moreover, the ‘Safe Life for All’ initiative allocates US$100 million to combat infectious diseases. Through the ‘Better Education for Africa’s Rise’ initiative, the government plans to spend US$100 million to foster industrial and technical manpower.
Key development funding priorities for 2016 to 2020:
- Increased ODA: Gradually increase total ODA to 0.2% of GNI by 2020 (2015: 0.14%)
- Focus on bilateral ODA: Maintain ratio of bilateral/multilateral ODA of 70:30
- Loans as key instrument: Maintain ratio of ODA provided as grants vs. loans at 60:40.
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.
Infrastructure is a focus area of bilateral cooperation
Supporting hard infrastructure through loans is a key area of bilateral ODA investments. In 2015, the government allocated 17% of its bilateral ODA to infrastructure projects. Key areas include transport and energy infrastructure. The vast share of infrastructure ODA is provided in the form of loans (85%). Geographically, South Korean infrastructure projects focus on Asia (81%), followed by sub-Saharan Africa (10%).
Other key areas of bilateral cooperation include education (15% of bilateral ODA in 2015), health and population (11%), water and sanitation (9%), and agriculture, including rural development (9%).
- 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 also defines 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 as president on May 9, 2017. This may affect the strategic priorities of South Korea's development policy.
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 Yun Byung-se, 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. Bilateral grants are implemented by the Korea International Cooperation Agency (KOICA), which is supervised by the MOFA (see below).
- The MOSF, currently led by Yoo Il-ho, 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 – including ODA channeled through MOFA – and its Budget Office can veto grants and loans that do not meet project approval criteria.
Government officials are not allowed legally to be affiliated with a political party. For this reason, ministers who have been previously affiliated with the leading Saenuri Party left the party when they came into office. The Saenuri Party changed its name to Liberty Korea Party in February 2017.
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 then 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 9 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 (SDG) 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 75% of all grants were provided by KOICA. KOICA has country offices in 28 partner countries.
The EDCF was established in 1987, with the purpose of promoting economic cooperation between South Korea and developing countries, through loans. The direction of EDCF operations and policy-making responsibilities rest with the MOSF. The Korea Eximbank manages and implements EDCF loans.
The parliament (National Assembly of the Republic of Korea) can influence the directions of South Korea’s development policy and budget. The National Assembly votes on and amends 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. In November 2016, the Sub-Committee on Budget decided to cut South Korea’s 2017 funding by US$4 million (KRW4.2 billion). 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 2015, 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 (17%).
- How is the South Korean ODA budget structured?
Ministry of Foreign Affairs and Ministry of Strategy and Finance manage 88% of the ODA budget; the budget is very prescriptive
The vast share (88%) of South Korean ODA is provided by the Ministry of Strategy and Finance (MOSF, US$1.2 billion, 53% of total ODA in 2016) and the Ministry of Foreign Affairs (MOFA, US$813 million, 35%). The remaining 12% is spread across 25 other ministries and agencies. The detailed budget breakdown for 2017 is not available yet.
South Korea’s ODA budget provides detailed information on planned spending: it includes breakdowns by sector, region, ministry, and implementing agency. It also sets out how much each ministry or agency should spend bilaterally and multilaterally. In addition, the annual budget lists concrete activities to be funded from each ministry’s budget. This leads to very limited ministerial discretion over each ministry’s budget once it has been approved by the parliament.
About two-thirds of the MOSF’s ODA budget is delivered bilaterally (73%), almost exclusively as loans through the Economic Development Cooperation Fund (EDCF). Only a very small amount (US$47 million, 4% of MOSF’s ODA) is delivered as grant funding. The rest (US$325 million) is in the form of contributions to international financial institutions, of which 87% are assessed contributions.
The ODA-related budget of the 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, as well as a budget line for voluntary contributions to international organizations.
Korea's ODA budget 2016
Ministry of Strategy and Finance 1,221 12,856 Bilateral 896 9,430 Economic Development Cooperation Fund loans 849 8,937 Grants (inlcuding Committee for International Development Cooperation spending) 47 493 Multilateral 325 3,426 Assessed contributions 284 2,994 Voluntary contributions (inlc. Global Agriculture and Food Security Program) 41 432 Ministry of Foreign Affairs 813 8,563 Bilateral grants 739 7,787 Projects and programs 340 3,581 Technical assistance 208 2,191 Other spending 148 1,559 Public-private partnerships 33 345 Admin costs 11 111 Multilateral 74 776 Assessed contributions 35 363 Voluntary contributions (incl. Gavi and UNITAID and part of funding for the Global Fund) 39 413 Other ministries 282 2,975 Ministry of Health (incl. part of funding for the Global Fund) 40 416 Ministry of Agriculture (incl. Food and Agriculture Organization, International Fund for Agricultural Development) 21 225 Total ODA spending 2,316 24,394
- 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
- Ministries submit medium-term finance plan: 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 limit 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-general of the ministries, as they submit the ministerial budgets for review in June.
- CIDC debates budget allocations: Between July and September, ministries 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 budget draft 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 2015, the South Korean government channeled 81% of its ODA bilaterally, well above the average of the OECD Development Assistance Committee (DAC) members (61%). The government plans to keep the share of ODA spent bilaterally at about 70% for the period 2016 to 2020.
Loans accounted for 40% of South Korea’s bilateral ODA in 2015, almost four times the DAC average of 10%. 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 has had with this instrument as an ODA recipient. The Ministry of Foreign Affairs, on the other hand, is more in favor of disbursing ODA as grants to prevent higher levels of debt in developing countries. Nonetheless, the government plans to maintain a focus on loans.
South Korea channels the majority of its bilateral grants and loans through its own implementing agencies (80% in 2015), mainly through the Korea International Cooperation Agency (KOICA) and Korea Eximbank. However, it has started diversifying its channels by promoting public-private partnerships such as the Global Corporate Social Responsibility Program, which spent US$127 million between 2014 and 2016 to promote the involvement of the South Korean private sector in development cooperation.
Key recipients of South Korea’s core contributions to multilateral organizations in 2015 were the World Bank (39%), UN agencies (25%), and regional development banks (24%). In addition, the country channeled US$257 million, or 12% of its total ODA in 2015 through multilateral organizations for programs earmarked for specific thematic priorities or regions (this is reported as bilateral ODA, see figure above).
South Korea’s multilateral ODA is based on three principles: 1) creating synergies with bilateral funding, 2) enhancing effectiveness and ensuring sustainable development of developing countries, and 3) enhancing mutual cooperation among stakeholders.
South Korea is also progressively ‘untying’ its funding, meaning that ODA no longer has to 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’ aid 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 51% of bilateral ODA between 2013 and 2015. The largest recipient over this time was Vietnam, which received around 15% 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 2017 International Cooperation Action Plan which allocates 57% of bilateral ODA to the Asia-Pacific region, 25% to sub-Saharan Africa and 11% to the Middle East/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 (36%) of South Korea’s bilateral ODA in 2015, well above the average of OECD Development Assistance Committee members (20%).
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 developing countries. This process is coordinated by the CIDC. Priority sectors at country level can be influenced through engagement with involved 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 in recent years, and the government plans to continue to do so. ODA is expected to reach 0.2% of South Korea’s GNI by 2020, up from 0.14% in 2016.
What will South Korea’s ODA focus on?
- South Korea is expected to channel considerable amounts of ODA through its flagship initiatives that accompany the Strategic Plan 2016-2020. This includes the ‘Better Life for Girls’ initiative promoting girls’ education and health (US$200 million for 2016 to 2020), the ‘Science, Technology and Innovation for Better Life’ initiative to promote R&D and entrepreneurship (US$200 million for 2016 to 2020), and the ‘Safe Life for All’ initiative to combat infectious diseases (US$100 million for the same period). US$100 million will also be allocated to the ‘Better Education for Africa’s Rise’ initiative that aims to foster industrial and technical manpower.
- 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.
- South Korea will likely continue promoting rural development, however the community-based ‘Saemaul Undong’ (‘New Village Movement’) approach is expected to undergo scrutiny when a new president comes into office, as this approach was introduced by the current President’s father during his time in office as President from 1963 to 1979.
What are key opportunities for shaping South Korea’s development policy?
- ODA is expected to grow further in the coming years. As much of the increased funding is not yet strictly allocated to specific projects, this provides opportunities to engage with the South Korean government. This is especially the case for proposals that are linked to South Korea’s five-year flagship initiatives (see above).
- The impeachment of President Park Geun-hye in December 2016, which was upheld in March 2017, will lead to a change in political leadership. Subsequently, South Koreans elected Moon Jae-in as president on May 9, 2017. This may lead to shifts in South Korea’s priorities for its development cooperation, and provides an opportunity to engage with government and other stakeholders to shape the direction of South Korea’s development policy moving forward.