Report The new development diplomacy in middle-income countries The changing role of traditional donors in India Nilima Gulrajani, Emma Mawdsley and Supriya Roychoudhury February 2020 Readers are encouraged to reproduce material for their own publications, as long as they are not being sold commercially. ODI requests due acknowledgement and a copy of the publication. For online use, we ask readers to link to the original resource on the ODI website. The views presented in this paper are those of the author(s) and do not necessarily represent the views of ODI or our partners. This work is licensed under CC BY-NC-ND 4.0. A visit to an integrated child development services and skills centre in Dehi. Credit: World Bank. Acknowledgements The authors would like to thank the peer reviewers who kindly gave their time to provide very helpful critique and comments: Jesse Griffiths (ODI), Marcus Manuel (ODI), Renu Modi (University of Bombay), Annalisa Prizzon (ODI) and Andrew Rogerson (ODI). The authors would also like to thank colleagues from the following institutions for engaging in the research, providing comment and information: Agence Française de Développement (AFD), United Kingdom Department for International Development (DFID), Observer Research Foundation (ORF), Research and Information Systems for Developing Countries (RIS), the Embassy of Japan, New Delhi; the Embassy of France, New Delhi, Japan External Trade Organisation (JETRO), New Delhi, Japan International Cooperation Agency (JICA), New Delhi, the Global Development Network (GDN), the British High Commission, New Delhi and Brookings India, Delhi. All views expressed are those of the authors’ alone and do not reflect those of the funders, ODI or the institutions reviewed in this report. 3 Contents Acknowledgements 3 List of tables 5 Acronyms 6 1 Introduction 7 2 What is development diplomacy? 9 2.1 Introduction 9 2.2 Development diplomacy as soft power 9 2.3 Development diplomacy as narrative and strategy 10 2.4 Institutional configurations of development diplomacy 11 2.5 Development diplomacy as toolkit 12 3 Catalysts of development diplomacy in India 13 3.1 Introduction 13 3.2 Global factors 13 3.3 India-specific factors 14 3.4 Donor-specific factors 16 4 Opportunities and risks of development diplomacy 21 4.1 Introduction 21 4.2 Opportunities 21 4.3 Risks 22 5 Conclusion 25 References 26 4 List of tables Tables Table 1 Some examples of development diplomacy narratives 11 Table 2 Top 10 bilateral DAC donors to India 16 Table 3 Total ODA commitments to India ($ millions) 17 5 Acronyms AAGC Asia Africa Growth Corridor AFD Agence Française de Développement BRICs Brazil, Russia, India, China and South Africa DAC Development Assistance Committee DPA Development Partnership Administration (India) DFID Department for International Development (UK) GPPD Global Partnership Programme for Development GoI Government of India HSR high-speed railway IFI international financial institution LIC low-income country LMIC lower middle-income country MIC middle-income country MINT Mexico, Indonesia, Nigeria and Turkey ODA Official Development Assistance SDG Sustainable Development Goals 6 1 Introduction Realist theories in international relations have countries (MICs). The rising power and influence long proposed that foreign aid is an instrument of emerging markets provides the backdrop enabling the pursuit, promotion and defence for Development Assistance Committee (DAC) of donor national interests (Morgenthau, donors reframing their bilateral development 1962: 302). Unlike the tools of ‘hard’ military cooperation. Over the last 15 years, 35 or economic power, realists view aid as a softer low-income countries, home to around five mechanism for framing agendas, and persuading billion people and producing a third of global and eliciting good will towards the donor (Nye, gross domestic product, have achieved MIC 2011: 20–21). During the Cold War, Western status.1 These emerging markets represent aid lubricated strategic military and political attractive investment, trading and commercial alliances with a view to containing communism opportunities and offer traditional donors and promoting liberal democracies (Alesina the prospect of cultivating vital new allies. and Dollar, 2000). While the ‘golden age’ of In contexts such as these, the rationale, modes aid that prompted the Millennium Development and partnerships of traditional aid donors are Goals may have led some to believe strategic in considerable evolution. considerations for aid-giving were a thing of the Meanwhile, 28 countries are projected to leave past, geopolitical and commercial interests have the DAC list of Official Development Assistance remained important influences on aid allocation (ODA) eligible countries by 2030, potentially decisions of all donor states (Fleck and Kilby, re-setting relations with former donors based 2010; Fuchs and Vadlamannati, 2013; Gulrajani on the principles of shared equality and respect.2 and Calleja, 2019). And yet, there is a tangible Donors’ domestic pressures of fiscal austerity and difference from the Millenium Development public scrutiny also encourage the recalibration Goals era. Whereas development used to sit of aid as an instrument of both domestic and alongside diplomacy as a distinct but related development benefit. Development diplomacy policy arena, we are now witnessing greater thus provides an expression of the potential intermingling between a donor’s development for dual rewards and mutual prosperity that and wider strategic interests. Traditional manifests itself through greater interdependency donorship is now in a state of palpable flux between donors’ development and foreign policy, (Gulrajani and Swiss, 2019). transforming the ‘charitable’ model of Western Development diplomacy refers to the aid into a diplomatic relationship between repurposing of aid in such a way that it claims sovereign states. to service public diplomacy ambitions and Development diplomacy constitutes a new aspirations while simultaneously achieving phase in bilateral development cooperation development goals. This repurposing is befitting contemporary economic trends and particularly evident in the evolving contexts geopolitical realities. How Western donors of Northern engagement with middle-income balance the potential opportunities and risks 1 In 2019–2020, countries that are formally classified as middle-income have a per capita gross national income of between $1,026 and $12,375. The boundary between lower and upper middle-income countries currently lies at $3,955. See https://blogs.worldbank.org/opendata/new-country-classifications-income-level-2019-2020 2 www.oecd.org/dac/financing-sustainable-development/ODA-graduation.pdf 7 deriving from the repurposing of traditional Our conceptual starting point is informed aid will shape the contours of the next decade by a review of key academic literatures of development cooperation. In this paper, in development studies and diplomacy. we explore the conceptual and empirical After presenting the conceptual framework for practice of development diplomacy in a single development diplomacy, we examine factors that middle-income country. India is a distinctive enable its application to three bilateral donors and important site of contemporary development (France, UK and Japan) operating in India. diplomacy; as a large and powerful emerging Our analysis is informed both by our reading economy that still faces significant development of this literature, but also by interviews and challenges. Development diplomacy in India discussions with civil servants, observers and involves traditional donors negotiating these academics, as well as our own direct experience contrasting and somewhat incongruent of the Indian setting. We conclude by drawing on dynamics, treading a fine line between this source material to account for some of the their geopolitical, economic and poverty emerging opportunities and risks deriving from reduction ambitions. development diplomacy. 8 2 What is development diplomacy? 2.1 Introduction or payment (Nye, 2011; 2019). Public diplomacy is the use of instruments by a ‘sending’ country Deriving from the Greek word diploma, meaning to influence perceptions, preferences, and actions an official document or state paper, diplomacy of foreign citizens in a ‘receiving’ country in is associated with the conduct and negotiation favour of the sending country’s interests (Custer of international relationships through peaceful et al., 2018). To create this soft power, countries means (Cooper et al., 2013; Rozental and deploy development resources, knowledge Buenrostro, 2013). Diplomacy is an instrument and know-how, their historical, political and of governmental foreign policy that seeks to cultural values, the strength and breadth of their foster change in the international behaviour networks (including their universities, think of states (Chin, 2013). While foreign aid has tanks and media institutions), their legal and always serviced national domestic interests, social policies and their shared connections to the changing political economy of development transmit their appeal and attractiveness. And cooperation set against a backdrop of emerging conversely, a country’s soft-power that includes market growth and influence has reinvigorated a state’s brand, history and reputation are critical calls to anchor development cooperation resources for bilateral relationship-building, even within diplomatic objectives and instruments. if effects