On June 30, 2022, South Korean Prime Minister Han Duck-soo announced that the country will increase its overseas development aid (ODA) by 12.4% in 2023 to reach US$3.4 billion.
Along with the new slate of funds going to KOICA (the South Korean government’s official donor agency), the prime minister said part of the commitment towards improving South Korea’s standing as a donor nation will be in the form of reducing regulations so that the private sector can “make a foray into the ODA procurement markets.”
Substantially enlarging South Korea’s ODA budget has been a top priority since day one for the new president, Yoon Suk-yeol, who took office on May 10, 2022. Speaking to the Washington Post after his election, President Yoon Suk-yeol said:
“It is important for South Korea to have a responsible attitude in international society, for example, increasing our ODA. We should take on a greater role as part of our responsibility as one of the top 10 global economies.”
South Korea has already made several substantial increases in its ODA budget in recent years. In 2021, South Korea provided $2.86 billion in ODA, a jump of 26.9% from 2020. South Korea currently ranks 15th amongst OECD-DAC donor nations, but its economy is ranked as the tenth-largest in the world. As such, South Korea only currently spends 0.16% of its Gross National Income (GNI) on ODA, as opposed to G7 countries with similarly sized economies like Italy, which gave 0.24% of its GNI to ODA in 2021, an imbalance that the South Korean government is eager to address.
From Recipient to Donor Nation
South Korea holds the unique position of being the first country to transform from a recipient of overseas development aid to a donor nation and member of the OECD-DAC.
South Korea received its first round of financing from the World Bank in 1962, a modest $14 million project to build a railway line. By the 1990s, though, South Korea had become one of the fastest-growing economies in the world, and it joined the Organization for Economic Cooperation and Development (OECD) in 1996. In 1991, KOICA was founded with a budget of just $57 million.
In 2009, South Korea joined the OECD’s Development Assistance Committee (DAC) and has been strengthening its ODA commitments ever since. President Lee Myung-bak led the effort in 2010 with his “global Korea” strategy for ODA, followed by President Park Geun-hye with her “Eurasian Strategy” and President Moon Jae-in with his “New Southern Policy.” And newly elected President Yoon Suk-yeol has stated that his ODA budgetary increases are part of his “Global Pivot Korea” strategy which will include a greater emphasis on public-private partnerships as opposed to relying solely on country programmable aid.
Recipients of South Korean ODA
One of the most important recipients of South Korean ODA outside of Asia is the South American nation of Peru. As Peru’s fourth-largest trading partner, South Korea, and Peru have taken several steps to integrate their economies, with Peru being a significant exporter of copper, minerals, and liquid natural gas along with agricultural items to South Korea, receiving high-tech equipment, appliances, and vehicles in return.
KOICA has collaborated with Peru to support the balanced development of its economy, working to “close structural gaps and mobilize the required resources for development,” said Daul Matute-Mejia, Peru’s Ambassador to South Korea.
Another recipient of South Korean ODA is Cambodia, which recently signed a number of agreements, including for a concessional loan of $1 billion and a grant of $50 million that will go towards the development of irrigation, energy, health, sanitation, potable water, telecommunications, and the road system in Cambodia. South Korea has already provided more than $1.7 billion of ODA to Cambodia, including $1.3 billion in concessional loans and grants totaling more than $450 million.
The top 10 recipients of ODA from South Korea in 2020 were the Philippines, Vietnam, Bangladesh, Myanmar, Ethiopia, Cambodia, Tanzania, Paraguay, Uzbekistan, and Indonesia. However, South Korea just signed a four-year agreement to substantially increase aid to Egypt, which received only $2.7 million in grants from Seoul last year.
