Aid in Transition: EU Development Cooperation with Russia and Eurasia

118 Pages·2015·2.42 MB·English

by  Theocharis N. Grigoriadis (auth.)

Theocharis N. Grigoriadis
Aid in
Transition
EU Development Cooperation with
Russia and Eurasia
Aid in Transition

Theocharis N. Grigoriadis
Aid in Transition
EU Development Cooperation
with Russia and Eurasia
Foreword by Prof. Axel Dreher
TheocharisN.Grigoriadis
FreieUniversita¨tBerlin
Berlin,Germany
ISBN978-1-4614-6581-2 ISBN978-1-4614-6582-9(eBook)
DOI10.1007/978-1-4614-6582-9
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To my parents, Niko and Efi.
With infinite love.

Foreword
A Google Scholar count of “development aid” shows almost 100,000 articles.
Amongthemostwidelycitedpapersinthisfieldofstudyarethoseevaluatingthe
effect of foreign aid on the recipient countries’ rate of economic growth. These
studiesarecriticizedforignoringthemultitudeofdonors’objectivesandmodalities
when allocating aid, thereby failing to establish a robust link between aid and
outcomes. Contemporaneous research addresses this concern by (1) disentangling
aidfromalargerangeofdifferentdonorsratherthanlumpingaidfromalldonors
together, (2) investigating the effect of aid on more fine-grained outcomes than
overallgrowth,and(3)dissectingaidintoitsvariouscomponents,andthemodal-
itiesitisdeliveredwith,ratherthantakingtheeffectofallaidtobehomogenous.
Theocharis Grigoriadis’s monograph makes an excellent contribution to this
strand of research. He provides a skilful analysis of the European Union’s Devel-
opmentCooperationwithRussiaandEurasia.Hemodelsaidfromdifferenttypesof
donors—strategic, normative, and just—and suggests the effects of aid to depend
onthedonor’stype.Hetakesaccountofthemodalitiesofaid,bydelvingdeepinto
the EU’s cooperation with post-Soviet recipient countries in the context of its
Transnational Sovereignty Partnerships. Rather than trying to establish a link
between aid and economic growth, he aims at understanding the contribution of
aidtoregionalintegration.HefocusesonRussiaasadonor,therebycontributingto
the literature on the so-called New Donors of aid. As such, this monograph
addresses a number of shortcomings identified in the literature on the effects of
developmentaidatthesametime.
Grigoriadis’sworkcombinesrigorousformalmodelingwithqualitativeempirical
evidence,whileatthesametimebridgingthedisciplinesofEconomicsandPolitical
Science.Overall,TheocharisGrigoriadishaswrittenahighlypolicy-relevantmono-
graph.Hewroteabookthatthestudentsofdevelopmentaidcannotignore.
AxelDreher
DepartmentofEconomics
HeidelbergUniversity,
Heidelberg,Germany
vii

Preface
In this book, I provide a formal theory of institutions and aid effectiveness in the
post-Soviet space. While Eastern Europe and the former Soviet Union have been
the recipients of extensive development assistance from both bilateral and multi-
lateral donors such as OECD member states, the Bretton Woods system, and
regional economic institutions, the TACIS program of the European Commission
maintainsakeypositioninthemarkettransitions ofpost-Sovieteconomiesinthe
1990sand2000s.AsthemaininstrumentofEUdevelopmentaidforthetransfor-
mation of the former Soviet Union, the TACIS program had to face a series of
crucial tradeoffs, inherent to the complex institutional nature of central planning
and the hybrid structure of the EU itself. The first tradeoff has been between
sovereignty and transnationality. The collapse of the Soviet Union marked the
end of sovereign monopolies and a strict definition of the public domain, where
ministries and state-owned companies dominated production and set the goals of
egalitarian development under conditions of imperfect bureaucratic monitoring.
EU development aid is modeled as a soft budget constraint that finances the
development strategies of the recipient. The donor reserves the right to reject
the continuation of financing the same project in the next period, if the recipient
hasnotcompletedtheaidcontractinthecurrentperiod.
ThisenforcementmechanismoftheEuropeanCommissioninducescontractual
compliance by the recipient. Furthermore, it suggests that foreign aid allocation
dependsontheadministrativeorganizationandthepoliticalconstraintsofthedonor
herself. Hierarchical monitoring and U-form administrative organization have led
to the treatment of development aid as an insurance mechanism for trade and
investment.Idefinethisdonortypeasreciprocalorstrategic.Existenceofmultiple
veto players and a complex administrative structure make the overall approval
ofdevelopmentaidbudgetharderandrequireahigherdegreeoftransparencyboth
in the decision-making process and the financial objectives of the donor govern-
ment.Idefinedonorsthatadvanceinstitutionaltransformationintheterritoryofthe
recipientasnormative.Long-runconvergenceandreinforcementofeconomicties
betweenthe donor andthe recipient require notonly an increase inbilateraltrade
andintensiveforeigndirectinvestmentbythedonor.Theyprimarilydependonthe
emergence of civic institutions, the modernization of public administration, and
private sector development. The main difference of normative donors from
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