Comparison between North-South Aid and South-South Cooperation: Based on the analysis of the new development finance institutions

Abstract

According to the different players, development cooperation is often divided into North-South Aid and South-South Cooperation, both of which have a history of several decades. Since the beginning of the 21st century, the rise of a number of emerging economies has brought South-South Cooperation into a new stage, which can be seen from the establishment of some new development finance institutions led by developing countries. BRICS Bank, Asia Infrastructure Investment Bank (AIIB) and Silk Road Fund are three important new development finance institutions. Compared with the traditional development finance institutions like World Bank and International Monetary Fund (IMF), they have their own concepts of development cooperation, which are different from the traditional ones. First, the new finance institutions pay more attention to the equality between partners, not imposing conditions and respecting the ownership of development partners. Second, the new development finance institutions value the market philosophy, which means that they emphasize the importance of field investigation and implement development cooperation in accordance with the actual needs of the partners and the comparative advantages of the providers. Finally, the new development finance institutions focus their resources on problem-solving and avoid doctrines-imposing. They believe that it is easier for the developing countries to achieve development through a gradual and bottom-up model. Although there are differences between the traditional and new development finance institutions, the latter is not parallel to or substitute of the former. They can cooperate with each other and provide better public goods for international cooperation through inclusive competition.