Governance and official development assistance allocation

Abstract

Sound institutions and effective governance have long been recognized as critical determinants of foreign aid allocation in developing countries. Hence, focusing on Myanmar within the broader context of the Association of Southeast Asian Nations (ASEAN), this paper investigated Official Development Assistance (ODA) allocation patterns based on governance indicators. The study examined whether foreign aid donors reward recipient countries in the ASEAN region based on their governance quality, which I measured using the World Governance Indicators (WGI) by the World Bank from 2006 to 2020 (15 years). I find evidence and compelling insights that a positive relationship exists between the amount of ODA and governance indicators. Through the lens of donors, the analysis suggests that countries exhibiting high governance quality attract more foreign aid from developed nations. The empirical findings highlight the pivotal role of governance quality, particularly in terms of control of corruption, regulatory quality, and voice and accountability, in influencing ODA allocation. This study holds particular relevance for policymakers, government officials, donors, and development practitioners, offering valuable insights to enhance the effective allocation of international assistance to recipient countries